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Oracle’s stock has risen 37% so far this year.
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Oracle
The stock is on fire, up 8% this week, 13% in the last six trading days, and 37% for the year. And it was more of the same on Friday: Oracle (ticker: ORCL) shares surged 2.5 percent to a new closing high of $87.76. For the first time, the enterprise software company’s market capitalization is approaching $250 billion. Part of the credit for the protest should go to the Pentagon.
The Defense Department canceled a 10-year, $10 billion cloud computing contract with IBM on Tuesday.
Microsoft
(MSFT), which Oracle and Microsoft both own.
Amazon.com
(AMZN) had been suing Amazon for a long time. In addition, the Department of Defense is establishing a new replacement project that Oracle may be able to bid on. As Barron’s revealed in February, Oracle is moving an increasing amount of its database and application business to the cloud. The shift has paved the way for a resurgence in top-line growth. Oracle recently released its May quarter financial results, which showed an increase of 8% in top-line revenue, the largest increase in a decade. In the first quarter of this year, Oracle Cloud Infrastructure expanded by more than 100 percent. In addition, the company has landed numerous high-profile contracts, most notably with videoconferencing businesses.
Video Zoom
(ZM) as well as
8×8
(EGHT). Despite this, Oracle Cloud behind Amazon Web Services, Microsoft Azure, and Google Cloud, the market leaders in public cloud services. Being a Pentagon player, on the other hand, would change that. The Defense Department’s new project, dubbed the Joint Warfighter Cloud Capability, will be a “multi-cloud/multi-vendor” contract, according to the Pentagon. Only Microsoft and Amazon appear to fit the department’s requirements, according to the government, which will seek ideas from “a restricted number of providers.” But, and this is a huge but, the department also stated that it would “immediately engage with industry” and continue study to see if any other U.S.-based cloud providers can meet the requirements as well. “If such is the case, the Department will negotiate with those companies as well,” the department stated. Therein lies a light of hope for Oracle, which has long claimed that its cloud fits the government’s technical criteria. After Tuesday’s announcement, CEO Safra Catz told reporters in Israel that she spoke with the Pentagon’s IT staff and that “there is preparedness to look at the subject anew.” While a partial win for Oracle on the new contract may not result in significant top-line growth, it would be a significant statement of the company’s capacity to compete with AWS and Azure. While that hasn’t happened yet—unclear it’s whether Oracle meets all of the Department of Defense’s requirements for the work—investors are intrigued. Eric J. Savitz can be reached at eric.savitz@barrons.com./n
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