We are used to discussing mergers and acquisitions in the tech sector, but it is a rarity to split a company into two. Analysts always have to ask whom and how to profit? Shareholders? Other stakeholders, including customers? Employees? Why doesn’t this happen more often?
Certainly businesses outpace the demands of their markets, but more often than not, a business will sell itself to a vendor rather than a splitting or retreat from private – an exception appears to be Dell.
Should Oracle Split?
There are not many good examples of large companies splitting up like the amoeba, but HP formed an enterprise division specializing in server and other enterprise technology in late 2015, and a consumer division oriented to PCs and printers, among other things . .
In the four years following the split, each company’s stock contains mostly ferocious water, so the conclusion you can draw is that the division doesn’t do much for shareholders, a major constituency. You must also say that these companies did not make tanks.
A modest offer
The question I want to ask here is whether Oracle should consider a similar gamble, a split. Oracle was arguably in a better position than HP, when it split, after withdrawing money through a cascade of ill-acquisition and write-downs that took longer than Adec’d. The acquisition of Oracle usually has fruits, and you only need to look as far away as NetSuite, which has been growing like a cosmic weed since its purchase.
However, Oracle is an existence, partly due to its teddy coming to the clouds but also as a casualty of its success. This has long been forgotten now, but it was once common knowledge that no manufacturer in computer hardware survived the transition to smaller devices.
The names of the mainframe manufacturers were “Control Data,” “Burrows” and “IBM”. Mini-computers were dominated by a handful of companies that began in the Boston-suburbs, and were named “Digital Equipment Corporation,” “Data General,” “Prime,” “Wang,” and a few others. HP fared well, and it was one of the few mini-computer manufacturers that did not occupy Route 128.
The PC revolution saw companies such as DEC and failed to enter the market due to an inability to standardize on the operating system. Even PC people went through some generational turmoil. Compaq was purchased by HP; IBM sold its business to Lenovo; Dell went public, then private, then emerged. There were also companies such as Gateway – and Eagle, whose CEO crashed their Italian sports car and their company’s IPO made them a polyandry.
The software has been different. There were about a dozen relational database vendors in the 1980s. Oracle dominates the industry and remains an independent company today as it creates a ton of applications and some very advanced hardware – particularly storage devices that keep data running at memory speeds rather than very slow disk drives.
Application vendors typically lead database vendors from on-premises to client-servers to the cloud.
Why Oracle, now?
Oracle has been the unsurpassed hero of the cloud revolution, though it was late to keep its products there. Oracle databases have been the mainstay of enterprise cloud computing, although upstarts such as Amazon AWS are distant in that market. Today Oracle’s autonomous database in the cloud is one of a small handful of databases with AWS and Azure, and its companion hardware sets it apart.
From those who spread knowledge outside of business schools – you may have heard of Clay Christenson’s The Innovator’s Dilemma (1997) – know that when upstart starts in your market, you’re already in trouble. The dilemma is what to do about it.
Trying to compete with upstarts doesn’t work well – not necessarily because your technology can’t keep up, and not because your business model can’t change, and also because your internal culture isn’t too rigid. is.
Some of these issues may have been true in the past, but this is not someone’s first trip around the track. What to do becomes an opportunity to chart a new path, or at least better focus on the core business.
Mainframes and mini-computer manufacturers did not have that luxury. Some were certainly slow to adapt, some had cultural issues, and some were locked into business models that would not consider changing shareholders.
It is not today, however, and it is not the position of Oracle.
Today Oracle has some well-differentiated products that give it a significant performance edge. It is also Oracle’s good fortune that the industry is at a turning point: cloud computing, which is still replacing on-premises computing, is just morphing. In the next decade we will be transforming cloud computing into a utility similar to the electric grid in some important ways.