Dave Welch (@OraVBCA), CTO & Chief Evangelist
The City of Sunrise (Florida) Firefighters Pension Fund sued Oracle on August 10, 2018 alleging Oracle misled investors on cloud sales growth.
Déjà vu? The first class action alleging Oracle’s stock price manipulation through misstating cloud revenue was filed June 2, 2016. Another class filing followed shortly. Both plaintiffs voluntarily dismissed their class actions out of court, and I think very predictably so. I would surmise the current class action filing will end the same way.
In response to the current action, Oracle spokeswoman Deborah Hellinger told CRN in a statement that the “suit has no merit and Oracle will vigorously defend against these claims.”
On June 2, 2016, the day after former staff accountant Blackburn sued Oracle for wrongful termination in response to her refusal to cook the cloud revenue books, Oracle told the press it was going to sue Blackburn. I didn’t believe Oracle’s “intend to vigorously defend the matter” statement then if it implied defense in a court hearing. (Oracle settled out of court with Blackburn February 8, 2017.) And I’m afraid I don’t believe it with the Sunrise Firefighters Pension Fund now.
This new class action on the part of City of Sunrise Firefighters’ Pension Fund gives the appearance to this layman (non-attorney) of having been in the works for some time. I note the filing doesn’t mention Oracle’s 6/19/18 conflation of cloud software, on-prem, IaaS, and PaaS revenue due to its claim that fluidity for its customers between on-prem and cloud mandated the change. What do we expect when Oracle’s board on September 4, 2017 made Ellison, Catz, and Hurd’s bonuses contingent on Cloud revenue? The analysts and market weren’t having it, and rather thought Oracle was hiding poor cloud business line performance. Oracle’s stock price dove 7%.
Oracle appears to have consistently maneuvered so as to avoid actual court hearings on such issues, as discussed in or evidenced by the following:
- My Mars v. Oracle blog post January 17, 2016.
- Pam Fulmer’s October 13, 2016 filing in the Oracle v. Cogent Communications case (which Oracle motioned to dismiss with prejudice December 15, 2016).
- VMworld 2017 U.S. session with Mars’ outside counsel, Art Beeman and Joel Muchmore, discussing the Mars v. Oracle action.
- A&E Adventures v. Oracle filed February 15, 2018 was voluntarily dismissed by A&E Adventures August 2, 2018.
The complaint filed by the City of Sunrise Firefighters’ Pension Fund also alleged Oracle has been coercing customers to adopt its cloud services, to inflate revenue and hide market disinterest.
“In truth, Oracle drove sales of cloud products using threats and extortive tactics,” the complaint, filed on Friday, stated. “The use of such tactics concealed the lack of real demand for Oracle’s cloud services, making the growth unsustainable (and ultimately driving away customers).”
Related to market disinterest, Oracle Cloud is seriously trailing in Gartner’s magic quadrant for Cloud Infrastructure as a Service. The gap between AWS and Oracle increased compared to last year, potentially due in part to Gartner changing their quadrant algorithm.
In 2017, Oracle was at the bottom of the Visionaries quadrant (lower right). In 2018, Oracle moved into the Niche Players quadrant (lower left).
AWS informed us that over a year ago it provided more than five times the compute capacity than the aggregate total of the other fourteen providers at the time. But I found this recent news spot about U.S. Government agencies’ adoption of AWS even more impressive. At House of Brick, we’re seeing notable momentum of Oracle workloads into AWS.
I’m afraid I’m not seeing anything remotely like that with Oracle Cloud. I don’t have to take off my shoes to count the number of House of Brick customers I am aware of that have actually implemented anything in the Oracle Cloud. On the other hand (er, other foot), I’d probably need a bunch of people with shoes off to count the number of customers with Oracle cloud credits on the shelf. This is Oracle Cloud inventory customers were compelled to purchase in order to receive additional on-prem software at the same discount level they used to get.
Oracle has thrown its customer relationships to the wind. I liked this statement in the City of Sunrise Firefighters Pension Fund filing:
“Oracle’s use of audits was well known within the industry, but the extent to which the Company was using threats of audits to coerce customers to purchase cloud products was not known to investors, and expressly denied by the Company.”
The filing also states:
“Among other things, the Company threatened current customers with “audits” of their use of the Company’s non-cloud software licenses unless the customers agreed to shift their business to Oracle cloud programs.”
Warning: we see no protection against audits, including of customer use of Oracle Cloud, in the Oracle Cloud Services agreement.
I view the Sunrise Firefighters suit as instructive on multiple levels. It affirms what we’ve been saying about Oracle Cloud’s position in the market. The filing also contributes to and affirms Oracle audit customers’ defense of their contractual rights. I predict the case will eventually be dismissed prior to seeing a court hearing, despite the probability that it may never be able to be proved that Oracle drove the dismissal.