Hubris Alert?


Historically, the wheels have come off the bus in spectacular fashion shortly after companies make big, bold revenue forecasts in the high tens of billions of dollars.  If my memory serves, Compaq, Dell and IBM all hit the wall after stating ambitions of $50 billion, $60 billion and $100 billion respectively.  If you have time to talk about big revenue dreams, there is probably something else you’re not paying attention to that warrants your attention.

Oracle is evidently predicting $50 billion in revenue in five years, up from the about $18 billion expected for the fiscal year that ended a couple weeks ago (but not yet reported).  That is over 22% compounded growth on a pretty hefty base.  Finding $4 billion in new revenue in the next year is no easy task (especially when they are forecasting less than half that).  Even after 31 acquisitions over the last couple years, Oracle only grew by 89% over the last five years.  To hit the target, they have to do 227% in the next five years.

Maybe it is just a hardware company curse and they have nothing to worry about.

Maybe the hubris threshold is higher for Oracle based on past performance.

Maybe they haven’t actually invoked the curse as it wasn’t a public statement and can dismissed as just motivational sales meeting chatter.

Maybe this means maintenance fees for the installed base are going to go through the roof.

Maybe it signals that Oracle is going to stop dorking around with the dinky acquisitions they have been doing and get serious about rolling up the industry and/or getting into some new businesses.  Oracle could buy the next ten software companies in size below them and just about get to their target.  It would diversify them into a few new businesses.  Imagine your friendly Oracle sales rep peddling Madden NFL Football and Mario Party 8.  Sorry, that would be Mario Party 8i…

I am fascinated that both IBM and Oracle have essentially adopted the private equity strategy without the actual buyout and are focused on financial engineering more than technology engineering.

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