Oracle President Mark Hurd sat down for a one-on-one with CNBC's MARIA BARTIROMO. Below is a transcript from the segment:
MARIA BARTIROMO: I’M HAPPY TO WELCOME TO THE PROGRAM, RIGHT NOW, ON A CNBC EXCLUSIVE, ORACLE PRESIDENT MARK HURD. MARK, GOOD TO HAVE YOU ON THE PROGRAM.
MARK HURD: THANKS, MARIA, THANKS FOR COMING.
BARTIROMO: THANK YOU FOR HAVING US. IN THIS OPEN WORLD CONFERENCE, IT HAS BEEN QUITE EXCITING. IS IT FAIR TO SAY THIS IS A REPOSITIONING FOR THE CLOUD FOR ORACLE?
HURD: WE ANNOUNCED THE CLOUD IN JUNE. WE’VE BEEN WORKING REALLY ON CLOUD APPLICATIONS, THE COMPANY HAS FOR MULTIPLE YEARS. I THINK WE MADE SOME EXCITING ANNOUNCEMENTS LAST NIGHT IN THE CONTEXT OF BEING ABLE TO DO THINGS WITH THE CLOUD, BOTH OF WHAT YOU THINK OF AS THE ORACLE CLOUD BUT ALSO PRIVATE CLOUDS FOR CUSTOMERS LAST NIGHT THAT ARE PRETTY EXCITING. BUT I WOULDN’T CALL IT REPOSITIONING. I WOULD CALL IT A CONTINUATION OF A LOT OF WORK THE COMPANY HAS BEEN DOING FOR A LONG TIME TO GET READY FOR THIS.
BARTIROMO: ABSOLUTELY. NOW, I WANT TO GET YOUR TAKE ON REALLY IS THAT WHERE THE GROWTH COMES FROM GOING FORWARD FOR ORACLE? BUT FIRST, LET ME GET YOUR TAKE ON WHAT’S GOING ON– IN THE LAST QUARTERLY RESULTS THAT WE REPORTED, JUST ABOUT A WEEK AND A HALF OR SO, SUGGEST THINGS ARE SLOWING. HOW WOULD YOU CHARACTERIZE BUSINESS TODAY?
HURD: YEAH, WE REPORTED ABOUT TEN DAYS AGO. WE GREW OUR SOFTWARE BUSINESS AT ABOUT 11%– NOT ABOUT, BUT 11%. WE HAD DOUBLE-DIGIT GROWTH IN ASIA, DOUBLE-DIGIT GROWTH IN LATIN AMERICA, DOUBLE-DIGIT GROWTH IN THE U.S. GOOD GROWTH IN EUROPE REALLY OUTSIDE PUBLIC SECTORS. SO LOOKED GOOD FOR US. WE REPORTED ON OUR CONFERENCE CALL. WE SAW SIGNIFICANT GROWTH IN OUR PIPELINE WHICH IS OBVIOUSLY A GOOD INDICATOR. AND IF YOU LOOKED AT WHAT CONSENSUS ESTIMATES WERE FOR SOFTWARE FOR Q2, WE ACTUALLY RAISED THOSE ESTIMATES A BIT FOR OUR COMING Q2. SO SOME OF THAT
Maria May ACTUALLY BE ORACLE SPECIFIC. WE FEEL GREAT ABOUT OUR PRODUCT LINE. WE’VE EXPANDED OUR DISTRIBUTION OVER THE COURSE OF THE PAST 18 MONTHS. SO IT MAY NOT BE A READ ON THE ENTIRE ECONOMY, BUT WE FEEL GOOD ABOUT OUR POSITION.
BARTIROMO: MUCH OF THE ANALYSTS AND HOLDERS OF THE STOCK OUT THERE, OF COURSE THE STOCK HAS BEEN A GREAT PERFORMER, 25% YEAR TO DATE, AND YOU’RE IN THE LEADERSHIP POSITION, NO DOUBT ABOUT IT. BUT WHEN YOU STRIP OUT ACQUISITIONS, A LOT OF PEOPLE LOOKING AT YOUR EARNINGS SAYING, YEAH, WHEN YOU SEE THE LICENSED GROWTH OF 11%, STRIP OUT THE ACQUISITIONS ACTUALLY AND IT’S MORE LIKE 2%. SO ARE THINGS AS VIBRANT AS THEY HAVE BEEN? OR ARE YOU SEEING SOME SLOWDOWN IN SOME PARTS OF THE BUSINESS?
HURD: WELL WE FELT GREAT ABOUT OUR GROWTH IN Q1. IT’S WHAT WE SAID WE WERE A LITTLE BIT BETTER THAN WE EXPECTED. AS I MENTIONED, WE RAISED FOR Q2. SO, AGAIN, I THINK WE’RE DOING WELL. WE’RE GAINING SHARE IN VIRTUALLY ALL OF OUR SEGMENTS. YOU KNOW, I’M GUN SHY TO GIVE YOU A MESSAGE THAT SAYS THAT’S A GOOD READ-THROUGH, THOUGH, ON THE ENTIRE ECONOMY.
BARTIROMO: WELL WHAT CAN YOU TELL US ABOUT I.T. BUDGETS TODAY? YOU KNOW, WE’RE COVERING EVERY DAY WHAT’S GOING ON IN EUROPE. YOU KNOW, WHAT’S GOING ON IN ASIA WHERE CHINA IS SLOWING QUITE DRAMATICALLY. 50% OF THE BUSINESS COMING FROM OUTSIDE THE UNITED STATES. WHAT CAN YOU TELL US ABOUT SPENDING MONEY, MANAGERS PUTTING MONEY TO WORK IN TERMS OF I.T.?
HURD: PEOPLE WILL SPEND MONEY IF THERE’S GOOD RETURN ON INVESTMENT, SOLID RETURN ON INVESTMENT, PEOPLE WILL SPEND. I THINK THAT’S INDICATIVE OF WHAT YOU SAW IN OUR RESULTS. THAT SAID, THERE ISN’T A CUSTOMER WENT DO HAVE, MARIA, WHO ISN’T ON AN AUSTERITY PLAN AND INNOVATION AGENDA AT THE SAME TIME. PEOPLE ARE TRYING TO SAVE MONEY. AT THE SAME TIME, TO FREE THEM UP TO BE ABLE TO INVEST.
BARTIROMO: LET ME GET YOUR TAKE ON THIS TRANSITION OR SORT OF THE WAY DATA HAS TRANSITIONED. YOU KNOW, TRADITIONAL DATA, ORACLE HAS BEEN THE MAIN COMPANY AND THE LEADERSHIP FIRM THERE. BUT DATA IS CHANGING. AND SO NOW PEOPLE ARE CALLING IT BIG DATA, WHETHER YOU’RE TALKING ABOUT TRADITIONAL DATA OR THE DATA FROM CELL PHONES, SMARTPHONES, BIOTECH, A LOT OF HEALTH CARE INFORMATION. WHAT ARE YOU DOING IN TERMS OF TRANSITIONING TO THE BIG DATA? BECAUSE IT DOES SEEM SOME OF THE SMALLER UPSTARTS HAVE TAKEN SOME MARKET SHARE IN SOME OF THAT BIG DATA, THE DATA THAT’S CHANGING.
HURD: MORE DATA– BIG DATA, MOST OFTEN DESCRIBED AS MORE DATA. WE VIEW THAT AS GREAT.
BARTIROMO: BUT YOU HAVE THE PRODUCTS TO KEEP UP WITH THAT?
HURD: YOU’VE SEEN US MAKE SEVERAL ACQUISITIONS WHERE WE’VE INTEGRATED SOCIAL MEDIA CAPABILITIES INTO OUR APPLICATIONS. WHAT’S IMPORTANT FOR US IS TO ALLOW OUR CUSTOMERS TO BE ABLE TO TAKE ADVANTAGE OF WHAT ARE VERY ATOMIC LEVELS OF DATA. FOR EXAMPLE, A CUSTOMER WE HAVE THAT’S GOT A BRAND THAT RELEASES A PRODUCT, WE CAN INTEGRATE SOCIAL MEDIA DATA TO TELL THEM HOW PEOPLE ARE REACTING TO THAT BRAND, HOW PEOPLE ARE GETTING REALTIME FEEDS ABOUT WHAT’S HAPPENING WITH THEIR PRODUCT, WITH AN EVENT THAT THEY’RE DESCRIBING. AND WE CAN INTEGRATE THAT SOCIAL DATA, IF YOU WILL, BIG DATA, INTO OUR CORE APPLICATIONS. THIS IS A TREMENDOUS OPPORTUNITY FOR OUR CUSTOMERS AND FOR US.
BARTIROMO: AND DO YOU FEEL YOU’VE GOT THE RIGHT PRODUCT LINE TO CAPTURE THAT? YOU KNOW, SOME OF THESE SMALLER UPSTARTS, AND THERE ARE A LOT, YOU KNOW, THEY’RE TRYING TO MAKE THE CASE TO YOUR CLIENTS, A GE, FOR EXAMPLE, THEY’RE SAYING, LOOK, YES, ORACLE CAN HANDLE THIS TRADITIONAL DATA, BUT YOU DON’T HAVE TO PAY HIGH MAINTENANCE FEES. HOW ARE YOU GOING TO PROTECT THAT MAINTENANCE REVENUE THAT YOU’RE CHARGING COMPANIES WHEN YOU’VE GOT AN UPSTART SAYING, COME WITH US, FOR THE SOCIAL MEDIA PART OF YOUR BUSINESS?
HURD: MARIA, WE’RE NOT TRYING TO PROTECT ANYTHING. WE’RE TRYING TO GROW. WE’RE GOING AT THIS WITH EVERYTHING WE’VE GOT. IN TERMS OF GROWING, NEW SET OF APPLICATIONS, WE CALL THEM FUSION CLOUD APPLICATIONS. YOU’LL SEE DEMOS TOMORROW. LARRY WILL DO A KEYNOTE IN THE AFTERNOON WHERE WE’LL INTEGRATE SOCIAL DATA, IF YOU WILL, BIG DATA INTO OUR CORE APPLICATIONS. WE’LL DO THE SAME THING ON THURSDAY, I’M GOING TO DO A KEYNOTE ON BIG DATA. I’LL GIVE YOU A DIFFERENT EXAMPLE OF SORT OF THE SAME POINT, HOW WE INTEGRATE UNSTRUCTURED DATA YOU MENTIONED, PHONE CALLS, PICTURES, OBJECTS OF ALL TYPES, INTEGRATE THAT WITH WHAT YOU WOULD THINK OF AS STRUCTURED DATA TO FORM AN INTEGRATED VIEW OF DATA AND MORE IMPORTANTLY TURN THAT DATA INTO INFORMATION. INFORMATION THAT YOU CAN USE TO SELL MORE, TO CROSS SELL, TO UPSELL, TO BE ABLE TO DO THINGS THAT FRANKLY YOU NEVER WOULD BE ABLE TO DO BEFORE AND DO IT IN REALTIME.
BARTIROMO: DO YOU NEED TO RESIZE ANYTHING IN TERMS OF THE PRICING? TECHNOLOGY’S GETTING CHEAPER. ISN’T THAT ONE OF THE BIG ISSUES WITH TECHNOLOGY? NO MATTER WHAT COMPANY YOU ARE. INNOVATION HAS TO BE THERE, AND UNFORTUNATELY SOME THINGS ARE COMMODITIZED. TECHNOLOGY IS GETTING CHEAPER, ISN’T IT?
HURD: MARIA, TO THE POINT, WE HAVE THE ABILITY, AND YOU’RE GOING TO HEAR THIS AS YOU ARE AROUND THE CONFERENCE THE NEXT DAY OR SO, TO DRAMATICALLY CHANGE THE COST POINTS THAT OUR CUSTOMERS HAVE. MOST OF OUR CUSTOMERS JUST TO GIVE YOU NUMBERS, I KNOW YOU LIKE NUMBERS, DATA IS GOING TO GROW FOR MOST OF OUR CUSTOMERS 40%, 45%. THEY’RE SPENDING, I’LL GIVE YOU A LITTLE BIT OF A TECHNICAL TERM, BUT 8,000 TO 10,000 BUCKS A TERABYTE TO STORE THAT DATA. THEY ARE DOING THAT WERE STORAGE IS IN SOME CASES 10% OF THEIR TOTAL I.T. BUDGET. IF YOU RUN THROUGH THOSE NUMBERS, YOU’RE GOING TO GROW 2%, 3% YOUR I.T. BUDGET DOING NOTHING MORE THAN CHASE THE DATA. ORACLE, WE HAVE THE ABILITY TO TAKE THAT POSITION AND SHRINK THEIR DATA, COMPRESS THEIR DATA, GIVE THEM MORE PERFORMANCE WHILE THEY DO IT, SAVE OUR CUSTOMERS A BUNCH OF MONEY, CONSOLIDATING THAT INFRASTRUCTURE, MAKE IT PERFORM BETTER. AT THE SAME TIME, THE COMPANIES, YOU’RE GOING TO HEAR AROUND THE CONFERENCE, HAVE TREMENDOUS OPPORTUNITIES TO INNOVATE WITH NEW MODERN APPLICATIONS AS WE ARE RELEASING WITH FUSION CLOUD APPLICATIONS. THAT’S OUR AGENDA, HELP OUR CUSTOMERS INNOVATE, HELP OUR CUSTOMERS SAVE MONEY AT THE SAME TIME.
BARTIROMO: WHAT’S A BIGGER PRIORITY TO YOU? TALK TO US ABOUT THE USE OF CASH. YOU HAVE A SMALL DIVIDEND. RELATIVE TO SOME OF YOUR COMPETITORS. MICROSOFT, CISCO, HAS BEEN RAMPING UP ON THE DIVIDENDS. YOU’VE BEEN BUYING BACK STOCK. AND THEN OF COURSE ACQUISITIONS HAVE BEEN THE LIFEBLOOD OF THIS COMPANY. WHAT’S THE BIGGEST PRIORITY FOR THE USE OF CASH RIGHT NOW?
HURD: WELL I THINK SAFRA’S BEEN VERY CLEAR IN HER MESSAGING TO THE CAPITAL MARKETS. WE’RE GOING TO HAVE A BALANCED APPROACH TOWARD HOW WE DEPLOY OUR CAPITAL. WE’RE GOING TO BE INQUISITIVE WHERE IT MAKES SENSE. WE HAVE BEEN. THAT’S PROBABLY THE BEST MEASURE OF OUR BEHAVIOR, WHERE WE’VE SEEN THINGS. TYPICALLY OVER THE PAST YEAR WE’VE BOUGHT LEADING COMPANIES, COMPANIES THAT HAD LEADERSHIP POSITIONS. THEY HAD TECHNOLOGICAL POSITIONS THAT HAVE ADVANCED OUR PORTFOLIO. WE HAVE CONSISTENTLY, WELL, YOU MENTIONED OUR DIVIDEND, INCREASED OUR DIVIDEND AND WE’VE BEEN ACTIVE IN SHARE BUYBACKS. WE’RE ACTIVE IN OUR FISCAL Q1 SHARE BUYBACK BECAUSE WE THOUGHT THE PRICE OF THE STOCK WAS VERY LOW. AND SO WE WERE AGGRESSIVE IN BUYBACKS. AND I THINK THIS SAFRA’S BEEN CLEAR, WE’RE GOING TO HAVE BALANCED APPROACH TOWARD THE CAPITAL STRATEGY.
BARTIROMO: YOU THOUGHT YOUR STOCK WAS VERY LOW. I’LL TELL YOU ONE THING, THE MARKET VALUE LOSS WITHIN TECHNOLOGY HAS BEEN QUITE STUNNING WHEN YOU LOOK AT THE TOP OF THE LIST. RIGHT THERE AT THE TOP OF THE LIST IS YOUR OLD COMPANY, HEWLETT-PACKARD. THE VALUE HAS DROPPED CONSIDERABLY SINCE YOU’VE LEFT. WHAT’S GOING ON THERE?
HURD: YOU KNOW, MARIA, I WOULD SAY I’VE BEEN A LOT MORE FOCUSED ON THE MARKET CAP INCREASE OF ORACLE THAN I HAVE BEEN IN ANY CHANGES OF HP STOCK. I’LL LEAVE IT AT THAT.
BARTIROMO: IS HP STILL A COMPETITOR OF ORACLE OR HAVE YOUR COMPETITORS CHANGED?
HURD: WELL, YOU KNOW, MARIA, I THINK, LISTEN, FIRST OF ALL, HISTORICALLY THE COMPANIES HAVE HAD GREAT COMPLEMENTARY SKILLS, THEY’VE BEEN PARTNERS FOR YEARS. I DO THINK THE MARKET IN TECHNOLOGY EVOLVES AND THERE’S TERMS WE HAVE IN THE INDUSTRY CALL COOPETITION. AND I THINK THERE ARE AREAS WHERE MANY COMPANIES THAT WE PARTNER WITH PARTNER IN ONE DIMENSION AND COMPETE IN ANOTHER. AND FRANKLY IN THE INDUSTRY, WE’RE HISTORICALLY VERY COMFORTABLE WITH THAT. WE PARTNER HERE. BUT WE KNOW IN SOME AREAS WE’RE GOING TO COMPETE. AND I THINK YOU’LL CONTINUE TO SEE THAT EVOLVE. TAKE SALESFORCE.COM, ONE OF OUR BEST CUSTOMERS. RUNS ON ORACLE DATABASE, RUNS ON ORACLE MIDDLEWARE, YET WHEN WE GET INTO THE MARKET FROM A SALES AUTOMATION APPLICATION PERSPECTIVE, WE’RE COMPETITIVE.
BARTIROMO: ACTUALLY, I SPOKE WITH MARC BENIOFF AT SALESFORCE, HE SAID
Larry EllisON IS HIS MENTOR. AND I KNOW THAT’S A BIG COMPETITOR OF YOURS SO I THOUGHT THAT WAS VERY GENEROUS OF HIM. I’VE GOT TO ASK ABOUT A MOVE THAT YOU MADE JUST RECENTLY, YOU’VE DECIDED AND YOU’VE ANNOUNCED THAT YOU WILL NO LONGER BREAK OUT DATABASE REVENUE. SO THAT’S AN APPLICATION IN THE TECHNOLOGY BUSINESS SEGMENTS AND INSTEAD YOU’RE GOING TO REPORT A SINGLE LICENSE IN CLOUD SUBSCRIPTION METRIC. ALL THE ANALYSTS ARE DISAPPOINTED
HURD: OH, THEY LOVE IT– NO, THEY LOVE IT–
BARTIROMO: THEY SAY THAT THIS IS LESS INFORMATION. AND WHEN A COMPANY SAYS WE’RE GOING TO GIVE YOU LESS INFORMATION, IT’S A WATERSHED MOMENT. DOESN’T THIS OBSCURE WHAT’S REALLY GOING ON IN THE BUSINESS?
HURD: MARIA LISTEN, I KNOW THEY’D LOVE TO HAVE A CONFERENCE CALL EVERY FRIDAY. I COULD GO THROUGH OUR PIPELINE, I COULD GO THROUGH OUR CUSTOMERS, OUR DEALS. I MEAN, IN THE END, THE MARKETS BLENDING. WHAT’S SAAS, OR SOFTWARE AS A SERVICE, WHAT’S A PRIVATE CLOUD, WHAT’S ON PREMISE, WHAT’S A LICENSE FEE, WHAT’S RENEWABLE, YOU KNOW, ANNUITY FROM REVENUE PERSPECTIVE IS ALL BLURRING. SO THE FACT OF BREAKING THIS OUT, THE QUESTION IS HOW MEANINGFUL IT IS IN RESPECT TO WE’RE NOW GOING TO REPORT TOTAL SOFTWARE REVENUE. AND WE THINK THAT’S AN APPROPRIATE WAY TO REPORT THE BUSINESS. I UNDERSTAND THE REACTION YOU’RE DESCRIBING BUT WE THINK THIS MAKES SENSE.
BARTIROMO: AND YOU THINK YOU’RE GOING TO BE ABLE TO STILL GIVE ANALYSTS AND THE INVESTMENT COMMUNITY ENOUGH INFORMATION ABOUT WHERE THE BUSINESS IS GOING? WHERE DOES THE GROWTH COME FROM NEXT THREE YEARS AT ORACLE?
HURD: WELL, FIRST WE HAVE AN ANALYST MEETING THURSDAY WHERE WE’RE EXCITED TO JUST TELL THEM A LOT ABOUT THE BUSINESS. I MEAN, WE’VE GOT SO MANY GREAT THINGS GOING ON. I DON’T THINK I WOULD PIGEONHOLE THE GROWTH INTO ONE AREA. THE CLOUD HAS TREMENDOUS GROWTH FOR US. THE CLOUD IN A BROAD BASE, INFRASTRUCTURE IS A SERVICE, PLATFORM IS A SERVICE, APPLICATIONS IS A SERVICE. TREMENDOUS OPPORTUNITIES THERE. WE HAVE THIS THING, MARIA, CALLED ENGINEERED SYSTEMS. THE ABILITY TO TAKE SERVERS, STORAGE, OUR DATABASE, INTEGRATE, CONSOLIDATE, SAVE OUR CUSTOMERS MONEY. WE DOUBLED OUR BUSINESS IN ENGINEERED SYSTEMS WHEN WE REPORTED IN QUARTER ONE. WE HAD TRIPLED IT THE YEAR BEFORE. THIS IS A TREMENDOUS GROWTH ENGINE FOR THE COMPANY COMPLEMENTED BY WHAT WE DO WITH CLOUDS. WE’VE MADE TREMENDOUS INVESTMENTS IN OUR INDUSTRY GROUPS. ALL OF THESE ARE SEGMENTS WE FEEL THAT THERE’S MATERIAL GROWTH FOR US AND WE’RE INVESTING INTO IT.
BARTIROMO: AND SOFTWARE AS A SERVICE, I KNOW, IS A BIG THEME, AS YOU’VE BEEN MENTIONING. SO REAL QUICK, AN APPROPRIATE GROWTH RATE FOR ORACLE IS WHAT IN THE COMING–
HURD: I’M OUT OF THE PROGNOSTICATION BUSINESS. I CAN TELL YOU THIS, WHATEVER THE MARKET PERFORMS, WE’RE GOING TO PERFORM BETTER THAN THE MARKET. WE’RE IN A POSITION, MARIA, WHERE WE HAVE– WE’RE GOING TO SPEND $5 BILLION IN RND THIS YEAR. WE SPENT $4.5 BILLION THE YEAR BEFORE. 4.2, 4.3 THE YEAR BEFORE THAT. TO YOUR POINT, WE’VE MADE VERY SPECIFIC PRECISE ACQUISITIONS TO COMPLEMENT THAT PORTFOLIO. WE’VE GROWN OUR SALES FORCE MATERIALLY, OVER THE PAST COUPLE OF YEARS, TO ENHANCE OUR DISTRIBUTION. I CAN’T TELL YOU HOW GOOD WE FEEL ABOUT THE POSITION OF THE COMPANY. OUR JOB, FRANKLY, MARIA, I WON’T GIVE YOU A GROWTH RATE JUST TO GO OUT AND EXECUTE.
BARTIROMO: GOOD TO HAVE YOU ON THE PROGRAM. THANKS VERY MUCH, WE APPRECIATE IT. MARK HURD, PRESIDENT AT ORACLE.
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