It appears Oracle’s cloud FUD chickens are coming home to roost.
The US based specialist securities prosecutor BLB&G has filed a class action lawsuit against Oracle on behalf of the City of Sunrise Firefighters Pension Fund.
In a statement, the class action states that Oracle violated stock exchange rules by making false claims during conference calls.
Of particular interest is the following section, which echoes sentiment from the ITAM Review community regarding Oracle’s behavior:
“Throughout the Class Period, Defendants misrepresented the true drivers of the Company’s cloud revenue growth. In particular, Defendants falsely attributed the Company’s revenue growth in its cloud segment to a variety of factors and initiatives, including, among other things, Oracle’s “unprecedented level of automation and cost savings,” as well as the Company being “customer-focused” and “intimate partners with our customer.”
In truth, Oracle drove sales of cloud products using threats and extortive tactics. 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. 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.”
Revenue recognition time bomb?
In addition to these alleged false claims from Oracle regarding cloud growth, I suspect there is a serious revenue recognition issue on the horizon.
We hear that ITAM Review readers either:
- Are coerced into signing a cloud agreement as a “commercial solution” to any audit misdemeanors
- Or proactively seek to purchase an Oracle cloud solution as a strategy for reducing legacy on premise support spend (e.g. Pretend to be interested in cloud if perpetual maintenance can be reduced, then dump the cloud when it expires).
Both of these tactics suggest Oracle’s cloud solution not actually being used. We also hear from ITAM Review readers that part of Oracle’s order process is to sign the customer into the cloud platform therefore demonstrating “usage” under revenue recognition rules. I would suggest further digging into this area to find true actual usage (And therefore traction) of their cloud solution.
BLB&G welcome similar claims before 9th October 2018.
Press statement: https://www.prnewswire.com/news-releases/bernstein-litowitz-berger–grossmann-llp-announces-securities-class-action-suit-filed-against-oracle-corporation-and-certain-of-its-executives-300695598.html
BLB&G website: http://www.blbglaw.com
About Martin Thompson
Martin is also author of the book "Practical ITAM - The essential guide for IT Asset Managers", a book that describes how to get started and make a difference in the field of IT Asset Management.
On a voluntary basis Martin a contributor to ISO WG21 which develops the ITAM International Standard ISO/IEC 19770.
Learn more about him here and connect with him on Twitter or LinkedIn.