WHEN: Today, Tuesday, September 30th
WHERE: CNBC's "Squawk Alley"
Following is the unofficial transcript of a FIRST ON CNBC interview with Oracle CEO Mark Hurd today on CNBC's "Squawk Alley" (M-F, 11AM-12PM ET). Following is a link to the interview on CNBC.com: http://video.cnbc.com/gallery/?video=3000315481.
All references must be sourced to CNBC.
JON FORTT: MARK HURD, CEO OF ORACLE ALONGSIDE SAFRA CATZ, ALSO CEO OF ORACLE. THANKS FOR JOINING US HERE I THINK THIS MIGHT BE YOUR FIRST BROADCAST INTERVIEW SINCE GETTING THAT TITLE. WANT TO TALK ABOUT PLATFORM AS A SERVICE, WANT TO TALK ABOUT ENGINEERED SYSTEMS, FIRST OFF I WANT TO TALK ABOUT THE NEW TITLE AND ALSO M & A. SO TIBCO RECENTLY GOT TAKEN OUT FOR A LITTLE LESS THAN FOUR TIMES FORWARD REVENUE. A LOT OF PEOPLE THOUGHT YOU MIGHT BE INTERESTED, WHY DIDN'T YOU TAKE IT OUT?
MARK HURD: JON I KNOW YOU KNOW THAT I CAN'T COMMENT ON M & A. AND I'LL JUST LEAVE IT AT THAT.
FORTT: ARE WE IN A SPACE RIGHT NOW WHERE M & A IS AN IMPORTANT WAY TO GROW? BECAUSE IT SEEMS LIKE WE'RE SEEING SOME ENTERPRISE CONSOLIDATION PICKING UP AGAIN.
HURD: WELL I THINK ANYTIME THERE IS A GROWTH IN THE INDUSTRY I MEAN ORACLE IS ONE OF THE ONLY VERY FEW TECH COMPANIES THAT'S REALLY GROWING ITS TOP LINE AND WHEN YOU DON'T HAVE GROWTH I THINK COMPANIES LOOK AT ALTERNATIVES POINT ONE. POINT TWO, CERTAINLY M & A IS A WAY TO GROW. AND WE ARE A BUILD AND BUY COMPANY. FRANKLY EVEN A LOT OF THINGS WE'VE DONE OVER THE YEARS HAS BEEN MORE TO BUILD OUR PORTFOLIO AND BUIKD OUR CAPABILITIES CERTAINLY AS WE'VE ENGAGED IN GROWING THE CLOUD BUSINESS AND IN OUR CLOUD PORTFOLIO IT'S BEEN A GREAT WAY FOR US TO SUPPLEMENT WHAT'S BEEN SOME PRETTY STRONG ORGANIC DEVELOPMENT AS WELL.
FORTT: RIGHT. SO A LOT OF PEOPLE ON THE STRUCTURE THAT YOU ARE IN RIGHT NOW WITH TWO CEOS. SAY, THAT'S GOT TO BE TEMPORARY. IT DOESN'T LAST SOME OF YOUR COMPETITORS HAVE HAD IT FOR A WHILE. SAP WORKED EVENTUALLY IT SHIFTED. WHY ARE THEY WRONG IN THIS CASE?
HURD: I'M ONLY GUESSING IT IS PROBABLY THE SAME PEOPLE WHO SAID TWO PRESIDENT WAS DIFFERENT AS WELL. IT IS REALLY WHAT WE'VE BEEN DOING FOR A WHILE. I THINK IT'S IMPORTANT TO NOTE WE'VE GOT A GREAT CHAIRMAN WITH LARRY. LARRY IS NOT GOING ANYWHERE. LARRY, SAFRA AND I HAVE BEEN WORKING TOGETHER FOR A NUMBER OF YEARS NOW. AND THE THING WE'RE MOST FOCUSED ON JON RIGHT NOW IS EXECUTION. WE BELIEVE VERY STRONGLY IN THE STRATEGY OF ORACLE AND WE BELIEVE VERY STRONGLY IN THE STRENGTH OF OUR PRODUCT PORTFOLIO WHICH I THINK IS WHAT YOU WANT TO GET INTO. WE THINK THERE IS A CHANGE IN THE INDUSTRY WITH THIS MOVEMENT TO CLOUD AT THE PLATFORM LEVEL AT THE APPLICATION LAYER, THE INFRASTRUCTURE LAYER. WE HAVE A CHANCE TO LEAD THAT AND WE HAVE A CHANCE TO CHANGE THAT AND HELP COMPANIES. IF YOU WERE ONE OF THE KEYNOTES YESTERDAY WE HAD A NUMBER OF LARGE CUSTOMERS TALKING ABOUT HOW DIFFICULT IT IS WITH ALL THE DIGITAL DISRUPTION OUT THERE TODAY TO MOVE FROM WHERE THEY ARE TO WHERE THEY NEED TO DO GO, TO DEAL WITH THE SECULAR CHANGES GOING ON IN THE WORLD. AND WE ARE ONE OF THE FEW COMPANIES THAT CAN HELP THEM GET THERE. SO FOR US WE'RE IN A GREAT POSITION RIGHT NOW AND WE NEED TO FOCUS ON EXECUTION. THAT IS THE NUMBER ONE THING ON OUR MIND.
FORTT: LET'S TALK ABOUT HARDWARE. A LOT OF PEOPLE POO POOED THE IDEA WHEN ORACLE BOUGHT SUN SAYING THEY DON'T REALLY WANT IT FOR THE HARDWARE AND THEN AFTER YOU ACTUALLY TOOK THE HARDWARE PEOPLE WERE SAYING THE MARGINS ARE GOING TO BE TERRIBLE. YOU BROUGHT UP THE MARGINS. BUT LATELY IT SEEMS LIKE THE MARGINS HAVE PLATEAUED A BIT FOR AWHILE. REVENUE GROWTH HASN'T BEEN WHAT YOU GUYS WERE LOOKING FOR AT LEAST ACCORDING TO WHAT YOU GUYS HAVE SAID IN THE PROXY. SO WHAT MOVES THE NEEDLE FROM HERE? HOW DO YOU GET HARDWARE REVENUE GROWTH ON THE TOP LINE TO GROW WHILE KEEPING YOUR MARGINS.
HURD: WELL AS WE REPORTED LAST QUARTER WE GREW OUR ENGINEERED SYSTEMS BUSINESS DOUBLE DIGITS. WE'VE NOW SOLD ALMOST 11,000. WE WERE JOKING BEFORE THE SHOW ABOUT YOU HAVING AN ENGINEERED SYSTEM WITH YOU. AND IT IS A VERY LARGE COMPUTER AND WE'VE SOLD NOW ALMOST 11,000 OF THOSE. WE'VE DONE OVER $3 BILLION OF HARDWARE ALONE OVER THAT IN ENGINEERED SYSTEM SO IT'S BECOME A VERY BIG BUSINESS FOR US. AND THIS IS REALLY THE MARRIAGE OF HARDWARE AND SOFTWARE TOGETHER. THAT PART OF THE BUSINESS HAS TAKEN A LARGE AMOUNT OF THE MARKET SHARE. WE ARE VERY BULLISH ON IT AND IT REALLY IS SORT OF WHAT YOU ARE HOLDING THERE THE INTEGRATION OF THE HARDWARE AND SOFTWARE TOGETHER TO CREATE A BETTER DIFFERENT USER EXPERIENCE. THIS IS THE WAY WE THINK COMPUTING IS HEADED AND THE GROWTH IN THAT PART OF THE BUSINESS HAS BEEN SIGNIFICANT FOR US.
FORTT: SO TALK ABOUT THE LANDSCAPE FOR ME. BECAUSE IT SEEMS LIKE YOU GUYS HAVE REALLY PIONEERED THAT ENGINEERED SYSTEMS APPROACH. THIS IS HARDWARE. IT IS EXPENSIVE HARDWARE. A LOT OF PEOPLE THOUGHT THAT THAT WOULDN'T WORK, THAT IT WAS OUT OF VOTE, BUT YOU HAVE PROVEN THAT THERE IS A MARKET FOR IT. BUT THEN AT THE SAME TIME, YOU'VE GOT CLOUD, SOFTWARE AS A SERVICE WHERE PEOPLE ARE ABLE TO PAY BY THE DRINK.
HURD: RIGHT.
FORTT: SO THERE IS COST SAVINGS, THERE'S OPTIMIZATION, THERE'S PERFORMANCE. WHERE DO YOU EXPECT MOST OF THE GROWTH TO COME FROM? IS IT GOING TO BE AT THE NARROWER MARGIN END OF THE SPECTRUM WHERE YOU HAVE INFRASTRUCTURE AS A SERVICE WHERE YOU ARE SAYING YOU ARE GOING TO BE PRICE COMPETITIVE? IS IT AT THE HIGHER MARGIN END OF THE SPECTRUM IN ENGINEERED SYSTEMS WHERE YOU GUYS ARE PUSHING TRYING TO GET MORE REVENUE?
HURD: THAT WAS ONE QUESTION IN LIKE 12 PARTS. SO THAT WAS GOOD. LET ME TRY TO HIT AS MANY OF THOSE AS I CAN. FIRST, I THINK THE TREND IN ENGINEERED SYSTEMS IS VERY SIMILAR TO THE TREND IN CLOUD OR WHAT IS REALLY MOTIVATING PEOPLE TO GO THIS DIRECTION AND THAT IS SIMPLICITY. IT'S REALLY THE FACT THAT I CAN MOVE BUDGETARY DOLLARS THAT I SPEND GLUING THINGS TOGETHER AND DOING ALL OF THIS INTEGRATION AND MOVING IT TO SOMEBODY ELSE. IN THIS CASE TO US. WE GLUE THE OPERATING SYSTEM TO THE SERVER, THE DATABASE TO THE OPERATING SYSTEM. PERHAPS MIDDLE WARE TO THE DATABASE, EVEN THE APPLICATION. AND WE DO THAT WORK AND THE CUSTOMER DOESN'T. IT'S VERY SIMILAR TO THE SAME THING ABOUT CLOUD. THE FACT IS THAT I NOW GET SOFTWARE OVER THE INTERNET. I DON'T KNOW THE SERVER IS, I DON'T KNOW WHAT THE OPERATING SYSTEM IS. IT IS DONE FOR ME. THE WORK IS DONE IN A WAY THAT IS SIMPLER NOW FOR ME. AND THAT DRIVE I THINK MOVES THROUGH THE INDUSTRY OVER THE NEXT SEVERAL YEARS. TO YOUR QUESTION ABOUT CLOUD, THERE ARE THREE LAYERS TO THE CLOUD. PLATFORM, AS YOU MENTIONED. INFRASTRUCTURE AND SOFTWARE AS A SERVICE, WHICH REALLY IS APPLICATIONS. IF YOU BREAK THOSE THREE LAYERS OUT, THERE ARE TWO LAYERS WHERE ORACLE IS EXTREMELY DIFFERENTIATED. THAT IS AT THE PLATFORM LEVEL. LARRY, THIS AFTERNOON WILL BE DOING SOME DEMOS. DEMOING OUR PLATFORM AS A SERVICE. THINK OF TWO CORE PRODUCTS AT THE PLATFORM LAYER. JAVA, THE MOST POPULAR PROGRAMMING LANGUAGE IN THE WORLD, AND THE ORACLE DATABASE, THE MOST POPULAR DATABASE IN THE WORLD. THAT WILL ALLOW OUR CUSTOMERS TO BUILD APPLICATIONS, IF YOU WILL, OVER THE INTERNET. WITH SOFTWARE OVER THE INTERNET. THEY DON'T NEED A COMPUTER, THEY DON'T NEED A LICENSE FEE. AND ABOUT 30%, JON, OF ALL IT SPENT IS DONE IN DEVELOPMENT AND TESTING OF APPLICATIONS.
FORTT: MICROSOFT HAS BEEN IN THIS SPACE WITH ASSURE. YOU ARE GOING TO BE GOING HEAD TO HEAD WITH THEM. YOU MAKE THE ARGUMENT THAT THEY ARE GOING TO WANT TO USE ORACLE'S DATABASES VERSUS MICROSOFT'S OFFERING AND SO FORTH. HOW TOUGH IS THAT SELL GOING TO BE THOUGH, GIVEN THAT THEY HAVE BEEN THERE ALREADY?
HURD: WELL LETS GO THROUGH IT. THEY HAVE DOT NET. WE HAVE JAVA. I LIKE OUR HAND. WE HAVE THE ORACLE DATABASE. THEY HAVE A DATABASE. WE LIKE OUR HAND. WE ARE DIFFERENTIATED AT THE PLATFORM LEVEL WITH THE BEST TOOLS IN THE WORLD. AT THE APPLICATION LAYER, WE HAVE TWO STRATEGIES THAT MAKE US UNIQUE. ONE, WE HAVE BEST OF BREED APPLICATIONS WHETHER IT'S IN HCM, ERP, EPM, MARKETING SALES. WE WANT EACH OF OUR APPLICATIONS TO BE BEST OF BREED. WE ARE WINNING NOW IN HCM. WE ARE WINNING – WE ARE PERHAPS THE ONLY ONES WITH ERP, EPM IN THE CLOUD. NOW, MARKETING WE'VE TAKEN A HUGE LEAD IN MARKETING CLOUD. AND THEN WE ARE NOW THE ONLY ONE WITH A SUITE OF APPLICATIONS. SO THAT NOW INSTEAD OF HAVING TO GO TO 25 OR 30 SEPARATE CLOUD PROVIDERS, YOU CAN DO THE BULK OF YOUR APPLICATION WORK WITH ONE COMPANY BEING ORACLE. JON, LET ME JUST FINISH. DIFFERENTIATED PLATFORM LEVEL. DIFFERENTIATED AT THE APPLICATION LAYER. INFRASTRUCTURE, WE THINK WILL MOVE IF YOU ARE BUYING PLATFORM FROM US, YOU'LL BUY INFRASTRUCTURE. IF YOU BUY APPS FROM US, YOU'LL BUY INFRASTRUCTURE. AND WE'LL PRICE RIGHT UP AGAINST THE BIG GUYS IN THIS.
FORTT: AND THAT IS WHAT I WANT TO SLIP IN THOUGH THEY ARE TELLING ME WE ARE RUNNING OUT OF TIME. IS THAT HOW YOU PRESERVE MARGINS WHEN YOU ARE PRICE COMPETITIVE ON INFRASTRUCTURE BY BEING ABLE TO UP SELL THOSE OTHER CRITICAL PIECES THAT YOU TALKED ABOUT WHERE YOU BELIEVE ORACLE IS BEST OF BREED?
HURD: JON, WE'LL PRICE THE INFRASTRUCTURE RIGHT ON TOP OF AN AMAZON BECAUSE WE THINK IT IS GOING TO BE CONVENIENT FOR OUR CUSTOMERS. IF THEY ARE BUYING PLATFORM FROM US, THEY WILL BUY INFRASTRUCTURE FROM US. IF THEY BUY SAS FROM US, THEY WILL BUY INFRASTRUCTURE FROM US. AND WE THINK IT IS GOING TO BE A GREAT MARKET FOR US.
FORTT: MARK HURD, CEO OF ORACLE. THANKS FOR JOINING US ON "SQUAWK ALLEY."
HURD: THANKS, JON.
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