Oracle buddies up with Microsoft. Plus our take on Salesforce and Meta news

Published Fri, Sep 15 20233:35 PM EDT

Kevin Stankiewicz @in/kevin-stankiewicz-b5593466 @kevin_stank

A new partnership between Microsoft (MSFT) and Oracle (ORCL) has the potential to benefit both Club holdings in the competitive cloud-computing landscape. The pair announced Thursday that Oracle would now put database hardware inside the data centers of Microsoft's cloud unit Azure. The move is aimed at making it easier for Azure customers to access and maximize Oracle services, such as Oracle Autonomous Database, and to generally speed up transition to the cloud, the tech giants said. Oracle, a database pioneer with more than 40 years of history operating in the market, had existing offerings geared toward Azure customers . But the new deal — called Oracle Database@Azure — is a more tightly integrated service that's expected to deliver improved reliability and performance. This upgrade will be especially beneficial as artificial intelligence adoption grows, Microsoft CEO Satya Nadella and Oracle co-founder and Chief Technology Officer Larry Ellison said at an event at Microsoft's headquarters Thursday . Wall Street analysts were generally upbeat on the implications for Microsoft and Oracle, which joined the Club's portfolio a month ago. "Win-win" was a phrase used in research notes from analysts at Bernstein, Barclays and Deutsche Bank "This move will expedite cloud migration for both companies and help them better compete against the likes of AWS and GCP," Barclays analysts wrote, referring to Amazon' s (AMZN) Amazon Web Services and Alphabet 's (GOOGL) Google Cloud Platform. Both Amazon and Alphabet are also Club holdings. "For Microsoft, this will help them lift-and-shift mission-critical Oracle workloads to Azure, where they can further monetize them with AI capabilities such as OpenAI," Barclays analysts continued. "For Oracle, this adds credibility to their cloud narrative and ensures they will get paid for moving on-prem workloads over to Azure." Ellison said about 500 customers "successfully" used the old offering from Oracle and Azure, but still wanted a more "seamless connection" between where their data is stored and their other applications being run on Azure. For example, now Azure customers will be able to buy access to Oracle databases directly through Azure Marketplace, an app store for a range of software optimized to run on Microsoft's cloud-computing service. Ellison said there's plenty of on-premise databases that have not moved to the cloud, and contended that Oracle Database@Azure should motivate more customers to embark on that transition. "A majority of the data has not migrated from on-premise into the cloud as yet, but it will. And we are trying to hasten that process to make it easier for customers to actually move their entire datacenter workload to the cloud," Ellison said. Analysts at Bernstein downplayed concerns that the deeper partnership with Microsoft will hurt Oracle's fast-growing cloud-computing service, known as Oracle Cloud Infrastructure. OCI's emerging leadership for AI computing is a big part of our investment thesis in the company. "Companies where Oracle is key technology or where the differentiated capabilities of Oracle OCI are critical will still move to OCI," Bernstein wrote in a note to clients. "This partnership also lowers the potential risk of Microsoft trying to target Oracle database customers to move off Oracle. We never believed that Oracle wins everything in [Infrastructure-as-a-Service/Platform-as-a-Service], but they offer differentiated capabilities that has allowed them to become a strong #4. If this partnership is executed correctly, the upside is far greater than the downside." Salesforce back to hiring Salesforce is hiring 3,300 people across its sales and engineering units, in addition to staff for its fast-growing data cloud team, Bloomberg reported Thursday . "We have some very successful parts of our business right now, and we want a surge in those areas," Brian Millham, Salesforce's chief operating officer, told Bloomberg in an interview. CRM 1Y mountain Salesforce's stock price over the past 12 months. The hires follow Salesforce's decision in January to lay off about 10% off its workforce , which at the time totaled more than 79,000 people. The job cuts were part of an aggressive and ultimately successful push to improve profitability at Salesforce, which reported an adjusted operating margin of 31.6% in its most-recent quarter , up from 19.9% in the year-ago period. At its Dreamforce conference in San Francisco this week, Salesforce highlighted a range of AI tools that we believe should help attract new business after a period of slower top-line expansion. Salesforce can both invest in growth and "continue to achieve great margins," CEO Marc Benioff told Bloomberg on Thursday. "We know we have to hire thousands of people," he said. Adding employees will translate to additional expenses, but it could be a sign management believes demand for enterprise software could pick up soon. Indeed, continued cost discipline in other areas and a reacceleration of revenue growth are conditions under which profitability can be protected. META 1Y mountain Meta Platforms' stock price over the past 12 months. What's up with WhatsApp? The head of WhatsApp on Friday denied a report in the Financial Times , which suggested messaging service owned by Meta Platforms has discussed showing advertisements inside the app. The executive, Will Cathcart, called the story "false," in a post on X , the social media site formerly known as Twitter. "We aren't doing this," he wrote. The Financial Times reported that discussions about displaying ads in WhatsApp — specifically, spliced within the list of conversations — were in their early stages, citing three people familiar with the matter. Even with WhatsApp's denial of the FT story, the report caught our attention because there's been elevated attention lately on Meta's efforts to better monetize the messaging app with billions of users around the world. Meta acquired WhatsApp for $19 billion in 2014. Last year, Meta CEO Mark Zuckerberg told Jim Cramer that WhatsApp is "really going to be the next chapter, with business messaging and commerce being a big thing there." So far, WhatsApp's business messaging efforts have demonstrated "early, but promising progress," CFO Susan Li said on Meta's July earnings call. To be sure, WhatsApp remains a very small piece of the company's overall revenue pie, and it's not core to our investment thesis, which rests on successful cost-cutting efforts and improved ad sales on Facebook and Instagram. Nevertheless, WhatsApp monetization remains an interesting area to watch, given its massive reach globally. (Jim Cramer's Charitable Trust is long ORCL, MSFT, GOOGL, AMZN, CRM and META. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. 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The Oracle logo is displayed on the exterior of Oracle's headquarters in Redwood Shores, California, Dec. 9, 2021.

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A new partnership between Microsoft (MSFT) and Oracle (ORCL) has the potential to benefit both Club holdings in the competitive cloud-computing landscape.