Oracle reported better-than-expected quarterly earnings and sales of new software licenses, but analysts seem divergent on whether Oracle is positioned for longer-term growth in 2010. Throughout 2009, Oracle has continued to release new products and enhancements to existing lines, as it positions itself to challenge IBM in the systems arena.
quarterly results may have been solid, but analysts seem to have mixed views on
the company's prospects heading into 2010.
On Dec. 17, Oracle reported quarterly profits above Wall Street
expectations, with revenues of $5.86 billion and net income of $1.46 billion.
Sales of new software licenses rose 2 percent year-over-year, a marked reversal
from the previous quarter, when Oracle
predicted that sales of new licenses would be either flat or markedly down.
But will Oracle maintain that growth? And what does it mean for the tech
sector as a whole as miserly, recessionary 2009 comes to a close?
"PGR experts are skeptical about
Oracle maintaining the level of growth seen in Q2 going into 2010," Laxmi
Poruri, an analyst at Primary Global Research, wrote in an e-mail to eWEEK.
"Experts believe the technology value proposition for additional modules
like order management, talent model, etc. are not going to drive sales as much
as Oracle would like us to believe unless there is a more significant
turnaround than what we are seeing in terms of total IT [spending]."
Investors "are looking for new and compelling products from Oracle
(including SAAS [software as a service], hosted offerings) that would improve
the business of the app side," Poruri said. "Ellison addressed the
vision of Fusion (in terms of SOA [service-oriented architecture] and its
advantages in the SAAS and hosted environment), but again, initial uptake may
not be there due to high upfront TCO."
On the bright side for Oracle, Poruri said, "Our experts are seeing
that there is less attrition in terms of movement to third-party support and
maintenance firms for Oracle, relative to Microsoft and SAP."
And not all analysts saw dark clouds for the country's second-largest
Oracle's results showed that "enterprise IT spending is picking up nicely,
that Oracle is executing well with its broad product portfolio and that Street
estimates ... have continued to move higher," Jefferies & Co. analyst
Ross MacMillan wrote as chief author of a Dec. 18 research note. "Oracle's
database [and] middleware business outperformed as we would expect, given its
shorter sales cycle and some additional drivers of growth (such as new releases
and the Exadata OLTP [online transaction processing]/database machine)."
While some tech companies chose to narrow their product pipelines during the
global recession, Oracle issued a variety of new upgrades and releases
throughout 2009. Many of these, such as the Oracle Enterprise GRC
(Governance, Risk and Compliance) Manager and a new version of Oracle
Enterprise GRC Controls, are designed to
provide an end-to-end solution for organizations' needs.
However, by offering end-to-end solutions and closed-loop products, Oracle
seeks to further push its brand in the enterprise at a time when it faces
increased competition on a number of fronts.
During the summer, Oracle also introduced Fusion Middleware 11g, an upgrade
to its middleware platform that it said allows for increased operational
insight and automation. Many of its subsequent products make use of the
Perhaps the most dramatic news from Oracle came in April, when the company
announced that it would acquire Sun Microsystems in a deal worth roughly $7.4
billion. When the deal is complete, Oracle will be able to more fully integrate
Java and Solaris into its products. However, the
Oracle-Sun deal is currently under antitrust scrutiny,
the European Commission.
Based on previous comments by Oracle CEO
Larry Ellison, it seems likely that 2010 will see Oracle
moving to challenge IBM in the systems arena.
"We have a deep interest in the systems business," Ellison told an
audience at the Churchill Club, in San Jose, Calif.,
in September. "We've already beaten IBM
in software. Now we want to beat them in systems."