Close
  • Latest News
  • Artificial Intelligence
  • Big Data and Analytics
  • Cloud
  • Networking
  • Cybersecurity
  • Applications
  • IT Management
  • Storage
  • Sponsored
  • Mobile
  • Small Business
  • Development
  • Database
  • Servers
  • Android
  • Apple
  • Innovation
  • Blogs
  • PC Hardware
  • Reviews
  • Search Engines
  • Virtualization
Read Down
Sign in
Close
Welcome!Log into your account
Forgot your password?
Read Down
Password recovery
Recover your password
Close
Search
Logo
Logo
  • Latest News
  • Artificial Intelligence
  • Big Data and Analytics
  • Cloud
  • Networking
  • Cybersecurity
  • Applications
  • IT Management
  • Storage
  • Sponsored
  • Mobile
  • Small Business
  • Development
  • Database
  • Servers
  • Android
  • Apple
  • Innovation
  • Blogs
  • PC Hardware
  • Reviews
  • Search Engines
  • Virtualization
More
    Home Applications
    • Applications
    • Database

    Oracle Touts Apps Growth; Analysts Suggest Caution

    By
    Renee Boucher Ferguson
    -
    September 20, 2006
    Share
    Facebook
    Twitter
    Linkedin

      eWEEK content and product recommendations are editorially independent. We may make money when you click on links to our partners. Learn More.

      The tension mounted as Oracle readied its first-quarter 2007 earnings report after the close of market Sept. 19.

      It was clear the company was going to do well—preliminary reports were published the previous week—but no one knew exactly how well. Or the implications for Oracles biggest competitor, SAP.

      The numbers, on face value, tell a pretty good story: Oracles total software revenue was up 29 percent to $2.7 billion, with database and middleware license revenue up a respectable 15 percent.

      But the real heart-stopper: Applications new license revenues were up 80 percent.

      SAPs software license revenues, meanwhile, were up 8 percent for its second quarter, reported in July.

      Oracle never let that thought pass for a moment during its 35-minute press and analyst call Sept. 19.

      A banner on its Web site said early in the day Sept. 20 “Oracle 80 Percent, SAP 8 Percent.”

      The numbers suggested that Oracles two-year acquisition spree is paying off.

      In that time, Oracle has acquired more than 20 companies, reportedly spending more than $20 billion all-tolled. And the numbers suggest Oracle is gaining market share over SAP.

      But in the midst of a flurry of optimistic research reports from financial analysts with headlines like “Kicking Apps and Taking Names,” a note of caution can be heard.

      Goldman Sachs and Credit Suisse, among others, have suggested that investors back out of Oracles acquisitions to get a clearer picture of organic license revenue growth—a key indicator of how the software company is faring in the market, and against SAP.

      Rick Sherlund, the lead analyst on Goldman Sachs research note, points out that Oracle Fusion Middleware showed a reported 56 percent growth, but that number actually includes some analytics revenues from Siebel.

      Taking Siebel out of the equation, Oracles middleware growth is closer to 25 percent—still a good growth opportunity for Oracle and a pretty good showing overall.

      But take a closer look at the applications numbers and a different story starts to emerge.

      According to Goldman Sachs, the companys reported license revenue growth of 80 percent shrinks down to 46 percent if Oracles acquisitions of Siebel, i-Flex and Portal Software are excluded—still an impressive number, but not quite the massive gain Oracle reported.

      “If we were to back out PeopleSoft and look at Oracles traditional applications business, we suspect growth of about 15 percent would be evident,” wrote Sherlund, in New York.

      Credit Suisse said that Siebel sales were about $100 million for the same first-quarter period last year.

      The suggestion is that either sales in this part of the business have fallen by about 70 percent or, more likely, its sales are classified differently within Oracle.

      By adding Siebels $100 million back into the Oracle mix for the same quarter a year ago, new license sales come out flat.

      /zimages/1/28571.gifTo read more about Oracles Q1 2007 earnings report, click here.

      Bernstein analyst Charles DiBona wrote that despite Oracle beating consensus expectations, “we believe that license revenue performance still fell within normal seasonal patterns.”

      Bill Wohl, vice president of product and solutions public relations at SAP, said that its impossible to do an apples-to-apples comparison of SAP and Oracles earnings given each companys fiscal calendar.

      “How theyre doing versus us in the current quarter, you cant write about that yet,” said Wohl, in Newtown Square, Penn. “The only way to do that is to wait until we report our next quarter.”

      SAP, which saw an 8 percent increase in software license sales for its second quarter of 2006, reported in July, will announce its third-quarter earnings Oct. 19.

      Wohl also threw a potshot at Oracles accounting, saying that its combined growth with Siebels combined growth is not quite adding up.

      “The sum of the parts is greater than the sum of the whole,” said Wohl.

      “Oracle may have retained Siebels customer base, but theyre not actually growing. Theyre going in the reverse direction, with about a 4 percent decline in business.”

      Analysts suggest that much of Oracles growth for the quarter—while maybe putting a dent in SAPs business—can largely be attributed to PeopleSoft customers who, feeling a little more comfortable with Oracles strategy, are finally opening up their pockets to buy more software.

      That growth, according to Goldman Sachs, is likely to slow over the next few quarters as Oracle begins to “anniversary” acquisitions.

      Thats not to say Oracles strategy of growth through acquisition isnt working.

      The company posted its best quarter in over a year, and exceeded analysts—and its own—guidance.

      Its also done remarkably well in retaining an acquired customer base that had one foot out the door from the start.

      But even with all the brouhaha around one quarters earnings over another, the fact is, both Oracle and SAP are several years out in their respective service-oriented architecture strategies—and in luring their customer base to their next-generation suites.

      It could be a few years before either one can claim true dominance.

      “Real customer relationships take years to undo, and there is simply more noise about share shifts than actual customer movement,” writes Goldman Sachs Sherlund.

      “The migration to the next generation of applications based on SOA will take place over the next five to 10 years, and both companies are likely to benefit, in our view.”

      /zimages/1/28571.gifCheck out eWEEK.coms for the latest news, reviews and analysis about productivity and business solutions.

      Renee Boucher Ferguson

      Get the Free Newsletter!

      Subscribe to Daily Tech Insider for top news, trends & analysis

      Get the Free Newsletter!

      Subscribe to Daily Tech Insider for top news, trends & analysis

      MOST POPULAR ARTICLES

      Artificial Intelligence

      10 Best AI 3D Generators 2023

      Aminu Abdullahi - November 17, 2023 0
      AI 3D Generators are powerful tools for creating 3D models and animations. Discover the 10 best AI 3D Generators for 2023 and explore their features.
      Read more
      Latest News

      Zeus Kerravala on Networking: Multicloud, 5G, and...

      James Maguire - December 16, 2022 0
      I spoke with Zeus Kerravala, industry analyst at ZK Research, about the rapid changes in enterprise networking, as tech advances and digital transformation prompt...
      Read more
      Applications

      Datadog President Amit Agarwal on Trends in...

      James Maguire - November 11, 2022 0
      I spoke with Amit Agarwal, President of Datadog, about infrastructure observability, from current trends to key challenges to the future of this rapidly growing...
      Read more
      Cloud

      IGEL CEO Jed Ayres on Edge and...

      James Maguire - June 14, 2022 0
      I spoke with Jed Ayres, CEO of IGEL, about the endpoint sector, and an open source OS for the cloud; we also spoke about...
      Read more
      Applications

      Kyndryl’s Nicolas Sekkaki on Handling AI and...

      James Maguire - November 9, 2022 0
      I spoke with Nicolas Sekkaki, Group Practice Leader for Applications, Data and AI at Kyndryl, about how companies can boost both their AI and...
      Read more
      Logo

      eWeek has the latest technology news and analysis, buying guides, and product reviews for IT professionals and technology buyers. The site’s focus is on innovative solutions and covering in-depth technical content. eWeek stays on the cutting edge of technology news and IT trends through interviews and expert analysis. Gain insight from top innovators and thought leaders in the fields of IT, business, enterprise software, startups, and more.

      Facebook
      Linkedin
      RSS
      Twitter
      Youtube

      Advertisers

      Advertise with TechnologyAdvice on eWeek and our other IT-focused platforms.

      Advertise with Us

      Menu

      • About eWeek
      • Subscribe to our Newsletter
      • Latest News

      Our Brands

      • Privacy Policy
      • Terms
      • About
      • Contact
      • Advertise
      • Sitemap
      • California – Do Not Sell My Information

      Property of TechnologyAdvice.
      © 2022 TechnologyAdvice. All Rights Reserved

      Advertiser Disclosure: Some of the products that appear on this site are from companies from which TechnologyAdvice receives compensation. This compensation may impact how and where products appear on this site including, for example, the order in which they appear. TechnologyAdvice does not include all companies or all types of products available in the marketplace.

      ×