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Friday, July 01, 2005

Oracle boasts strong growth in apps business

Oracle announced a 24% rise in revenue for its fourth quarter, which it attributed to its merger with PeopleSoft and strong growth across all product lines. Oracle reported revenue of $3.88 billion and a 3.2% rise in profits. North America license revenue was up 39%, and there was particular success in small and mid-size deals.

Although the numbers exceeded Wall Street expectations, they may not be as strong as they first appear. The reason is that Oracle refused to indicate how much revenue came from the Oracle side and how much came from the PeopleSoft side. Without that information, it's impossible to know the true growth rate until a quarter to quarter comparison can be done for the merged company--in other words, next June.

According to BusinessWeek, Oracle's revenue was actually slightly less than if Oracle and PeopleSoft had remained independent.

Tellingly, Oracle co-President Safra Catz said that it was "irrelevant" to separate out license revenue from sales of Oracle's products versus those of PeopleSoft. "We really merged the sales organization entirely," she said. "There are no PeopleSoft salesmen or Oracle salesmen."

Trust me: Oracle knows exactly how much of each product it sold. Why would it not want to talk about that? Since Oracle won't say, I'll speculate: sales of PeopleSoft products were weak and Oracle had to make it up on the Oracle side.

One problem that Oracle might be having is that during its fight for PeopleSoft, PeopleSoft was making huge discounts in order to keep its revenue numbers up. That would have pulled in deals from future periods, which drained the pipeline. I suspect that Oracle may have been doing a little bit of the same thing to get the results that it got last quarter. Oracle is normally more disciplined than most vendors in not rewarding prospects that wait to sign until the last day of the quarter. But I did hear that Oracle was offering some pretty aggressive discounts a couple of weeks ago.

Combine the drained pipeline with the natural wait-and-see attitude of PeopleSoft customers after the acquisition, and you can envision why sales on the PeopleSoft side might have been problematic. This might explain, in part, why Oracle was so interested in rebuilding and expanding the J.D. Edwards reseller channel earlier this year--to do anything it could to bolster the PeopleSoft side and thus justify the acquisition.

For Oracle and PeopleSoft users the message is clear: if you've been planning some additional license purchases, or implementing some additional modules, understand that Oracle might continue to be in the mood to deal. Name your price--you might be surprised.

Related posts
Oracle's new reseller strategy and speculation on the future of JDE
Brawl continues between Oracle and SAP
Oracle takes control of PeopleSoft

by Frank Scavo, 7/01/2005 10:38:00 AM | permalink | e-mail this!

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