Wednesday, September 20, 2006
Oracle yesterday announced a 29% increase in earnings and a 30% increase in revenue for the first quarter. (The percentages reflect the increase over the first quarter last year.) Total revenue was $3.59 billion. These results far exceeded analyst expectations.
There are several aspects of Oracle's performance that are especially positive:
In Oracle's press release, it was quick to use these results as vindication of its strategy to beat SAP.
- These results are not just the result of squeezing more money out of Oracle's installed base: new license sales were up 28% overall, which include both database and application sales.
- New application license sales rose a whopping 80%, indicating Oracle's success in getting customers of its acquired products to continue buying.
- Oracle's core database and middleware business also expanded, at a 15% pace.
- These first quarter results follow exceptionally strong performance in the previous quarter.
- The first quarter is normally Oracle's slowest quarter, as the opportunity pipeline tends to be drained as a result of the typical year-end push by the sales force."We're rapidly taking applications market share from SAP," said Oracle President, Charles Phillips. "Q1 was the second consecutive quarter that Oracle's applications new license sales growth was 80% or more. That's ten times SAP's 8% new license sales growth rate in their most recently completed quarter."Recently, I've been somewhat skeptical of Oracle's ability to fund continued development of its acquired products at the same time that it is developing its next generation Fusion applications. The financial results from this quarter and the previous quarter will certainly help in its efforts.
"SAP appears to be rethinking their strategy as they lose application market share to Oracle and confront the difficulties of moving their application software to a modern Service Oriented Architecture (SOA)," said Oracle's CEO, Larry Ellison. "They've just announced that they are delaying the next version of SAP applications until 2010. That's a full two years behind Oracle's scheduled delivery of our SOA Fusion applications. And now Kagermann is talking about an acquisition strategy to augment SAP's slowing organic growth. These are major changes in direction for SAP."
The Wall Street Journal has more on Oracle's performance.
More on Oracle's Fusion strategy
Oracle's Fusion strategy: clear as mud
Fusion to build on Oracle's E-Business Suite