Wednesday, 24 June 2009

Oracle – reasons to be cheerful

(By Philip Carnelley – Wednesday 24th June 2009 9:45am). Software giant Oracle cheered the markets last night with its Q4/FY results to 31 May. Q4 revenues rose 4% at constant currency (ccy) to $6.9bn (down 5% as reported). FY revenues grew 10% ccy (+4% as reported) to $23.3b. Using ccy figures: over the year, new database/middleware software licences were up 7%, whereas new applications licences fell 10%. Maintenance revenues grew 12% for applications and 23% for database. EPS dropped in the quarter, which will grab the headlines, though operating margins of 42% for the quarter and 36% for the year were both up 1pp yoy. Management guided 0-2% yoy ccy growth this quarter excluding Sun.

What was most cheering was that the company, something of an industry bellwether, said it believes that stability is returning to the market. Execs commented that customers are not as nervous as they were at the beginning of the year though budgets remain very tight, and said its pipeline is growing “significantly” – but without giving details.

As ever, Oracle Co-President Chuck Phillips stuck the oar into archrival SAP, boasting that “we…took market share from SAP in every region around the world.” He said that Oracle grew its European applications business by 5% [ccy] and compared that to SAP. As SAP’s last reported quarter was Q1, this is not a straight comparison – but it is true that SAP’s new licence sales took a nosedive in that quarter, down 27% (ccy) in EMEA and 35% in the Americas, compared to +5% and -22% at Oracle for this quarter.

Larry Ellison also took a swipe (more than once) against – clearly his bête noire of the moment – saying Oracle was repeatedly winning business against them. In fact, Oracle’s On-Demand software revenue line grew 12% (18% at ccy) in the year. But, at $779m this only represents 3% of Oracle revenues. By comparison, Salesforce’s revenues for last year were $1.1b, up 44%, and the company is forecasting a further 16% increase for the next FY to around $1.25b.

Given that Oracle’s biggest revenue falls were in its fourth quarter, the main reasons for optimism about these numbers were that the company saw growing revenues (at least before currency shifts) in all regions and generally beat expectations. We will have to take its comments on its pipeline on trust – at least until the next quarter. However these results do support our thesis that things are bottoming: CIOs are becoming able to plan with more confidence during this year, leading to potential uptick in IT spending in 2010.

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