David Bradshaw
Oracle beats guidance
Last night, Oracle released its results for the quarter to 30 November, its fiscal Q2 2007. Total revenues were $4.16 billion, up 26% on last year's revenues, or 23% at constant currencies. Operating income was $1.36 billion up 22% (16% constant currencies), and though operating margin declined to 32.6% from 33.9% a year ago, last year's margin was boosted by the reversal of litigation expenses, and without this the margins would have been almost identical.Total EMEA revenues were up by 30% to $1.42 billion. However, since the average value of the Euro was 6% higher in the quarter just closed compared to last year and in the UK (Oracle's largest market outside the US) the pound was higher by almost 7%, the EMEA revenues were probably up by around 24% in constant currencies. Revenues from the Americas were up by 25% to $2.17 billion while Asia-Pacific revenues were up 22% to $571 million.Comment: There's lots of positive news in this, but some not so good too. The good news was that sales execution was excellent in both EMEA and Latin America, but not so good in North America and Asia-Pacific. Oracle put this down to new hires in North America coupled with sales people coming on-board from acquired companies - this led to a lot of time being spent on training and not selling. If there is a silver lining to this dark cloud, it is that Oracle entered its Q3 with an unprecedented large pipeline, and should make its projections for the upcoming quarter very easily. Some of the financial analysts were not reassured by this, seeing it as a potential warning that sales cycles were getting pushed out (which is often the first sign of a downturn in sales). However, the Oracle people on the call were adamant that it was just a temporary glitch in the normally fearsomely effective Oracle sales machine.One topic that CEO Larry Ellison spent some time on during the call was Oracle's growing focus on vertical markets through acquisitions and enhancements to its existing products. He spoke at length about the retail market, which Oracle began to focus more strongly on from March 2005 when it bought Retek. Ellison claimed that it has gone from rough parity with SAP in the retail market to clear leadership, with eight out of the world's top ten retailers using Oracle's retail software.What is clear to us is that Oracle's vertical market strategy is becoming a significant strength for the company. If you look at Oracle's application portfolio from a 'vanilla' point of view, then the combination of Oracle's business applications with those of PeopleSoft, JD Edwards and Siebel, and with the upcoming Fusion applications, looks very messy. But looked at from a vertical perspective, it makes a great deal more sense. Oracle continues to carry on buying vertical specialists to fill out its portfolio in future, seeing this as the way that it will eclipse SAP.
