The Village View

Monday, February 20, 2006

Larry's new revenue stream or just new excuse

Here's Oracle CEO Larry Ellison at the recent Credit Suisse Software conference explaining how to view Oracle's revenue stream:

"...I think new license revenue is an interesting number, but I think you've got to remember, we are -- our business is largely a subscription-renewal business. In other words, the bulk of our revenue, the largest business is not our "what new license or new subscriber" business. By far, our largest business and by far our most profitable business are existing subscribers that renew their subscriptions every year...

...we are heavily biased towards building our recurring revenue stream rather than a new license stream, because it's just much more profitable business. There's more money in it."

One thought is that this could explain Oracle’s recent interest in and acquisition of Open Source software companies. After all, most OSS companies don’t make money by charging for an up-front license, but rather collect on maintenance and support contracts. These contracts are generally charged on a monthly or annual basis. Hmm, sounds kind of like a subscription business.

Of course, maybe there’s another reason that Larry is so interested in the subscription business: including acquisitions, Oracle's total new application and database license revenue fell 16% from Q2-05 to Q2-06.

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