The Village View

Wednesday, September 20, 2006

Thoughts on Oracle Q1 '07 earnings announcement

so, not surprisingly, I've got a few thoughts on Oracle's earnings announcement yesterday. In general, I think you have to say that Oracle had a good quarter, generally meeting (and in Non-GAAP EPS exceeding) guidance/consensus. As is my style, I'll bullet point some things I thought were interesting or on which I think some color commentary would be helpful:

Growth Analysis

Q1 06
Q1 07
Oracle apps76
Total app license rev127

- From the above, you can see that Peoplesoft was the largest organic growth contributor (34M) with a 69% growth
- Probably largely due to pent up demand as a result of Applications Unlimited
- Peoplesoft to Fusion will be major re-implementation and customers may slow purchases again as Fusion approaches
- Oracle Apps was up 18% - 76M to 90M. Because this likely includes 2M of Portal, the "real" Oracle Apps growth rate is just under 16%. - i-flex was not expected to be included by the Street (think Oracle owns just over half). Without this 9M, App license rev was 219M (still above consensus of 213M)
- Siebel down from last comparable quarter (Siebel's Q3 05) of 112M to 31M). See my previous post.
- Organic growth was 47% over a pretty weak Q1 05

- If you compare Oracle + Siebel Q1 06 (using comparable Sept 05 quarter for Siebel) to Oracle (including acquisitions) Q1 07, new app license revenue is actually down about 5% - 239M (127 Oracle + 112M Siebel) to 228M
- The decrease is even larger if you compare to Oracle + combined pre-acquisition companies Q1 05

Oracle Assertions

Some of the statements made on yesterday's call (especially by Chuck and Larry) were in the ludicrous category. Oracle are great marketers, I'll give 'em that.

- It takes some big ones to say that SAP's SOA enabled applications are 2 years behind Oracle's Project Fusion Apps. Basically, they twisted statements Shai announced at TechEd about the "core" plus enhancement packages. mySAP ERP 2005, delivered on SAP NetWeaver (read SOA) , is the core ERP platform SAP delivered in June 05. SAP will release regular functionality enhancements that do away with the need for major upgrades through 2010. In other words, you don't have to rip out your system constantly in order to upgrade. This is a good thing, isn't it?

- I thought I heard Larry say something about more SAP customers on Fusion middleware than on NetWeaver. My sense is that somehow they are counting something they sell alongside the database as "Fusion MW." I'd be shocked if this statment were even remotely true with regards to the app server. Heck most Oracle customers (Peoplesoft, JDE, Siebel) aren't on Fusion middleware.

- I haven't seen anything to say that SAP is changing its acquisition strategy. All I heard Henning say was that SAP will continue to look at acquisitions as part of our strategy (at SAP they're generally around building out the product set, not acquiring customers).

- Oracle claimed 88 "head-to-head" wins against SAP. If you listened to the Q4 earnings call you heard Chuck claim they beat SAP 585 in fiscal 06. Jeff did a pretty good job of debunking that one. Call me dubious on this one too.

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