Oracle Kicks Butt, Names Names

Oracle (Nasdaq: ORCL) beat many Wall Street predictions in its second fiscal quarter, reporting US$1.3 billion in net income and a year-over-year 36 percent increase in stock earnings. The increase in quarterly profit equated to 25 cents per share.

The Redwood Shores, Calif., software giant raked in $5.3 billion in revenue during the quarter, a 28 percent increase from its second quarter of last year. When charges are excluded, Oracle's quarterly earnings per share were up 40 percent to 31 cents per share and net income was up 38 percent to $1.6 billion compared with the same quarter last year.

The company enjoyed huge growth in software license revenues, President and CFO Safra Catz said. "In Q1 we reported new software license revenues up 35 percent, the strongest growth of any quarter in 10 years. In Q2 we did even better with new software license sales up 38 percent. We exceeded our guidance and our best-case forecast with strong revenue growth across all product lines and geographies."

Stacks of Cash

Total software revenues were up 29 percent to $4.2 billion and new software license revenues totaled $1.7 billion. Database and middleware new license revenues were up 28 percent and applications new license revenues increased 63 percent.

Services revenues also climbed. Oracle said the service revenue figure for the quarter of $1.2 billion represents a 22 percent increase compared with the same quarter last year.

Not shy about comparing itself to its competitors, Oracle named names.

"In Q2 Oracle's applications new license sales grew 63 percent compared to SAP's new license sales growth rate of 15 percent in their most recently completed quarter," said President Charles Phillips. "We like our growth strategy of expanding beyond ERP into high-end industry specific vertical software in contrast to SAP's strategy of moving down market to sell ERP systems to small companies."

Oracle also trumped IBM (NYSE: IBM), CEO Larry Ellison pointed out. "Our database and middleware new license sales grew 28 percent in Q2," he said. "We continue to take market share from IBM in both product categories."

Well-Honed Sales Strategy

Oracle's strong Q2 can largely be attributed to the way it managed to integrate sales staff from the companies it acquired during the past several years, Nucleus Research analyst Rebecca Wettemann said.

Oracle is very structured in the way it compensates its salespeople, Wettemann told CRM Buyer. "Despite a number of different product lines and people brought together, the sales teams work well. Some companies don't pull that off, particularly when they are trying to integrate sales teams after acquisitions."

Aside from managing to integrate the sales teams in a way that avoided them "stepping on each other," Oracle also did a good job of focusing on customer needs during a tough economic period, said Wettemann.

"Oracle is very much focused on integration and helping customers leverage value out of the software they have," said the analyst. Oracle "positions itself as a partner" and helps customers get the most value out of the software they own, she said.

"A tough economy means people are more cautious about making purchases," said Wettemann. "What they don't want is a software sales guy. They want somebody who is going to be a partner and show them not only how to get the most value but how to prove that value to their boss. Today, that sells software."