By Erika Morphy E-Commerce Times
03/27/08 1:55 PM PT
Although weakness in new license growth has alarmed Oracle investors, the company's position may not be as dire as it seems at first glance, according to Rebecca Wettemann, vice president of Nucleus Research. When economic times get rough, companies are more likely to turn to more affordable subscription services, and Oracle's SaaS offerings may be its ace in the hole.
How Much is 'Free' Costing You? Learn how DaveRamsey.com saw a 567% uplift in ROI with Omniture. This complimentary guide and webinar cover the most important factors in selecting an analytics solution. Download Now.
Oracle's (Nasdaq: ORCL) shares fell 7.2 percent Thursday on news that the company did not sell as many new licenses in its third quarter as expected. The stock closed at US$19.43 per share, down from $20.94 a day earlier.
Sales of new software in Q3 registered $1.6 billion, a 16 percent increase from the same quarter last year. Analysts had been expecting an increase of 20 percent or more.
Oracle also reported a 30 percent increase in its quarterly profit and a 21 percent increase in revenue, with net income registering $1.3 billion on revenue of $5.3 billion. In these areas, Oracle met the Street's expectations.
Oracle has built itself a financial cushion with its aggressive acquisition strategy over the last several years: Along with new customers, it has also accumulated a steady stream of maintenance revenue.
Key Indicator
However, it is growth in new licenses that most analysts look to when accessing an IT vendor's long term health and stability.
The slowdown in license growth is a reflection of companies' mounting concerns about the U.S. economy in general and the turmoil in the financial markets in particular, Oracle CFO Safra Catz told listeners on a conference call.
"Customers got a little more cautious at the end of the quarter, given what was going on in the financial markets," she stated.
Missing the Point
Wall Street may be missing a subtle -- yet crucial -- metric in Oracle's financials that suggests the company may be healthier than it appears, Rebecca Wettemann, vice president of Nucleus Research, told the E-Commerce Times.
"The Wall Street analysts are focused on new application software revenue -- but that is not the number they should be watching," she opined.
New software licenses are going to fall for all the enterprise vendors as concern about the "R" word continues to grow, said Wettemann. "The big enterprise deals simple don't happen in this economy."
Deals that do close, though, are smaller, more nimble Software as a Service deployments, she continued. Oracle's OnDemand offerings should bolster growth.
More to the point, though, Wettemann said, is the fact that Oracle supplies database and middleware solutions to more than half of the top SaaS vendors. She noted that the company's database and middleware sales for Q3 were up 20 percent compared to the same quarter last year.
Some of that can be accounted for by customers migrating to Oracle after their vendors were acquired. Still, Wettemann expects to see revenues in this category remain robust, with more companies adopting Oracle's back-end infrastructure as they shift to on-demand services.
Xactly: Putting Method in the Madness of Sales Force Compensation March 27, 2008
At bottom a simple concept, sales incentive compensation is in reality an opaque process that can prove to be very frustrating to sales reps. Most handle many products and many clients, and typically a company has variations in compensation for both categories, depending on their importance to the firm at that point in time. Xactly interjects transparency into these calculations, CEO Chris Cabrera said.
Related Stories
Little Deuce Coupe March 12, 2008
The fact is, Oracle is resurgent in CRM, and the company is doing some interesting stuff picking up on social networking among other things. Senior Vice President Anthony Lye is a big believer in the whole CRM 2.0 idea and he's ready to compete anywhere you can find an Internet on-ramp -- browser, desktop, portal, PDA.
Oracle Ventures Into Web 2.0 Universe With On Demand v15 March 11, 2008
With Oracle On Demand version 15, users can take objects -- top accounts or contacts or sales leads, for example -- and embed them as gadgets on iGoogle or MyYahoo or on their BlackBerry devices. They can also add relevant content from other applications such as MySpace and RSS feeds.
Oracle Adds Single-Tenancy to Siebel CRM Mix February 21, 2008
Demand for single tenancy will grow as companies realize it is no longer the limited medium it was several years ago, predicts Anthony Lye, SVP of Siebel CRM On Demand. "For a long time, SaaS was considered to be synonymous with multitenancy, but I think that will change going forward as more firms realize what can be done with the technologies on the market."
Related News Alerts
More by Erika Morphy
Ballmer Gives Shareholders - and Dell - Cause for Optimism November 20, 2009
Microsoft CEO Steve Ballmer was all smiles at the company's shareholders meeting, as he touted the early success of Windows 7. Ballmer's cheer may have been contagious; after posting a massive earnings decline for the third quarter, Dell needed some good news to latch onto, and the prospect of broad enterprise adoption of Windows 7 could spur PC sales.
AA.com Sucks the Fun Out of Trip-Planning November 20, 2009
Using AA.com to book a flight was a painful experience. Densely packed, disorganized information was displayed in an unattractive format. On the plus side, it did seem as though the deals American Airlines advertised were real and not mere bait-and-switch lures. For anyone who wants a travel-planning Web site to inject a little pleasure into the experience, though, I say look elsewhere.
Salesforce.com Pumps Up Volume of Workplace Chatter November 19, 2009
Salesforce.com has developed a collaboration platform that puts social networking to work. Salesforce Chatter facilitates employee collaboration on projects through Facebook-like profiles, status updates, feeds and groups. The question remains whether employees will be as open to social networking in the workplace as they are in their personal lives.
Headline Feeds
over the last several years: Along with new customers, it has also accumulated a steady stream of maintenance revenue.
Talkback: 
