I havenâ€™t yet done any slicing and dicing of Oracleâ€™s (ORCL) calendar 2Q07 numbers into database, middleware, transactional standalone apps and ERP but a quick top-line analysis says Oracleâ€™s trailing-12-month growth rate dipped just a bit from calendar 1Q07. Thatâ€™s to be expected given the law of large numbers but itâ€™s a little bit of a yellow flag because the most recent reporting period (ended May 31, 2007 for Oracle) was Oracleâ€™s fiscal 4Q, its traditional load-em-up period.
Maybe Oracle believes its approximately 14% trailing-12-month backcast growth rate (around 25% before backcasting for acquisitions) will still be good enough to gain share on BEA (BEAS), IBM (IBM) and SAP (SAP) in the middleware, database and ERP markets respectively when those other companies issue reports for comparable time periods. Maybe Oracle even kept a little business in the drawer for the summer quarter, traditionally its slowest period.
The admittedly random top-line growth-rate factoid and the general tone of the conference call leads me to believe that Oracleâ€™s two-year PeopleSoft/Siebel-user-led growth spurt may be just about over. Up-selling and cross-selling can last only so long. Oracle has done an excellent job at both, especially at getting its acquired application users to try one or another part of Fusion middleware. But the Hyperion user base is not as likely to generate as many such opportunities, which is why many of Oracleâ€™s remarks and answers at its June 26 conference call were rightly about execution. Oracle talked about:
- â€œWorld-class renewal rates.â€ Actually Oracle did lose all those name-brand users mentioned in the lawsuit against SAP, but, in fact, there is likely little difference in renewal rates company to company.
- Margin improvement â€œas earlier acquisitions are coming up to scale.â€ There was a long interesting answer about how that isnâ€™t happening as fast as Oracle had earlier predicted, because the company chose top-line growth over margins.
- Taking â€œinto account our commercial paper obligations.â€ Thatâ€™s real boring stuff but itâ€™s the necessary blocking and tackling Oracle has to do to make its many acquisitions pay off if the cross-selling and up-selling have really peaked.
In fact, in their remarks, Larry led off with a dissertation about GAAP and Charles talked about credit/debit benchmarks. Neither was as entertaining as the usual bombasts against competitors. There was no blowing by BEA or eating IBM for lunch, and just a bit of innocuous stuff about â€œsurrounding SAP.â€
Oracle did not talk much about â€œnew software license revenue.â€ It said it grew that segment more slowly in fiscal 4Q than the fiscal year overall; one might have expected the opposite given the Hyperion acquisition. And I heard no mention of the Red Hat Linux knockoff program but I must admit that at about the halfway point in the conference call, all this nuts and bolt financials stuff was putting me to sleep. Well I guess that the summer doldrums affect all boats the same way as a rising tide.
Tags: Oracle, margin expansion, Hyperion, SAP