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You are here: Home / CRM Systems / Oracle Downplays Low Apps Sales
Oracle Downplays Low Sales Growth for Applications
Oracle Downplays Low Sales Growth for Applications
By Mark Long / CRM Daily Like this on Facebook Tweet this Link thison Linkedin Link this on Google Plus
Oracle told investors that net income reached $1.3 billion in the company's third quarter -- a 30 percent rise from a year earlier. Moreover, revenue at the business software maker grew 21 percent to $5.3 billion.

Software license updates and product-support revenues were up 23 percent in the quarter to $2.6 billion, which puts Oracle on track to surpass $10 billion for the year, said Oracle CEO Larry Ellison.

"Our operating margins are now substantially higher than our competitors, including Microsoft, reflecting the unique leverage in our business," Ellison said.

Cautious Customers

Some analysts were surprised by Oracle's relatively light sales growth in applications during the third quarter, but Ellison downplayed their concerns. Oracle's stock dropped in early trading Thursday.

"What happened with applications was very simple," Ellison said. "We just had an exceptionally strong quarter a year ago, which makes for a very, very difficult comparison."

Though Oracle's applications business delivered new license growth of just 7 percent year over year, CFO Safra Catz reminded investors that this was in comparison with a very robust growth rate of 57 percent in the year-earlier quarter.

"Our trailing 12 months application license growth rate is 29 percent, well ahead of our peers, more than double that of SAP and well ahead of our own expectations," Catz said.

Faced with a tighter economic environment, some customers reached an "economic inflection point" that caused them to exhibit more cautious behavior in the third quarter, Oracle executives said. As a result, they said, the closing of some deals did not gain final approval until early in the current quarter, which is typically the busiest time of Oracle's fiscal year.

"As we get past the inflection point, people do eventually get back to business, and we are seeing that now already early in the fourth quarter," Oracle President Charles Phillips said. "A lot of those deals have closed already and we're off to a good start."

The BEA Upside

For a while now Oracle has looked to outside acquisitions for help in growing its bottom line each quarter, and the latest financial period was no exception. Oracle's Hyperion acquisition contributed $64 million in license revenue during the third quarter even as newly acquired Agile added $14 million, Catz noted.

Looking ahead, Oracle is counting on BEA Systems to help stoke revenues further.

"We believe our acquisition of BEA comes at precisely the right time, both financially and strategically," Catz said. "The BEA support base will add to our cash flow, margin and earnings story."

Oracle anticipates that its BEA deal, which has already cleared U.S. antitrust review, will be approved by BEA shareholders on April 4. "We expect to close as soon as we receive clearance in Europe," which is expected in the current quarter, Catz said.

Ellison told analysts he expects Oracle's internal debate over which BEA products it will keep -- as well as which products it will consolidate down into single areas of middleware -- will be relatively short given that "BEA and Oracle have developed middleware according to industry standards."

"And it's very easy for the customers to take the next version because, again, our products have the identical user interfaces based on those industry standards," Ellison said. "So the integration of BEA should happen more quickly -- on the selling side, on the customer side, and on the development side -- than almost any of our other large acquisitions."

Read more on: Oracle, Ellison, Hyperion
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