This looks like good news. But there appear to be clouds gathering on the horizon.
Oracle Corp. posted a quarterly profit on Tuesday that topped Wall Street’s estimates, as new business software license revenue rose, sending its share price up sharply.
Shares are up, but competitors are down. What's a consumer to do?
There are elements of this article that should get our attention, I believe.
Kim Caughey, who helps manage more than $900 million in assets at Fort Pitt Capital Group, said the results showed the company is succeeding in keeping customers gained through a string of acquisitions that included PeopleSoft.
A lot of Oracle's growth is through acquisitions. But there is still growth outside of that.
Stripping out its Siebel, Portal and i-flex acquisitions, Oracle said revenue grew 47 percent as the company posted gains across all its geographic regions.
“It is one thing to just hold onto the customer,” Caughey said. “It is another thing to get them to buy the next version as well. It looks like they are doing that.”
It looks like all phases of their corporate blueprint are coming together.
More importantly, for many investors, the results represent another sign that Chief Executive Larry Ellison’s strategy to lead consolidation of the business software market is working. The company spent some $20 billion over the past three years gobbling up rivals.
But, of course, fewer rivals means fewer choices for consumers.
Oracle shares have gained about 32 percent since June 15 when it first told investors of stronger-than-expected software license revenue for the fiscal fourth quarter. At the same time shares in its major rival, Germany’s SAP AG, have fallen about 5 percent.
The combatants are lining up it seems.
Ellison also vowed to keep buying rivals to close the gap with SAP, which has met Oracle’s challenge by focusing on winning new business rather than buying it via acquisitions.
So, which is better: buying or building? We shall see.
SAP later disputed Ellison’s characterization. In a statement it said that since January 2003, SAP has “consistently articulated and delivered on its vision” for growth through both acquisitions and internal growth.
I think it's obvious where SAP falls.
Analysts say the two rivals are largely taking share from smaller companies, though Oracle is pegged to grow faster in the applications market in 2006.
So, the battle lines are drawn.
According to research firm AMR, SAP’s share of the business applications market is expected to grow to 43 percent in 2006 from 42 percent while Oracle’s share is seen rising to 23 percent from 20 percent.
So Oracle has a way to go. Are there enough competitors to swallow up to close the gap?
Here's hoping consumers don't get caught in the crossfire.
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