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Even backcast, Oracle QoverQ growth in total revenue in healthy 15% range

Posted on September 21, 2007

When compared with its leading competitors, Oracle (ORCL) had good results on the topline for its quarter ending August 31, 2007. Subtracting estimates for Agile, SPL Worldgroup, Metasolv and especially Hyperion on the back of an envelope, and a bit more for the half dozen other smaller acquisitions since last year’s first fiscal quarter, Oracle year over year quarterly revenue growth was about 15%. By comparison, Microsoft (MSFT) grew about 13% in its most recent quarter and SAP (SAP) and IBM (IBM) grew about 10%. My estimate for IBM of 10% is for the Software Group only and includes a backcast calculation for its acquisitions.

My estimate isn’t based on an attempt to discriminate organic vs. acquired new license vs. maintenance vs. consulting; you can’t compare against the others if you do that. This is just top line. By its metrics, Oracle said “Our Q1 database and middleware new license sales growth rate of 23% was the highest in seven years… If we continue to grow our middleware software business at the same rate we grew it this quarter, Oracle will challenge IBM for the number one position in middleware by the end of this year.” As we guessed last December would happen, Chuck Phillips said he would stop picking on BEA (BEAS) on this metric.

Strangely out of nowhere, Larry Ellison said SAP NetWeaver had “disappeared” since Shai Aggassi resigned. “It is not doing very well,” he claimed without giving any specifics. Also based on new software license revenue, Oracle claims to be the fastest growing middleware company. Of course, Oracle does not provide middleware statistics so you have to take Oracle’s word for it or do some triangulation. The last time I did such a triangulation in the spring (I don’t agree new software license is the best metric), SAP was growing faster than Oracle in middleware while Oracle was growing faster than SAP in ERP. Somehow I doubt that Shai’s new fondness for wind-up cars would change that in a few months.

On the applications side, it was the usual mantra: “We continue to take applications market share from SAP.” Oracle is upfront about why; it bought the share. Oracle is less upfront—as you would expect—in explaining the difference between its strategy and SAP’s.

• Oracle’s growth strategy is acquisitive; SAP’s is organic.
• Oracle says it’s expanding in its own base (including non-Oracle-application Oracle database users); SAP’s growth strategy includes moving down market and into Software as a Service (SaaS) looking for totally new customers.
• Also, maybe a secret worth keeping, Oracle doesn’t say that it is already strong in the mid market via JDEdwards.
• Oracle says it is moving beyond ERP to industry-specific software; SAP already has both, an industry-specific integrated ERP/CRM capability (rather than, for example, an Oracle Pharma ERP product based on eBusiness Suite and an Oracle Pharma CRM product based on Siebel)

The most important difference is that Oracle has an objective of growing EPS 20% a year through 2010. SAP’s goal is different, raising its user count to over 100,000 by the end of 2010. With different goals, all of the tactics are going to be different as well.

One thing’s for sure. The installed base census Oracle bought two to four years ago is clearly paying off Vis a Vis the EPS goal and that really only kicked in earlier this calendar year. Look for more throughout the fiscal. The open question is: Did Oracle learn anything from the old Computer Associates as it began executing the Charles Wang strategy of the 1990s?

–Dennis Byron

Tags: middleware , ERP, SaaS, CRM, NetWeaver

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