Friday, 19 September 2008

Applications tarnish Oracle’s sparkling 1Q09 results

Though Oracle turned in a pretty good set of 1Q09 results last night (click here) – indeed its best operating margins on record – this certainly wasn’t the case for its applications revenues and especially so in EMEA. Although new software licence revenues company-wide grew 10% (in constant currency – ccy), new applications licence revenues declined 14% ccy, masked by the impressive 23% ccy growth in Oracle’s database and middleware new licence revenues. EMEA proved Oracle’s most difficult applications market, with new licence revenues down 26%. Even in Americas region – which you’d think would show the most pain – new application licence revenues “only” dropped 10% ccy.

These results seem consistent with our ‘make do and mend’ view on IT spending, i.e. CIOs reining back on non-discretionary software (new applications) but maintaining spend in non-discretionary areas like maintenance, or cost-saving areas like middleware (i.e. squeezing more useful business information from existing databases). It’s just as well Oracle’s database and middleware business is twice the size of its applications business as we think it’s going to remain tough out there for applications vendors for some time yet.

1 comment:

Neil Ward-Dutton said...

Richard, even Oracle's uptick on middleware/database revenues are most likely attributable to revenue from the recently acquired BEA - so a result of enlarged market share through acquisition rather than a signal of increased demand.
All the best,