Friday, 19 December 2008

Best-of-Breed Bellwether #1 - Oracle

Given that Oracle has bought up dozens of software competitors in the last five years, its health (or otherwise) is not a bad barometer for the software sector as a whole. Like the curate’s egg, it was ‘good in parts’.

Oracle makes c50% of its revenues from ongoing maintenance – which on the new maxim of ‘Make do and Mend’ is the reassuring bit. Oracle’s services revenues grew 8% in the quarter – which was pretty good!

One of the ‘bad’ bits was that Oracle makes over 50% of its revenues from outside the US – where the dollar’s slide has depressed revenues. Translating into profits, Oracle suffered its first downturn in earnings in three years.

The worst hit part, however, (and this should come as no surprise to HotViews readers) is new product sales which fell 3% in the quarter – although this was a rise of 5% in constant currency. This looked worse as Oracle had forecast a rise in the range 2-12% only a quarter back. In its outlook statement, Oracle said that new product sales could decline by up to 10% in the current quarter. Large corporations were signing fewer multi-year contracts, because of the worsening economy, and that the rate at which big deals were closed was expected to fall "significantly" during Q3. Total revenues were forecast to grow in the ‘modest’ range of 1-4%.

Given that Oracle is a ‘Best-of-Breed’ software provider, it gives a good snapshot of the state of global IT nation. Customers continue to spend on make-do-and-mend but not on new product or projects. On top of that, the situation is deteriorating rapidly. Heigh Ho!

No comments: