Oracle has made a lot of noise about its application and middleware strategy over the past year. That's unsurprising given the tens of billions it has spent on related acquisitions, most recently the $8.5 billion for BEA Systems Inc.
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But on Wednesday, Oracle CEO Larry Ellison said database growth remains a big priority. "We're not going to sit on our laurels," Ellison told financial analysts during the fourth quarter and fiscal year 2008 earnings call Wednesday evening.
"Our strategy in technology is to remain No. 1 in databases and increase our overall market share, and we're doing that," Ellison said. "We are faster and more scalable than IBM at the high end and more cost-effective than SQL Server. We actually cost less to own and run even than Microsoft SQL Server on the low end."
Ellison promised that an unspecified "major database innovation" will be unveiled at Oracle OpenWorld, the company's annual conference in September.
For the fourth quarter, sales of new "technology" licenses (meaning database and middleware licenses) grew 23% year over year to $2.1 billion; for the year those sales rose 24% to $5.1 billion.
Company executives also laid out some shorter-term tactical news. Oracle is adding Real Application Clusters (RAC) support to Oracle VM and is back-porting Real Application Testing to Oracle 9.2 and 10.1 databases to help customers migrate their applications, according to Oracle president Charles Phillips. Additionally, Oracle's Audit Vault Release 2 will add support for "minor databases" including SQL Server, Sybase and DB2.
Ellison, Phillips and chief financial officer Safra Catz all stressed the company's growing ability to sell more types of stuff -- including middleware, various enterprise applications and identity management -- as well as databases into existing accounts.
Vertical applications remain a huge focus.
"To compete in apps we have to go beyond just ERP where SAP remains very strong. We're the No. 1 player in CRM and the No. 1 player in industry-specific applications," Ellison said.
Oracle partners agreed that the string of acquisitions, including the buyouts of companies much smaller than BEA, PeopleSoft or Siebel, has significantly boosted their selling opportunities as well.
Mick Gallagher, managing partner of LST, a Fallbrook, Calif.-based Oracle database and apps partner, sees significant "net new" sales possibilities in Agile Software product lifecycle management, Demantra demand management and Stellent content management technologies. Oracle bought all of these companies over the past few years.
The EBS Group, based in Lenexa, Kan., has seen a big boost from Siebel CRM sales. "Siebel gives us more options than just NetSuite to offer our customers. Our pipeline is fuller than ever. There's a lot of interest and momentum because of all the acquisitions Oracle has made and in what the roadmap looks like," said CEO Scott Jenkins.
Several Oracle partners said BEA will be a bonus because many of their larger customers already run BEA's WebLogic application server, and now that will be part of their portfolio as well -- although that may cause channel contention with existing BEA partners.
Oracle's Catz said the company reaped $93 million worth of BEA sales in its fiscal fourth quarter ending May 31, 2008.
"The BEA contribution for the quarter exceeded expectations. Customers prefer to buy from Oracle," Catz said.
One large partner who sold both BEA and Oracle lineups said his BEA business spiked in the months going into the acquisition, because customers feared Oracle would buy the company and raise prices. That, in fact, came to pass as of June 1, as first reported by SearchITChannel.com
Overall, Oracle fourth quarter earnings news was almost completely positive.
Oracle beat Wall Street earnings per share (EPS) estimates by three cents, with the company logging 47 cents per share versus the 44 cents expected. The good earnings news was powered by 27% growth in sales of new software licenses to $3.14 billion compared to $2.48 billion for the year-ago quarter. (Wall Street expected $2.91 billion.)
Still, this may have been a case of making hay while the sun shone. Catz reminded analysts Wednesday that Oracle is entering its traditionally weak first quarter and that it will also be the first full quarter with BEA Systems fully aboard. There is "always a short period of adjustment" after a large acquisition, she said.
For the quarter ending in August, the company expects new license sales to grow 10% to 20% for the first quarter. "As you know, we're up against tough Q1 comparisons since we saw 35% new software license revenue growth last year atop a great Q1 the year before. And, Oracle's Q1 still ends in August."
Analysts took her words to heart. Oracle shares sank as much as 4% after the earnings call. Oracle share price hit a seven-year high of $23.57 earlier this month, but saw shares trading as low as $21.61
LST's Gallagher said he expects his business to see the usual summer doldrums, but he also expects business to be better than last year.
Oracle partners who bank on the company's success, despite continuing channel conflict with its sales force, were heartened by the earnings news and the fact that Ellison stressed database growth publicly.
Their take is that applications are important in the battle against SAP and in expanding partners' footprints inside existing accounts. But they add that the database remains the primary engine in Oracle's -- and their -- business. Many Oracle partners worry that Microsoft SQL Server, already strong in small and medium-sized businesses, could start to displace Oracle in larger accounts. (Microsoft is expected to announce the SQL Server 2008 update this summer.) Oracle database growth thus fuels many ancillary opportunities, they said.