Oracle Corp’s mixed fourth quarter figures, released late on Wednesday, have partially repaired its tarnished record of revenue growth, but the applications business, the cornerstone of Oracle’s growth strategy, has failed to perform. Fourth quarter net earnings rose by 12% to $403m, beating the consensus of analysts’ estimates by three pennies, while revenues grew by 24% to $2.4bn. And for the year to May 31, revenues grew by 26% to $7.1bn. But the figures mask flat revenues in the final quarter from new application licenses, while sales of new database licenses rose 13% and tools licenses rose just 6%. All the serious revenue growth was driven by services, which now constitutes over half of Oracle’s business. And therein lies Oracle’s biggest problem. How can it increase the sales of its applications software without surrendering its hugely profitable monopoly on implementing its own software? Oracle’s chief financial officer, Jeff Henley, confessed that the pattern of sales for Oracle’s applications had continued to be erratic in the final period, and so the company has trained its biggest guns on the problem. Larry Ellison, Oracle’s charismatic and influential founder, will concentrate full time on running the applications division. Because according to chief operating officer Ray Lane, Oracle is still learning how to be an applications company. It’s an easy thing to say, but a harder thing to learn. But this will now be the company’s number one objective, said Lane, shifting the emphasis into the future tense and away from the poor fourth quarter performance. We’ve got the momentum back in our database business, so now we can concentrate on applications, he said. Lane’s version of events is that a poorly aligned sales force has let the side down, not the products themselves. And the company plans a 50% increase in headcount for the applications sales team, which Henley warned would knock some of the stuffing out of profit margins for the coming year. Additionally, Oracle is on the verge of a giant print and TV advertising campaign to back up the sales push. More industry specific content will also be added to the applications suite to chase vertical markets, a successful strategy championed by rival Peoplesoft Inc, but not yet embraced by Oracle. Lane also outlined a sales plan which would bring software consultants into the sales process, up front, and not at the back. And he specifically mentioned the ‘Big Six’ accountancy firms as part of the plan. Whether or not this will see Oracle handing out lucrative implementation business to third party consultancy firms wasn’t made clear, but it’s hard to imagine the Big Six getting involved on any other terms. รก
