What ails Oracle?
Published: 17 Sep 2004 15:30 BST
Is Oracle's recent slowdown in the applications business a one-time fluke or just the latest setback in a troublesome area for the software maker?
On Tuesday the company reported good news and bad news: Database sales, which make up more than 80 percent of Oracle's business, are booming, up 18 percent versus one year ago. But Oracle executives said sales of their business applications software plummeted last quarter, down 36 percent compared with one year ago. With sales of only $69m (£38m), it was Oracle's weakest quarterly sales of applications in more than 5 years.
Oracle's chief financial officer, Harry You, dismissed concerns about weakness in Oracle's applications business overall. And during the company's quarterly conference call on Tuesday, Oracle executives deflected questions over whether the ongoing PeopleSoft takeover attempt has become a distraction. "I urge people not to get... misled. It's not as if it is a serious negative situation in our view, because we expect growth for the year," You told analysts.
One reason cited by Oracle for the big percentage drop in application sales this quarter, as compared with the same period last year, is a $30m deal the company inked last year in Russia. Excluding that deal, Oracle's applications sales declined by 11 percent. "Either way, we have work to do," You said.
Analysts were less optimistic. Oracle's application sales were "abysmal" and "well short of... even the most pessimistic estimates", according to JP Morgan analyst Adam Holt. If anything, the shortfall continues a downward trend. In July, Oracle reported that its applications business declined by 6 percent during the past year, even though analysts had projected growth of 10 percent.
To bolster its applications business -- and drive greater database and maintenance revenue -- Oracle launched a hostile bid for rival PeopleSoft more than a year ago. The company earlier this month won a victory against the Justice Department, which opposed the deal in an antitrust trial in a US District Court in San Francisco.
But that victory -- just one step in a long and ongoing process -- has come at a price, said Josh Greenbaum, an analyst with Enterprise Applications Consulting. "The irony of this whole takeover attempt is that Oracle hasn't been minding its own applications business; they've let that slip. Fundamentally, they haven't put the effort into applications that they've put into databases and technology."
Oracle executives deny that the PeopleSoft deal has hurt business. But there's some evidence that the battle has hurt Oracle on the public-opinion front. A recent survey indicated that technology buyers' opinion of Oracle is at its lowest level in 12 years and is deteriorating.
Previous
Did you find this article useful?
207 out of 404 people found this useful
Digg
Slashdot
Del.ici.ous
Stumble
Reddit
