Oracle: Beating Indigestion

(page 2 of 2)

>"What the Market Is Telling Us").

"We feel very good about our prospects heading into our seasonally strongest quarter," said Catz. But she noted that Oracle faces a tough comparison with strong fourth-quarter results last year. For instance, it would need to close about $1 billion in new license sales in North America alone next quarter to match last year's results, she said.

Outpacing the Competition

The upbeat outlook contrasts with gloomier results at other business software companies. Security software maker Symantec (SYMC) on Jan. 16 cut its earnings and revenue outlook for the fourth quarter, which ends Mar. 30. And SAP (SAP) on Jan. 24 reported that new license sales fell short of expectations and warned that costs would rise—to Ellison's apparent delight.

Ellison took the occasion of Oracle's earnings call to point out that while SAP's license sales had grown by only about 10% over the past year, Oracle's are up 61%. "We're gaining on them consistently and rapidly," he said.

Heather Bellini, a managing director at UBS (UBS), wrote in a Mar. 20 note that while Oracle's third-quarter license revenue growth "implies significant share gains vs. SAP," investors need to see the contribution from Hyperion and other recent acquisitions "to determine the magnitude" of the gains. And Hyperion won't show up on Oracle's books in a meaningful way until its next fiscal year starts in June.

Meanwhile, Ellison hinted at more acquisitions. Oracle has had success buying software firms that excel in specific industries, like banking and retailing. Now, the company will look at buying other category leaders—possibly in transportation and utilities, according to analysts. "We learned from Jack Welch," Ellison said of the former General Electric (GE) chief executive. "It's much easier to make money when you're No. 1 than when you're No. 2 or 3."

Ricadela is a writer for BusinessWeek.com in Silicon Valley.