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It’s hard to pick many weak spots in Oracle’s Q3 results. For the quarter ended 28 February, revenues were up an impressive 37% to $8.76b (up 35% in constant currency), with software revenues up 19% to $5.95b (17% ccy) – and new licenses up 29% to $2.2b (27% ccy). Hardware (mostly from Sun Microsystems) now counts for 19% of revenue vs. 9% in Q309, and services revenue was up 23% to $1.1b. Revenue was up at least 30% in all geographies. Group operating profit was up 61% to $2.98b (margin 34% vs. 29% in Q310). And the company increased its dividend by 20%. Of course, these high figures are in part due to acquisitions - although President Mark Hurd, did say that organic growth was "solid". If there is one weak spot it is in services where CFO Jeffrey Epstein said Oracle is “continuing to manage this business to profitable margins”, although specific numbers weren't provided.
Following its various software acquisitions, application license revenues are growing well – up 34% in Q3 to $639m, and 23% YTD. However this is pretty much in line with key rival SAP, which grew software sales 35% in Q410, its most recent quarter, and 25% yoy (see SAP to maintain growth pace in 2011). Based on this comparison it is hard to justify Epstein’s comment to investors that, “we continue to take share from SAP.” Of course there is no love lost between these two – as the TomorrowNow judgement against SAP, in favour of Oracle, shows (see here).
Where things are really motoring is Oracle’s cloud stack, made up of its Exadata database and its recently launched Exalogic middleware system, which together saw sequential revenue growth of over 50%. And the company expects Q4 growth to be even higher as customers build out their private clouds with Oracle systems. For example, in the quarter the company won a new multi-year deal with Salesforce.com to continue building “virtually all” of their cloud services on top of the Oracle database and Oracle middleware. In his typically understated way, CEO Larry Ellison said: “Oracle is the technology that powers the cloud.” While this is certainly a good start, we’re sure there are a few of its competitors that may not agree that Oracle has sewn the market up just yet.
