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Enterprise Software GiantOracle Global Sales Stronger As Information Technology Consolidates
With offices in about 150 countries around the globe, Oracle is the world's largest enterprise software company due to its unique competitive advantages.
Oracle Corporation’s comprehensive family of business software products encompass both database technology and application systems.
Oracle also sells consulting, education, support and outsourcing services to clients around the world. The company has over 56,000 full-time employees, just under 60% of whom are located outside the United States. Oracle application software automates both "back office" (e.g. financial, supply chain, procurement and human resources applications) and "front office" (customer sales, service and call center functions). Requiring minimal programming, Oracle's flexible and open architecture enables customers to tailor and integrate Oracle applications with existing legacy and third-party systems. Oracle is noted for product innovation. Over the past few years, Oracle has introduced a secure enterprise search product which enables workers to issue single word commands that retrieve information from websites, e-mails, secure storage systems, file systems and even application databases. Oracle's latest fiscal year-end was May 31, 2006. Total revenues in fiscal 2006 were US$14.4 billion, up 22% from the prior year. Revenues in the U.S. increased at a faster rate than in other regions primarily due to the American customer bases of acquired companies. Oracle has taken over more than 20 software companies, including rival PeopleSoft in January 2005 after a lengthy takeover battle, and Siebel Systems a year later. Oracle's revenues from Asia-Pacific clients were $2 billion in 2006, up 18% from 2005. The geographic segment comprised of Europe, the Middle East and Africa accounted for $4.7 billion in revenues, a 10% gain from the prior year. Revenues from North, South and Central Americas were $7.7 billion, 32% more than in 2005. Below are the percentages that different geographies contribute to Oracle's 2006 revenues.
At Oracle's second quarter 2007 conference call on December 18, President and CFO Safra A. Catz noted that Latin America, Europe, Middle East and Africa showed the strongest sales increases for the quarter ending November 30, 2007. And The Winner Is...Also at the December 18 call, Oracle executives announced that total revenue growth was up 24% to $4.2 billion for the second quarter. The 14% gain in new software licence revenues was 1% below plan. However, this was due to a number of large deals that will close in following quarters. For example, Wal-Mart will purchase $10 million worth of Oracle products over the next 3 quarters. Of the 10 largest retailers in North America, 8 now use Oracle retail software. Only one of these major retailers uses SAP - but even that one also uses Oracle retail. Oracle has consistently increased its earnings per share (EPS) by about 20% for many quarters. The company is about halfway through a five-year plan focused on the 20% EPS target. In addition to U.S. sales, Oracle's growth is propelled by rapid expansion in a number of international countries like China, where the company has just opened a dozen more offices. Oracle is also a major shareholder of I-Flex Solutions Limited, a publicly traded Indian software company specializing in banking industry systems. Big deals closed by Oracle in international markets during the second quarter of 2007 include sales of Oracle's:
During the second half of fiscal 2007, Oracle predicts that revenues will increase from 23% to 25%. The anticipated rise in net income ranges from 24% to 29%. Much of these improvements are fuelled by $20 billion worth of software company takeovers orchestrated by Oracle, which profoundly expanded product offerings that the company can sell to new clients and cross-sell or up-sell to existing clients. As I write this article on January 11, SAP has just reduced its estimated sales increase for its second quarter from 17% to 7%. German software giant SAP is locked in a battle for supremacy in business application sales against Oracle. SAP's share price immediately dove 10%. Oracle's stock price also declined from about $17.81 to around $17.30. This is curious. SAP's sales decline seems to bear out the fact that Oracle is gaining market share in business application software at the expense of SAP. Oracle is also winning market share from BEA Systems in middleware sales and from IBM in database sales. Coupled with the upbeat opinion of third quarter revenues and earnings, plus the robust sales in international markets, our thoughts are that Oracle's share price (ORCL on NASDAQ) may well approach $19 around the third week in March when results are announced at the Oracle conference call for the third quarter of 2007. Sources: Hoovers, www.oracle.com, Oracle Second Quarter 2007 Conference Call Transcript Note: Suite101 does not offer investment advice. Instead, we seek to educate and inform our readers by writing about the latest trends in world trade. Armed with these insights, you are in a much better position to make your own decisions. We encourage you to add your thoughts to our analysis by starting a discussion below.
The copyright of the article Enterprise Software Giant in International Trade Leaders is owned by Daniel Workman. Permission to republish Enterprise Software Giant in print or online must be granted by the author in writing.
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