Oracle software revenue shows signs of weakness

Oracle reported another strong financial quarter on Monday, posting $4.2 billion (£2.16bn) in revenue for the second quarter of fiscal 2007, results that beat analysts estimates by 1%.

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On a conference call to discuss results on Monday, Oracle president and chief financial officer Safra Catz acknowledged that Oracle missed its objective for software revenue growth in the quarter. She attributed this to the company failing to execute on key deals that should have closed in the quarter but did not.

She said to alleviate the execution problem going forward, Oracle will focus on letting salespeople work in the field rather than spend time engaged in sales meetings and other activities that don't lend themselves to deal-closing. "We think additional focus ... and better pipeline management should mean better results," Catz said.

Overall, executives on the call seemed to have a lot of faith in Oracle's backlog of unfinished sales deals, which Catz said is very big, to contribute to Oracle's success in the remainder of 2007.

Larry Ellison, Oracle's chief executive officer, noted that a good portion of the deals in the pipeline are wins in vertical markets where Oracle has not traditionally played. He said retail has been a key growth area for the company, claiming that eight of the 10 largest retailers in North America now use Oracle's retail applications, whereas only one uses rival SAP's.

Ellison said growth in the retail sector will begin to have a noticeable effect on Oracle's software revenue. "Retail will actually move the needle," he said. But this follows the company’s acquisition of retail software vendor Retek last year.

Ellison also said Oracle plans to continue its "dual strategy" of growing the company through both internal development and acquisition, a comment that may hint the company is eyeing more purchases to build out its massive software and applications portfolio.

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