As Oracle executives patted themselves on the back for their company's reporting another strong financial quarter, they also couldn't resist having a go at prime applications rival SAP.
"Oracle had another very strong quarter," Safra Catz, co-president and chief financial officer at Oracle, said Tuesday during a conference call with analysts to discuss the vendor's fiscal 2007 first-quarter results. "We had our strongest first-quarter license growth in more than five years by gaining market share," she added.
Charles Phillips, co-president of Oracle, said the company had won 88 deals going head-to-head with SAP during the quarter, including customer wins with Electrolux, Lockheed Martin and U.S. Steel. Some of the business is what he termed "winbacks" of business Oracle had previously lost to SAP, including a strategic win at Wal-Mart Stores Inc.
In recent months, the bitter competitive back-and-forth between Oracle and SAP has reached a crescendo. Oracle jumped on SAP's July announcement of lower than expected sales and cited it as proof that the applications vendor's growth had stalled. SAP retorted that the results were a slight blip and not indicative of a major issue with its performance, which it believes remains strong.
Larry Ellison, Oracle's chief executive officer, cites two factors that he believes are working in Oracle's favour over SAP: its Java-based middleware and its aggressive focus on getting industry-specific expertise and products through acquisitions.
Ellison claimed that Oracle's Fusion middleware is "years ahead" of SAP's NetWeaver integration platform. "NetWeaver is still relatively new and still incomplete," he said.
Oracle's so-called "hot pluggable" or component-based Fusion middleware strategy is paying off, Phillips said. Typically, the company sells one or two of its middleware components into a customer account with the hope that over time that customer will expand their use of Oracle's middleware.
Turning to applications, Ellison criticized SAP's recent decision to retain the current version of its enterprise resource planning (ERP) software, mySAP ERP 2005, through 2010 and provide new functionality through regularly issued optional enhancement packages.
"SAP has delayed the next release of its applications until 2010," he said. "They'll be two full years behind our Fusion release." Oracle is working on a new suite of enterprise applications, known as Project Fusion, which is due out in 2008.
By contrast, SAP executives have positioned the company's move to a more modular approach to product upgrades as being driven by customers' demands to pick and choose functionality.
This quarter will be the last time Oracle provides separate database and middleware growth figures, Catz said. In the first quarter, database revenue grew 10%, while middleware rose 56%. In future, Oracle will adopt the practice of IBM and Microsoft and not break out those sales, she said.
Looking to the second quarter, Catz expects Oracle's net income to grow by between 13% and 17% as revenue increases by 22 to 24%. She forecast earnings per share of $0.22. Those predictions don't take into account any specific charges likely to occur in the quarter.
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