Oracle will announce its Q3 results on 20 March against a backdrop of missing analyst expectations in its Q2 earnings call. Oracle was on a march for most of 2011 with its tidal wave of acquisitions driving growth and domination. It was a surprise therefore when in December 2011, just after great results from SAP, IBM and Microsoft, it announced a big miss and the stock plunged.
The big questions Oracle faces
The miss put emphasis on some key questions; Is Oracle managing the glut of acquisitions it has made or is this a sign of indigestion? Are continuing delays in its Fusion applications suite putting clients off investments as every additional acquisition muddies the water further?
Will the Exadata family of products actually sell in the way Oracle is claiming or will clients shop elsewhere due to vendor lock-in fears? And finally, will Oracle cling on to its support revenues that represent the vast majority of earnings when it faces growing claims of monopolistic, anti-competitive behaviour around support provision, and is increasingly seeing third party support organisations such as Rimini Street take away its crown jewels?
Its earnings call will give us a strong indication therefore of whether its first miss in around 10 years was a Q2 blip - was it the start of a fall? Focus will be on core technology sales, hardware trending, applications market share stats and support renewal rates.
What the clients and markets say
What we are seeing in terms of market behaviours is actually nothing remarkable. Certainly clients are facing increased audit activity in technology and applications, average deal sizes are being inflated with inclusion of many Oracle acquired product lines and the sell is obviously shifting from CIO to C level business leader - these are general trends anyway.
We have also noticed stress and pressure on Oracle sales reps and general morale seems to be dipping, but our overall observation, based on a number of global touch points, is that Oracle is closing significant business.
A lock-in too far?
If there were two weaknesses that we would be cautious of, it would be:
- Oracle applications new license win rate against SAP due to failing patience around Oracle Fusion.
- Exadata sales outside a small number of large client early adopters, potentially inhibited as many clients feel that trusting Oracle with hardware and software is a lock-in too far.
We look forward to analysing the earnings call data on the 20th.