by CIO Staff

Oracle’s Q4 Boosted by Increasing Deal Size, Quantity

Jun 23, 20064 mins
IT Leadership

Oracle’s top three executives Thursday pointed to an increase in both the number of overall deals and the size of individual customer wins as strong contributing factors to what they dubbed a “record” fourth fiscal quarter.

“All the deals have gotten chubby,” Safra Catz, co-president and chief financial officer at Oracle, said during a conference call with analysts to discuss the quarter. “Everything has bulked up.” The company saw plenty of mixed sales, selling combinations of its database and applications, its database with middleware, and its middleware with its identity-management software, she added.

“The entire pipeline has gotten bigger, the size of deals are bigger, and the number of deals are bigger,” Catz said. The vendor saw software contracts valued at more than US$1 million grow 39 percent, she added.

What Oracle has yet to determine is the main driving factor behind the growth, whether a surge in volume IT spending, a direct response to a general upswing in the global economy, or “people getting more comfortable with Oracle,” Catz said. She’d been particularly surprised by the $81 million that Oracle’s Siebel business pulled in, doubling the vendor’s expectations for sales of the software products it acquired at the start of this year.

“We’ve become a lot more important to customers,” said Charles Phillips, co-president of the company. “Almost every problem they have, we have a product for. Clearly, customers are more comfortable with our strategy, moving past a wait-and-see mode to a time-to-get-busy mode.”

Larry Ellison, Oracle’s chief executive officer, said the company’s focus on selling integrated suites of its products has really begun to pay off in terms of gaining customers and market share. “Integrated suites are winning out over best-of-breed [applications], he said. “[Oracle’s] Q4 was really a growth story, with gains in market share across the world.”

Ellison rushed to the defense of Oracle’s database business, which, like middleware, didn’t grow as spectacularly as the vendor’s applications business. The applications business has been fueled by the vendor’s continued acquisitions.

“Half the time you read stories about Oracle’s database business growing slowly and coming under attack by IBM and Microsoft,” Ellison said, claiming that recent analyst reports from the likes of Gartner and IDC put Oracle far ahead of IBM’s performance. “Our database business is growing very well, and it’s very healthy,” he added.

The Oracle CEO was also keen to toot his own horn for having predicted Oracle’s middleware business would eventually generate $1 billion, a milestone it surpassed in the fourth quarter, he said.

Ellison was somewhat evasive about his public musing as to the merits of Oracle getting into the Linux operating system business. Back in April, he told the Financial Times that Oracle had looked at each of the two leading Linux distribution players, Red Hat and Novell, but had decided against buying either of them since Oracle wouldn’t own the intellectual property.

“I was making a general comment about open source,” Ellison said during Thursday’s conference call. “The interesting thing is that it’s free to everyone, even Oracle.” The vendor could therefore choose to pick up some open-source software, leapfrog the competition and become the number-one distributor of a product, he added. “It’s free for us to own and support, which we may in fact do in the future,” Ellison said.

Although the fourth quarter traditionally has been a strong period for the company, the upcoming first quarter has always proven “tricky,” Catz said. She expects Oracle to increase new software license revenue by between 18 percent and 25 percent compared with the first quarter of fiscal 2006, and expects growth in total software revenue to be in the range of 20 percent to 25 percent. Total fiscal 2007 first-quarter revenue should rise 19 percent to 20 percent on earnings per share of $0.16 without accounting for the impact of any specific charges likely to be taken in the quarter, she added.

Oracle will no longer provide guidance for the fiscal year as a whole, she said, only on a quarter-by-quarter basis, in the light of the alterations the company kept having to make to its predictions after a succession of acquisitions, Catz said.

-China Martens, IDG News Service (Boston Bureau)

Check out our CIO News Alerts and Tech Informer pages for more updated news coverage.