SAP vs. Oracle: Battle of the Balance Sheets

For enterprise software vendors, the calendar year that was 2008 has mercifully closed. But now comes the difficult part: vendors announcing their Q4 earnings, a period in which the global economy imploded and companies’ desire for large ERP, CRM, BI and supply chain projects plummeted. 

Two of the market’s biggest players and fiercest rivals—SAP and Oracle—not only continued their nasty courtroom feud over now-defunct TomorrowNow, but they also delivered not-so-horrific results, displaying admirable levels of resilience amid the doom and gloom. (Those software salespeople must have been cutting some fantastic deals!)

So in the sprit of their ultra-competitive natures, let’s stack the two giants’ most recent quarters up against one another in a head-to-head balance-sheet battle, as well as examine the outlook for the rest of 2009. (Two things to note: Oracle’s fiscal year ends during the summer, while SAP’s at the end of calendar year, so I’m actually looking at Oracle’s Q2 FY 2009 numbers vs. SAP’s Q4 FY 2008 numbers; “Change” compares the most recent quarter to the quarter the year previous.)

Total Revenues / Change

Oracle: $5.6B / +6%

SAP: $4.5B / +8% Software Revenues / Change

Oracle: $4.5B / +7%

SAP: $1.7B / -7% Net Income / Change

Oracle: $1.29B / -0.5%

SAP: $1.1B / +13% Total Operating Margins / Change

Oracle: 35% / +1 percentage point

SAP: 37% / +2 percentage points Executive Quote on Results

Oracle: CEO Larry Ellison takes a shot at competition: “This quarter was conspicuous in a series of competitive wins against Salesforce.com.” And hints at more acquisitions: Looking at a “potential opportunity for large acquisitions, if the price is right.”

SAP: Co-CEO Leo Apotheker: “It could have been the best year in SAP’s history, but since September we have been talking about a new reality in the world’s economy. Our main focus is reducing operating costs.”

Financial Insights

Oracle: It does 55 percent of its business outside the U.S. That’s important because any sizable currency fluctuations directly impacts Oracle’s coffers. In fact, the strengthening U.S. dollar cost the company about $0.03 per share in earnings in the most recent quarter.

SAP: Execs won’t offer analysts a specific outlook for revenue from software and software-related services for 2009.

Layoffs Ahead?

Oracle: 500 (so far, according to reports)

SAP: 3,000 (in total, by the end of 2009) Big, Scary Numbers to Consider

Oracle: Oracle had $7.4 billion in cash and equivalents at the end of November 2008.

SAP: Some customers aren’t paying their bills: SAP’s “days sales outstanding,” a measure of the average time it takes a customer to pay an invoice, has increased to 71 days, from 66 in 2007.

Nagging Questions for 2009

Oracle: Will we see finally see next-gen Fusion Apps Suite? Will you ever settle TomorrowNow suit with SAP?

SAP: What’s the status of Business ByDesign? Any maintenance relief in sight? Will Oracle ever settle the TomorrowNow suit?!