Oracle Q1 Results: A Tale of Two Companies
How and why Oracle "substantially improved" its profitability during a global recession.
"It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity...."
Print
Charles Dickens elegantly assembled those words in A Tale of Two Cities. The incongruity of the world Dickens describes then applies perfectly to the first-quarter financial results the Oracle aristocracy delivered on Wednesday.
In looking at the numbers, it becomes clear that Oracle is trapped in the age of foolishness and epoch belief that shareholders are more important than customers, while those customers are in the worst of times and full of incredulity.
Oracle's profits rose by 4 percent year-over-year to $1.12 billion, but revenue fell by 5 percent to $5.1 billion, as the IDG News Service reported. New software license sales fell 17 percent year-over-year to $1 billion, due to the fact that Oracle's enterprise software customers have pulled back on purchasing new software.
A neat trick, did Oracle pull: Increasing year-over-year profits while revenues fell. Oracle President Safra Catz said in a statement that the vendor accomplished the feat by "substantially improving" its operating margins.
For instance, Oracle's enterprise software maintenance- and support-related revenues grew 11 percent to $3.1 billion—against just $226 million in expenses. How's that for profit margins?
Publicly-traded companies exist, theoretically, to serve their two masters: the customers who pay the bills and the shareholders who invest their monies.
But let's not ignore the obvious: Most publicly-traded companies don't have the lucrative cash cow that is software maintenance and support fees—with their 90 percent profit margins. Which is why Oracle can, without much effort, placate shareholders and The Street during this global recession, and ignore the plight of its cash-strapped customers crying "Where's the value?!" with maintenance and support costs.
Said Catz on the Q1 results: "Our operating model continues to drive earnings for our stockholders." You're telling me! On a conference call not long ago, Catz said of the bulging maintenance fee revenues that "as the number gets bigger and bigger it's really impossible for us to actually spend our way through it, and so in general that's the sort of overriding thing that guides our margins."
So on one hand you have the database and software company that purportedly serves enterprise customers. On the other, there's the maintenance-collection agency that serves its shareholders.
Expect to hear more—not less—from Catz and her intense focus on Oracle's numbers, as a recent Fortune profile makes clear. The former investment banker has had Larry Ellison's ear for a while now, and he likes what she's been saying. In fact, just a short time ago, Oracle's stock was at an amazing 52-week high.
Even though Oracle has forecasted flat or decreased new software-license revenues for the near future, if I were an Oracle shareholder, I wouldn't be too worried. It's been the best of times for them.
Do you Tweet? Follow me on Twitter @twailgum. Follow everything from CIO.com on Twitter @CIOonline.
Previous Post: Siemens and SAP Flap: Much Ado About Nothing--YetNext Post: Oracle Earnings Conference Calls of the Wild
Most Discussed Posts
Cloud computing has emerged as one of the most significant game changers to hit the technology landscape in the past 20 years. With this massive expansion of the cloud, the perception of the IT organization is shifting from a utility player to a change agent. This eBook breaks down five ways progressive organizations are using cloud-based IT Management solutions to help drive innovation and become more strategic, including: adding visibility and analytics, speeding up time-to-value, lowering costs, improving prioritization, and providing a blueprint for future cloud deployments.
Read the white paper to see how IBM helped Citigroup deliver new services and enhancements to their 200 million customers faster.
There are 3 ways to modernize legacy applications: rewrite completely, acquire packaged solutions or migrate existing code. This paper explains why it's best to migrate and how IBM® Rational® software can help.
Accommodating specific lines of business can result in a hybrid ecosystem of applications and servers. The resulting complexity of this architecture makes for an environment that is costly to maintain and difficult to change when addressing new challenges.
This whitepaper will help you to define a mobile device passcode policy. Security managers must attempt to reconcile two opposing goals. They must: 1) create a passcode policy that is strong enough to protect the device if it is lost or stolen, while: 2) not annoying users with needless length or complexity.
This whitepaper, authored by The Radicati Group, looks at the key reasons organizations should consider moving to a cloud-based archiving solution. Email archiving solutions enable organizations to store, monitor, and collect electronic data exchanged by their users to comply with internal policies and regulations.
ATERNITY will showcase a 30-minute demo on how Fortune 500 companies are leveraging its award-winning FPI Platform to deliver a user-centric approach to Proactive IT Management.
For businesses to move forward and tap into the ever-expanding universe of Internet users and network-enabled devices, it's critical to learn how to make the transition to IPv6. Learn the critical steps your organization must take to make a seamless transition-and keep your business world connected.
Learn how IT teams can protect against spear phishing tactics. Harry Sverdlove, chief technology officer of Bit9 offers a frank discussion about spear phishing - the most common technique used in today's advanced attacks.
Learn how to build a solid business case for your migration to Red Hat Enterprise Linux so you can run leaner, innovate faster, be more flexible and own the New Now.
Social media isn't about you; it's about everything around you. As you consider how your customers want to communicate with you, social media is something that can't be ignored. But what should your strategy be? Is social media "just another channel?" What kind of a plan makes sense for your contact center and for your customers? Join our experts as they share their insight and research results.
Hardware tokens were a popular method of strong authentication in past years but the cumbersome provisioning and distribution tasks, high support requirements and replacement costs have limited their growth. The additional log-in steps that hardware tokens require and the resulting user frustrations have limited adoption and make them impractical for larger scale partner and customer applications.
Sponsored Links
