Today Oracle announced its FY 2009 Q3 results and once again demonstrated that its multi-brand portfolio strategy is continuing to be effective despite the current economic climate. I won't restate the numbers, you can read those on the Oracle press release, but what I will focus on is why I think Oracle continues to be more successful than its direct competition. All three business lines (database, middleware and applications) held up fairly well, with apps being the real surprise. A lot of analyst expected Oracle's apps numbers to be much worse, especially since its largest competitor, SAP, had seen a decline in its apps revenue in the most recent earnings announcement. Let's give credit where credit is due, you don't execute to this level without very strong and consistent leadership at the top and down through the ranks. This requires building an effective strategy, putting the right people in place to drive it and maintaining focus by not overcorrecting for economic conditions.
So what is driving this success? I outlined several key Oracle strengths in my analysis of the Q2 announcement and I believe those strengths are in fact playing out as I had predicted. Oracle's product portfolio is very broad with both acquired and built products that give the sales team the opportunity to shift focus from products that aren't selling to other "hot" products. In apps this is particularly important in this economy because core ERP and ERP upgrades is one of the slowest markets. Over the last several years Oracle has built out many vertically focus apps that offer high value and yet don't require the level of investment that a full ERP suite would. Companies are continuing to invest in software for competitive advantage, revenue growth or cost reduction and these vertical apps (edge apps in Oracle lingo) are often just the area that does get funded even with tight budgets.
Oracle's leadership in the database market is also a strength for its apps and middleware businesses where competitors apps run on the Oracle database (and also in many cases Fusion Middleware). Oracle knows its competitors customers because often they are Oracle customers too which helps them "get in the door" when there is opportunity. This concept also applies to many of the acquired customers especially in the CRM (Siebel) and business intelligence (Hyperion) markets where those products were routinely deployed with SAP or Microsoft ERP suites. Cross-sell and up-sell have become a big part of the Oracle field sales strategy and that has proven to be an effective tactic.
Customers are buying SaaS / Cloud-based apps, as I've pointed out before. More and more Oracle is paying attention to its own SaaS products like CRM On Demand and clearly targeting salesforce.com (two earnings calls in a row both Charles Phillips and Larry Ellison have talked about wins against salesforce). Oracle offers a very flexible approach to its on demand apps (see this post) that I believe customers will find attractive. SAP does not have a SaaS offering.
During the call, as usual, the Oracle execs highlighted wins against key competitors. These "named" competitors are clearly the sales target. Mentioned today: Teradata and the Oracle Exadata DB appliance; salesforce.com and Oracle CRM On Demand; SAP and well, all Oracle apps; and Microsoft and IBM and the Oracle database. For the first time in awhile Larry also talked about Fusion Apps, stating that they're still on target for release by the end of the year and that they are all on demand ready.
One last point, the good news today extended to earnings / profit, where Oracle posted a non-GAAP earnings per share increase of 16% and non-GAAP net income increase of 12% y/y (operating margins of 46%). During the Q&A session the Oracle execs credited the continued margin improvement to Oracle's stable and increasing maintenance base. Oracle declared its first ever quarterly cash stock dividend of $.05 / share.
