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By John Goff
Corporate
customers are still putting off purchases of enterprise software. Or at least,
that would seem to be the takeaway from Oracle’s first quarter results,
announced on Wednesday.
The company’s
quarterly sales of applications were disappointing, to say the least. Oracle
had predicted revenues from new license purchases would drop anywhere from 4
percent to 14 percent. Instead, they plummeted 17 percent.
All told,
sales of these big-ticket items barely topped $1 billion for the quarter.
That’s way off the $1.3 billion the company took in from new licenses the
previous year.
The company’s
consulting business also got smacked. Revenues from consulting dropped over
$200 million, falling from $865 million in Q1 last year to $663 million in the
first quarter this year.
Those hits
dragged down the company’s overall performance in the first three months of the
year. Larry Ellison and crew reported total revenues of about $5 billion. A
year ago, Oracle’s Q1 revenues came in at $5.3 billion.
President
Safra Catz said on a conference call that a sharp decline in application sales
at SAP was hurting Oracle's sales. The German company, which is Oracle’s
fiercest rival, also happens to be one of the top resellers of the company's RDBMS
database.
JMP Securities
analyst Patrick Walravens told Reuters that corporate spending on big-ticket
technology projects has yet to pick up -- even though consumer sales are
improving. "Just because investor sentiment is improving about the
economy, that doesn't mean people are signing purchase orders,” he said.
To be fair,
the strengthening U.S. dollar hurt Oracle’s results. And the company still
managed to turn a 30-cent per share profit for the quarter, thanks to improving
margins.
In fact, the
software maker’s adjusted operating margin was 46 percent. That’s the highest ever
Q1 margin ever for Oracle. It’s also a big jump from the 40 percent margin the
company reported in the year-earlier period.
Those margins
could go even higher, as lucrative monthly maintenance fees become a bigger and
bigger contributor to the company’s revenue stream. Moreover, Oracle is still
sitting on a pile of cash – about $16 billion, to be precise.
Still, the
software seller has to sell software at some point. And prospects in that
department remain bleak. Oracle is now forecasting new software sales for the
second quarter could fall as much as 10 percent. At best, Oracle says those
sales will be flat in Q2.
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