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Oracle results reveal software licence gains

Strong first quarter results suggest database giant making headway in target markets.

By Miya Knights, 21 Sep 2007 at 12:23

Oracle late yesterday posted strong financial results for its first quarter, where software licensing revenue grew faster than it has done for the last decade.

In results where Oracle's earnings per share grew 28 per cent to $0.16 (8p), the vendor reported that new software licences grew 35 per cent to $1.1 billion (£497 million) - the biggest growth it has posted in the last ten years.

It also made gains in its traditional database and middleware business, but these were below those made in its applications business, up 23 per cent on the same period last year. This, however, still represented the strongest growth for the company in this area for seven years, it said.

In a conference call, chief executive Larry Ellison said a major release of its database software, 11g, contributed its new licence gains, attracting some 35,000 downloads within the first month of its launch.

Ellison also revealed he had his sights set firmly on overtaking IBM at the number two spot in terms of the middleware market when he said that, at current growth rates, Oracle will move from number three in the market to overtake IBM. Microsoft is currently the dominant player in the middleware market.

But Ellison also said they would have to make major internal changes to continue its rate of growth as far as software market share was concerned, where Oracle trails market leader, SAP.

In reference to SAP's aggressive targeting of the midsize space earlier this week with the launch of its first hosted offering, Business ByDesign, he said Oracle would have to build a new sales force and product line in order to make substantial gains here against SAP.

He was more positive about the prospects of selling applications into its existing database customer base. "We're just at the very beginning in terms of penetrating this market," Ellison said.

The company expects new software licence revenue to grow from 15 per cent last year to 25 per cent and total revenue to rise four per cent to 21 per cent in its current quarter.

Overall, Oracle managed to beat most financial analyst predictions, where revenue for the first quarter period ending 31 August rose 26 per cent to $4.5 billion (£2.24 billion) and net income was also up 25 per cent to $840 million (£417.8 million) compared to the same quarter last year.