If Oracle’s results for the third quarter are anything to go by, the IT sector may well have turned the corner on the recession. In figures released last night, profits for Q3 hit US $1.2 billion, with revenues up to US $6.4 billion from US $5.5 a year ago, beating analysts' forecast of US $6.3 billion.
The 17% increase in revenue is the second consecutive quarter of growth after a series of declines during the recession even though net profits fell in the quarter because of the acquisition of Sun Microsystems.
Sun Performs For Oracle
Oracle's revenue of US $6.4 billion includes an additional 10% that can be attributed to one month of Sun revenue as the deal closed on January 26, and Oracle's third fiscal quarter ended Feb. 28.
Contained within that figure is US $458 million in Sun hardware sales as of now, although the company says that this could rise to US $1.2 bn when the final figure is in.
However, Oracle said its new baby had performed beyond expectations and contributed handsomely to Oracle’s strong growth with predictions of growth of between 31% and 36% for this quarter.
The Sun integration is going even better than we expected. We believe that Sun will make a significant contribution to our fourth quarter earnings per share as well as meet the profitability goals we set for next year,” Oracle President, Safra Catz said in a statement.
Oracle Revenue Streams
One of the most important indicators of the health of the software markets is licenses and Oracle’s figures weren’t disappointing. Sales rose by 13% to US $3.3 bn — 10% excluding Sun — performing better than Oracle itself had expected. Application sales also did well with an increase of 21% to US $1.7 bn.
Oracle’s data warehousing machine Exadata is also performing well and with only one month in the fourth quarter gone there are US $100 million in bookings so far.
Exadata is the fastest growing product in Oracle’s history. Introduced a little over a year ago, the Exadata pipeline is now approaching $400 million …This strengthens both sales growth and profitability in our Sun server and storage businesses,” Oracle President, Charles Phillips said.
In keeping with tradition though, CEO Larry Ellison took time to bash SAP. Predicting that they would continue to grab “huge chunks of market share” from SAP, Ellison taunted the world’s largest software company by suggesting the only thing SAP was beating Oracle in was in the number of CEOs it has had.
SAP’s most recent quarter was the best quarter of their year, only down 15%, while Oracle’s application sales were up 21%. But SAP is well ahead of us in the number of CEOs for this year, announcing their third and fourth, while we only had one," Ellison said
However good the sound bite, more significant is his assertion that Oracle expects to continue its charge on the market with Fusion Applications due to be released later in the year.
He said Fusion Applications, when released, will be sold as on-premises software, integrated appliances and in on-demand form.
All posturing aside, Oracle’s results should give heart to an industry that has, like many others, taken quite a beating in the past 12 months. In 2009, tech spending dropped 9% compared with a decline in nominal gross domestic product of around 1%, according to Forrester Research.
However, things are looking up. On the same day that Oracle released its results, IDC also released research that shows that while spending on IT will not return to previous levels until at least next year, it will return to growth this year.
The research also shows that the recession hit business IT spending harder than anyone had anticipated so that annual growth will remain at 5.5% annually, much lower than previously expected. If nothing else, things seem to be moving in the right direction.