Never known for reticence, Oracle celebrated with a victory lap and some trash-talking. CEO Larry Ellison slammed chief applications rival SAP's strategy and product road map, while Oracle slapped a banner across the front of its Web site proclaiming, "Oracle Grows 10x Faster Than SAP!" But Oracle's posturing fudges facts and obscures the reality that its growth may prove hard to sustain once the effects of its buying binge wear off.
Oracle's claim to be growing ten times faster than SAP rests on its application license sales, which rose from $127 million last year to $228 million in this year's first quarter, an 80 percent increase. (In SAP's most recent quarter, which ended two months before Oracle's, it reported software sales of $792 Million in U.S. dollars, an 8 percent increase.
However, Oracle's year-over-year results are an apples-to-oranges comparison, factoring in its January purchase of Siebel Systems. Oracle claims Siebel added only $31 million to its applications license revenue during the quarter, about a third of what Siebel traditionally racked up in sales. Some of the disparity comes from changes Oracle has made in how it allocates Siebel's sales, a portion of which are now being counted in middleware revenue, not applications.
Nailing down Oracle's organic growth is confounding Wall Street. Fueled by the strong first-quarter results and Oracle executives' bullish forecasts, Oracle's shares shot up to a 52-week high following its earnings report. Several analysts enthusiastically applauded. "There can be no doubt that Oracle has found its way," Cowen & Co. analyst Peter Goldmacher wrote in a research note headlined "Wow." UBS analyst Heather Bellini quipped that Oracle bears have "nothing left to growl about" and cited Oracle as one of her top picks for the year.
But a pair of conflicting reports from Citigroup illustrates the difficulty of interpreting Oracle's results. Citigroup's Oracle analysts endorsed Oracle's strategy and said it looks to be taking share from SAP while Citigroup's SAP analysts drew the opposite conclusion and argued that SAP is the company with faster organic growth.
