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Thursday, March 27, 2008

Oracle (ORCL) 3Q:2008 results

Oracle missed applications revenue by close to 20% relative to consensus, driving a top line miss. They said closure rates slipped in February and that those deals have since closed. It's not uncommon for software companies to miss business at the end of the quarter and then insist the business in fact closed in early weeks of the following quarter. I'm not saying that it isn't true, it just feels a little canned.

Currency itself helped the top line by 6.4% versus expectations of 6% so the benefit was greater than expected. Applications were down 13.1% organically ex currency. Database revenue was up 9.2% organically ex currency. Not very impressive growth.

The company said the pipeline, potential business and deal flow, is much larger than it was last year at this time but they're assuming a lower closure rate for Q4, their biggest of the year.

Numbers aren't really coming down -- in fact, I saw some creep higher. Revenue guidance suggests a midpoint above consensus for next quarter. Analysts believe this is a fluke quarter due to macro-economic concerns and that lower closure rate guidance and a higher pipeline will lead to an upside surprise in Q4. I don't know if I buy that but the sell side does.

I would assume Oracle is the first to report this corporate hesitance and that this trend will be echoed in the coming weeks by other software companies as they find business harder to close in an uncertain economic environment... but I don't think I want to play long-term software investor. I had a data point, it was ostensibly correct, the news is out. It's probably time to book the trade.

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