Oracle Gets Flexible to Offset Recession PressureBy Kathleen A. Martin | Posted 2008-12-19 Email Print
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Oracle, the world's second-largest software company, reports its first quarterly loss in three years. Solution providers say the vendor is getting more flexible and creative in deals with partners and customers to keep sales steady.
Solution providers report Oracle is taking a more flexible approach to sales and partner engagements as it struggles to find its footing in the sluggish economy.
Oracle became the latest company to report poorer-than-expected earnings under the weight of the economic recession and slowing enterprise spending for new software and equipment. On Dec. 18, Oracle—the world's second-largest software company behind Microsoft—reported its first quarterly loss in three years, and said it doesn't see a quick recovery.
Editor’s Note: Oracle's loss was due primarily to currency fluctuations. Without the fluctuations Oracle would have noted a 10 percent gain in net income. This is one of the many factors worldwide companies face when a global economic crisis occurs and Oracle maintained their financial footing with only a slight decline in new licenses.
"The biggest barrier today and in the last couple of quarters has been the cutback in IT budgets and the pushback from CIOs to do more with less resources, whether it's financial, human or other," says Scott D. Rosenberg, CEO and founder of Miro Consulting, an enterprise solution provider and software licensing specialist.
Oracle's net income for the quarter ending Nov. 30 fell to $1.27 billion, down $30 million from the same period a year ago. Oracle cited a strengthening U.S. dollar as undercutting its results. Nearly one-half of the company's revenue is derived from overseas markets. Excluding the currency impact, Oracle said revenue would have grown at the much faster rate of 12 percent. As it stands, Oracle's revenue rose 6 percent to $5.6 billion.
Also dampening revenues and earnings were a decline in new software licenses (down 3 percent) and new applications licenses (down 15 percent). On a positive note, database and middleware licenses rose 4 percent compared with the same quarter last year.
As a result, solution providers say Oracle is getting more creative and flexible in its partner and customer engagements.
"Oracle is known for its tough stance on many aspects of the business, from licensing compliance to pricing. However, in the past year, we've seen Oracle entertain more options to fit the client's need. For example, Oracle has [been] giving some additional support options for restructuring support fees based on how stretched the IT budget has become," says Rosenberg. "We've just worked with Oracle on creating a more flexible financing support plan where payment is tied into the actual deployment of the product, whereas Oracle customers traditionally have had to pay 100 percent of the support bill up front. Of course, each case is different, which is why it's important to work with Oracle to find options."
While this is the first loss for Oracle in three years, the company says it doesn't see a quick fix to the slowdown. In additions to its earnings announcement, Oracle offered guidance on its third-quarter earnings. Analysts and investors agree the company is still strong and will meet market expectations. Solution providers say they continue to see demand for Oracle products.
"We have found that our Oracle software licensing and professional services businesses are still on target. We continue to develop new customers and receive new orders from existing customers," said Fred Strahle, president of DesTech, a Toronto-based enterprise software solution provider.