A great day for Larry Ellison

A great day for Larry Ellison

Summary: Earlier in the day, Larry Ellison, CEO at Oracle was crowing about the company's Q2 results. Larry Dignan reported the numbers but in amongst the commentary, the company claimed to have made 365 direct wins against SAP.


Earlier in the day, Larry Ellison, CEO at Oracle was crowing about the company's Q2 results. Larry Dignan reported the numbers but in amongst the commentary, the company claimed to have made 365 direct wins against SAP. I live Twittered the call in conference and at least one SAPper called that claim into question, claiming it doesn't stack up based on assumptions about the relationship between new customers and existing. During the call, Ellison said there are no longer 'SAP accounts' but 'SAP and Oracle accounts.'

Regardless of the veracity of those kinds of statement - which have been consistently been shown up as well massaged - Oracle is on a roll, generating billions of dollars in free cashflow. The trend, where Oracle is now able to sit side by side with its major competitor must be a concern to SAP at a time when it is trying to wrap up its friendly acquisition of BusinessObjects.

Later, Phil Wainewright reported that Netsuite catapulted to a strike price of $26, twice the lower end estimate contained in the offer document. That's amazing and far beyond where my Irregular colleagues thought it might land. Larry Ellison owns a large controlling stake in Netsuite, a company that's now valued at $1.5 billion.

I'm no investment analyst so I won't pass much thought on the Netsuite valuation but I suspect there is a touch of market madness in play here. Tech IPOs of this kind have been thin on the ground and I wonder whether excessive liquidity forced investors to drive the price.

However, despite this one-two for Ellison, we should not be all aglow. Margins at Oracle climbed to 41.3%, up from 38.8% in the same quarter of last year. Part of that is being driven by its high value vertical market applications but part also comes from maintenance charges for years' old product. Sooner or later customers are going to wake up and declare - enough is enough. I suspect that will be sooner rather than later as the subprime crisis eats into the IT budgets of companies affected by the downturn.

On Netsuite, while I congratulate the team for achieving this valuation, we should not automatically take that as a validation of the saas market. Netsuite still sells like any other ERP vendor using a collection of direct and indirect channels. That brings risk because the SMB market which Netsuite serves is highly price and service sensitive. Mis-steps in upgrade prices will cause resentment more likely to reach the public domain than would occur at the enterprise level. Netsuite has yet to leverage the on demand model to drive out cost which could be passed on to the end customer. However, Netsuite has demonstrated there is enthusiasm for saas vendors serving the lower end of the market. this is something many of us have suspected would likely be true. It is bound to concern Microsoft and put a smile on SAPs face as it readies a rollout of its Business By Design on-demand offering.

Curiously, Ellison said on the call that he sees no mileage in saas for Oracle's business model. Yet Netsuite is providing validation. I call that having your cake and eating it.

Expect to see more analysis on these companies over the coming days and weeks, especially in light of SAPs upcoming results.

Topics: SAP, Banking, Enterprise Software, Legal, Oracle, Software

Dennis Howlett

About Dennis Howlett

Dennis Howlett is a 40 year veteran in enterprise IT, working with companies large and small across many industries. He endeavors to inform buyers in a no-nonsense manner and spares no vendor that comes under his microscope.

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  • A great day for Humanity

    Now that heading should spark some interest - A great day for humanity. But I speak as an auditor would speak.

    Oracle 10 has a feature where data can be requested as it would have been viewed at a set point of time. This is like what many shops do when they create a month end static database for reporting purposes only it is more useful for investigating fraud.

    One of the problems we have in the USA that is illustrated by Enron, WorldCom and more recently the Port of Seattle is management that goes into a CYA mode when improprieties are noted, most often by newer employees, not skilled in keeping quiet.

    In the past the newer employee would be canned and some other employee blamed and canned and "trusted" employees, say non US citizens and outsourced contractors, would be chartered with cleaning up. Hence this Oracle 10 feature is a compelling reason to stick with Oracle and move to it. It is one reason for a theory of why Oracle is doing so well. All sales personnel need do is watch the papers for an embezzlement or something similar and then make a presentation to the board and chat Sarb Ox. Actually, they need do nothing. I think there was a Zdnet article that pointed out that these board members seek Oracle out after such an event. Think how management that tries to replace Oracle after it has been installed looks. It just doesn't happen.

    Over 50 percent of those surveyed reported observing impropriety in the work place in a recent study. I think the number was 58 percent. But few do anything about it because proof is difficult and there is always some doubt on the part of the observer. It is one reason for keeping Blogs open in the work place. But I digress. The Port of Seattle is a great example of recent improprieties long tolerated that no longer are being tolerated and Ellison and crew are on the crest of the wave to clean out the "good old boys" where every deal involves a side deal and rules are just guidelines and as Larry is quoted "where the penalties never outweigh the reward."

    Frank L Mighetto CCP
    US Citizen
  • RE: A great day for Larry Ellison

    Oracle is a commodity software product being sold and maintained at extortionate rates. Apart from Ellison???s yachts, homes and sports cars the high margins are apparently being spent on getting Oracle press releases posted in ZDNet blogs as news.

    There are serious, secure, performant, open source alternatives to Oracle and they are very low cost to implement. You may need expensive branded goods to show off your personal status but your business doesn???t need expensive branded bloatware to run. Spend the money on better people, better training, or getting more customers. Dont waste it on your infrastructure.