Oracle CEO Larry Ellison is banking on two things for the future growth in the company's applications business: Winning battles among various verticals such as retail and telecom billing and betting heavily on search. Oracle, which reported second quarter earnings earlier today, projected third quarter results in line with current expectations of earnings of 22 cents a share on sales of $4.18 billion as projected by Thomson Financial. But a strong pipeline as well as a bevy of new ERP modules to be announced Jan. 31 had executives sounding confident about upcoming quarters. Meanwhile that confidence comes as analysts were less-than-enthusiastic about Oracle's quarter. UBS analyst Heather Bellini said in a research note that Oracle's applications results were "close but no cigar" and short of Wall Street estimates. Ellison's cure: Winning battles with SAP by verticals. Touting Oracle's sales to retailers--and noting a new deal with Wal-Mart--executives say the focus for the company is providing applications tailored to specific markets. The strategy on the surface makes sense. After all, few CIOs are hankering to do full blown enterprise resource planning suites. "Our strategy is to move beyond just ERP," said Ellison, adding that Oracle is focusing on CRM and targeting retail, merchandising and telecom billing. Ellison noted that the telecom industry is launching new services that require new billing modules. Other verticals such as the government sector are also updating services. "Specific verticals will grow faster. ERP is fairly mature," said Ellison, who Oracle will be competitive with entrenched vertical-specific players and SAP. Ellison's other big bet is something he dubbed the "secure enterprise search paradigm." Ellison said that future Fusion applications will have search built in as a primary navigation tool. Ellison said he expects Oracle to thrive by focusing on secure search--an extension of how customers use Oracle's databases--to find any documents a worker is allowed to see. "If I searched on GE I'd find all entries I'm allowed to see," said Ellison. "We think this is a very important area." While the vertical wars were the focus of Ellison's pitch, Oracle also seems to be gaining momentum in on-demand software. In the second quarter, Oracle had on-demand applications revenue of $140 million, up from $125 in the first quarter. While that's a pittance in a company with revenue topping $4 billion this quarter Oracle does have some traction. Charles Phillips, president of Oracle, said Siebel on-demand signed up customers such as Equifax, Honeywell and Bank of America.
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