Postmortem Thoughts on SAP’s Disappointing Quarter – A Tipping Point?
During the past week we had the opportunity to listen to SAP’s earnings calls, attend Oracle’s analyst update, and speak with a number of independent applications consultants who work with larger companies to deploy and update applications.
We will spare readers a detailed summary of either Oracle’s Analyst Update or the SAP quarter given what has already been written in the general business press and by financial analysts. There are a myriad of very specific factors that have contributed to the recent earnings results of both Oracle and SAP that are independent of the underlying competitive attributes of both companies.
Our initial reaction to SAP’s comparatively weak license revenue figures was to not read too much into a single quarter’s performance. While we believe that view is correct, we have been somewhat surprised by the significant change in stance among the consultants we know toward Oracle. More specifically several months ago there was a good deal of concern and skepticism being expressed toward Oracle Fusion and the company’s commitment to continue to support indefinitely the wide variety of recently acquired applications. However, in our most recent conversations there has been a pretty dramatic reversal in this view. Today, while expectations as to when Fusion will arrive continue to, if anything, extend further into the future, there appears to be a good deal of confidence that Oracle will indeed continue to provide long term product support for the existing lines and that there will be no effort to force customers to adopt Fusion. As a result, the consultants are much more comfortable with their endorsements of Oracle and customers (as evidenced by Oracle’s very strong February and May quarter performances) appear to be moving forward again. It is unclear how much of the substantially improved license performance of Oracle’s applications business is a reflection of pent up demand and how long this pent up demand will favorably impact results. It is clear that the period of FUD (fear, uncertainty and doubt) that weighed on Oracle's performance as it executed an ambitious series of relatively large acquisitions (PeopleSoft/JDEdwards, Siebel, Retek, et. al.) is over.
Our point at the margin is that SAP’s disappointing Q2 performance and Oracle’s strong Q4 may in fact be early indication that the competitive balance is shifting to Oracle’s favor. It is clearly too soon to say for sure. We must admit that as long term bulls on Oracle the recent turn of events is exciting.
Legal Disclaimer Nothing herein constitutes an offer or solicitation to buy any security. Readers are advised to review their own financial situation, risk tolerance, and investment objectives as to any investment. Information provided here is based, in part, from sources believed to be accurate and reliable, although no representations or guarantees can be provided as to its accuracy or completeness.Blue Atlas Management, LLC is our official business entity for consulting related work. In addition, we also have a website for those of you who are interested in learning more a little more about our services http://www.blueatlasmanagement.com/. Please feel free to contact us at jmendelson@blueatlasmanagement.com, with any comments or questions.
We will spare readers a detailed summary of either Oracle’s Analyst Update or the SAP quarter given what has already been written in the general business press and by financial analysts. There are a myriad of very specific factors that have contributed to the recent earnings results of both Oracle and SAP that are independent of the underlying competitive attributes of both companies.
Our initial reaction to SAP’s comparatively weak license revenue figures was to not read too much into a single quarter’s performance. While we believe that view is correct, we have been somewhat surprised by the significant change in stance among the consultants we know toward Oracle. More specifically several months ago there was a good deal of concern and skepticism being expressed toward Oracle Fusion and the company’s commitment to continue to support indefinitely the wide variety of recently acquired applications. However, in our most recent conversations there has been a pretty dramatic reversal in this view. Today, while expectations as to when Fusion will arrive continue to, if anything, extend further into the future, there appears to be a good deal of confidence that Oracle will indeed continue to provide long term product support for the existing lines and that there will be no effort to force customers to adopt Fusion. As a result, the consultants are much more comfortable with their endorsements of Oracle and customers (as evidenced by Oracle’s very strong February and May quarter performances) appear to be moving forward again. It is unclear how much of the substantially improved license performance of Oracle’s applications business is a reflection of pent up demand and how long this pent up demand will favorably impact results. It is clear that the period of FUD (fear, uncertainty and doubt) that weighed on Oracle's performance as it executed an ambitious series of relatively large acquisitions (PeopleSoft/JDEdwards, Siebel, Retek, et. al.) is over.
Our point at the margin is that SAP’s disappointing Q2 performance and Oracle’s strong Q4 may in fact be early indication that the competitive balance is shifting to Oracle’s favor. It is clearly too soon to say for sure. We must admit that as long term bulls on Oracle the recent turn of events is exciting.
Legal Disclaimer Nothing herein constitutes an offer or solicitation to buy any security. Readers are advised to review their own financial situation, risk tolerance, and investment objectives as to any investment. Information provided here is based, in part, from sources believed to be accurate and reliable, although no representations or guarantees can be provided as to its accuracy or completeness.Blue Atlas Management, LLC is our official business entity for consulting related work. In addition, we also have a website for those of you who are interested in learning more a little more about our services http://www.blueatlasmanagement.com/. Please feel free to contact us at jmendelson@blueatlasmanagement.com, with any comments or questions.
posted by jcm at 5:01 AM
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