Oracle has weathered this 18-month long recession (and counting) better than many of its enterprise competitors. Well, at least so far.
The company’s quarterly financial reports over the past year have pleased Wall St. analysts, thanks largely to its perpetually steady maintenance revenues. Company officials have also pointed out over the past month or two pockets of growth in its broad product portfolio including its Exadata Database Machine and Fusion Middleware offerings. Licenses of its bread and butter database products however, have been flat to slightly down.
But most recently there are signs that maybe this wicked and seemingly unending recession is taking a toll on the folks in Redwood Shores.
In its financial statement last month for the quarter ending May 31, Oracle took a half step back. The company reported a net profit of $1.9 billion which is down 7% from the same quarter a year ago, while revenues tumbled 5.2% to $6.9 billion. But even this news wasn’t received so badly by Wall St. analysts who were expecting Oracle to lose even more.
In a note of caution however, Peter Goldmacher, an analyst with Cowen & Co., wrote last month he believed “Oracle’s standalone margin profile is unsustainable, and the pending acquisition of Sun is going to be more challenging than the current valuation implies.”
Then Oracle announced it was cutting up to 1,000 jobs in Europe. It isn’t the 5,000 layoffs that Microsoft announced a while back, or the 9,000 people IBM has let go this year, but still an indication the company was looking for ways to tighten its belt. Again this news is not so bad, but it is no reason to break out the champagne either.
But then two weeks ago the company announced it was halting construction of a mammoth $313 million data center in West Jordan, Utah. The 200,000-sqaure-foot facility will store customers’ data and be dedicated to supporting the products and services of its on-demand division. Oracle officials recently said revenues from that division have been growing at an impressive 25% a year.
It’s logical to assume this building, which will serve as the model for other “green” facilities Oracle is planning, will be instrumental in helping Oracle launch whatever cloud computing strategies it has planned. And the company will pursue a cloud computing strategy, despite some ambiguity about that issue coming from Mr. Ellison from time to time. Hasan Rizvi, senior vice president, Oracle Fusion Middleware Products, made that clear speaking at the company’s Fusion Middleware 11g announcement earlier this month.
Oracle didn’t offer any specific reasons for halting construction nor did it say when it would resume the project. What made some people nervous, particularly those in the state of Utah where the data center was projected to bring some $500 million in new state revenues over a 12-year period, was that Oracle used the word “postpone” in its only official statement.
On top of sales of new software licenses being down, it could be the fact Oracle will be shelling out $5.6 billion very soon for Sun, which could be weighing on the company’s decision to halt construction.
While faring better than its enterprise archrivals, Oracle will need the economy to improve significantly if corporate customers are going to spend more on new software licenses in the second half of this year. Maybe Fusion Middleware 11g and its associated tools, announced July 1, will help coax more dollars out of those tightly closed wallets.