Oracle's first fiscal quarter ended August 31, usually never its best time, yet earnings shot up 29% year-over-year to $670 million, or 13 cents a share, on revenues up 30% to $3.6 billion. The results exceeded Wall Street expectations and on the day of the announcement Oracle's stock rose in after-hours trading and has continued to climb.

The company said software revenues were up 29% to $2.7 billion with database and middleware new license revenues up 15% and revenues from new applications licenses was up 80%. Services revenues were up 33% to $846 million.

Oracle went on its $20 billion buying bender to buck up its flagging applications sales in the face of a mature database market. The miracle may be that Oracle appears to have kept its acquired customer base though Credit Suisse suspects a 70% decline in Siebel license revenues year-over-year; Oracle acquired Siebel on its shopping spree.

Credit Suisse thinks, "Oracle is still recovering from the disruptive effect of acquisitions" and that the "reported growth rate is largely a function of easy comparables."

Co-president Chuck Phillips claimed that Oracle was "rapidly" taking applications market share from SAP. "Q1 was the second consecutive quarter that Oracle's applications new license sales growth was 80% or more," he said. "That's ten times SAP's 8% new license sales growth rate in their most recently completed quarter."

SAP has promised 15%-17% growth this year and will probably remain 20 points ahead of Oracle in the business applications market.

In a prepared statement Ellison said, "SAP appears to be rethinking their strategy as they lose application market share to Oracle and confront the difficulties of moving their application software to a modern Service Oriented Architecture (SOA). They've just announced that they are delaying the next version of SAP applications until 2010. That's a full two years behind Oracle's scheduled delivery of our SOA Fusion applications. And now [SAP CEO Henning] Kagermann is talking about an acquisition strategy to augment SAP's slowing organic growth. These are major changes in direction for SAP."

Later in a conference call Ellison also said, "I can't think that our rate of gain will accelerate, but I think that our rate of gain against SAP will stay very, very high."

Ellison said he intends to continue Oracle's buying spree by picking up industry-specific skills and products, a strategy he suggested SAP follow before it becomes "progressively less competitive." SAP, which contested Ellison's characterization, has been trying to expand largely organically.

In a statement put out Tuesday night, SAP called Ellison's remarks about SAP's product and acquisition strategy "a complete misrepresentation" and contended that it "offers customers market-leading enterprise SOA applications today while Oracle's next-generation applications exist only in PowerPoint and won't be delivered until 2008 or beyond."

SAP claimed that "mySAP ERP 2005 gives customers and partners a world-class ERP platform with planned, regular functionality enhancements without the need for major upgrades through 2010, and has been shipping to customers since June of 2006. By contrast, Oracle's statements about SAP and their own Fusion progress continue to be inconsistent and misleading. In January, Oracle claimed they were halfway to Fusion and two weeks ago they said they were not even halfway done - Oracle needs to adopt one version of the truth, and be honest with the market on its actual progress."

Credit Suisse remarked that database results are "often taken as a proxy for overall tech spending" and noted that with Oracle's first-quarter constant currency growth rate of 13%, it looks "robust." It reckons Oracle's organic growth at 48% and dismisses the SAP miss as a "timing issue" that it can make up in the second half.

Oracle expects revenues this quarter to be up 22%-24% after adjusting for acquisition accounting and earnings to be 17 cents a share. Some on Wall Street say the projections are conservative, some don't.
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