Oracle's pipeline is crammed, execs say

Oracle's pipeline is historically fat, executives told analysts Monday as the company reported sales in line with expectations but with some softness in Oracle's database business.

Oracle posted revenue of US$4.16 billion in its second quarter, ended Nov. 30, a 26 percent year-over-year gain helped by the company's acquisitions. Oracle's net income jumped 21 percent to US$967 million. On a non-GAAP basis, Oracle reported net income of US$1.17 billion, or 22 cents per share, meeting the consensus estimate of analysts polled by Thomson First Call.

Oracle's applications revenue reached US$1.07 billion (US$340 million from new license sales; the rest from maintenance), up 39 percent from last year's second quarter. Its database and middleware revenue, reported as a combined segment, grew more slowly, with total revenue of US$2.15 billion. New license sales for database/middleware increased 9 percent, to US$867 million.

Oracle's middleware line includes the analytics technology it acquired from Siebel, a product set that executives said has been selling well. Oracle's overall middleware new license sales growth was "exceptionally strong" during the quarter, according to President Charles Phillips. Because Oracle wraps together its database and middleware numbers, tracking exactly what's happening in its database business is a mysterious art. First Albany analyst Mark Murphy recently put out a critical note saying Oracle's decision not to break out database sales "would be analogous to Boeing not disclosing actual airplane sales."

Oracle's stock took a hit two weeks ago when Wall Street began questioning how well Oracle's database sales held up in the second quarter. One longtime Oracle partner warned that the database sales would not meet expectations: "People bought early in the quarter, then it died. It was like people thought Christmas was in September."

On Oracle's call with analysts following its results release, executives avoided directly answering questions about second-quarter sales but acknowledged some "execution" issues. "It basically came down to execution on a number of deals that didn't close during the quarter," Oracle President and CFO Safra Catz said. "We think that additional focus and better pipeline management should result in higher conversion rates and better execution in Q3."

Oracle's pipeline has an unprecedented number of leads in the queue, executives said. New product launches, further growth from product lines Oracle has acquired, and a commitment to reducing internal overhead and freeing sales staffers up to spend more time in the field should make for a booming second half of Oracle's fiscal year, they said.

After spending Oracle's last earnings call trash-talking SAP, CEO Larry Ellison switched gears this time and instead talked up Oarcle's product catalog. Secure Enterprise Search drew special mention from Ellison, who cited it as an example of Oracle's organically driven innovations. Next month will be a big one for Oracle's applications line, as it launches five major ERP updates including version 12 of its Oracle E-Business Suite and Siebel 8.

--Additonal reporting by Barbara Darrow