Oracle Under Wide-Angle Lens

There's been so much discussion on Wall Street about Oracle's(ORCL) organic growth you'd be pardoned for thinking CEO Larry Ellison was a Northern California farmer.

With 10 acquisitions, including nine this year, the company is indulging in a spending binge that could cost it as much as $17 billion if all deals close. And that makes it increasingly important -- as well as increasingly difficult -- to gauge Oracle's internal growth rate.

"Adding another layer to the company isn't the issue," says Pat Becker Jr., an analyst with Becker Capital Management. "I'm looking at the core business -- applications and database -- and asking how much is it growing."

Indeed, Oracle added two new companies to the layer in the past two weeks, Siebel Systems(SEBL), in a cash and stock transaction expected to close in early 2006 and valued at $5.85 billion, and privately held G-Log, which makes software used in transportation and logistics.

Becker will get only a part of his question answered when Oracle reports first-quarter earnings after the closing bell Thursday. The company's core database business is fairly straightforward, but contributions by PeopleSoft, Retek and other recent acquisitions to the applications side are much harder to track.

"It is difficult," agrees Charles Phillips, Oracle's co-president and acquisition point man. "There's no longer a PeopleSoft sales force, or a Retek sales force. We're not breaking out those numbers," he said during an interview.

Robert Stimson, who follows enterprise software for WR Hambrecht, says the company's top-line growth was 9% in the pre-PeopleSoft days of 2004, but it likely slowed to 8.3% (backing out his estimates of PeopleSoft and Retek revenue) in 2005, and it will slow to 5.6% in 2006, excluding both of those acquired companies, as well as Siebel Systems. Hambrecht does not have an investment banking relationship with Oracle.