Oracle Falls Flat -- or Did It?Oracle seems to be making a habit of disappointing Wall Street with weaker-than-expected sales of database licenses. It did it again this week -- the third disappointment in a row -- when it reported otherwise in-line results for its third fiscal quarter but said that database sales grew by about half of what Wall Street expected. There is, however, another side to the story that investors might want to look at -- and it isn't the weak excuse regarding the stronger dollar put forward by Oracle CFO Safra Catz on the analyst call. Few analysts paid that one much attention, because everyone knew that the dollar was surging and baked it into their estimates. For the record, database and middleware sales were up close to 5% in absolute terms, and 9% in constant dollars. In any case, once investors noticed the database shortfall (first pointed out by TheStreet.com), they started selling shares -- but the loss was made up later in the session. But it's worth noting that the company's business model is changing, and Oracle now derives fully half of its quarterly revenue from maintenance fees, which sport margins of about 90%, says CEO Larry Ellison. Fair enough, say Oracle's critics, but doesn't a slowdown in the sales of new licenses mean that a slowdown in maintenance revenue lies ahead? Not necessarily. It's commonly thought that new license sales are akin to a well that feeds the spring of ongoing maintenance revenue. So, if the well dries, the spring follows. While there's some measure of truth in this, it's a rather misleading metaphor. "It's very hard to find a major company at this point that doesn't have an enterprise database," says Rob Tholemeier, a former sell-side analyst turned independent software investor. "More and more sales come from the existing customer base."
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