No, Larry Ellison isn't dead. But
, the company he leads, might have a hard time living up to revenue expectations this year.
While Ellison's health isn't in question -- there were rumors Thursday that he died -- there are questions about the vigor of Oracle's application software sales, or sales of business software, such as accounting software. After having
already disappointed in that area during its fiscal first quarter, which ended Aug. 31, one Wall Street analyst now says the company will have to post $1 billion in applications software sales in the fiscal year's second half to meet the Street's annual estimates. Should it miss again, it's already
expensive stock would be sure to suffer.
The $156 million that Oracle had in fiscal first-quarter applications software sales is just pocket change compared to what analysts are expecting for the entire year. Eric Upin, an analyst at
, has his set his target, based on company guidance, at $1.4 billion to $1.6 billion for the fiscal year, which ends in May. But in Oracle's fiscal second quarter, he expects the company will sell just $248 million in application software, which means it'll need an awfully vibrant spring to reach the full-year target. (His firm hasn't done recent underwriting for the company.)
On the Back End
"Even if they blow the numbers away and do $300 million in the second quarter, that means they have to do more than $1 billion in applications business during the second half," says Upin. "This is a very back-end loaded year."
Upin, who recently downgraded Oracle to long-term attractive from buy, notes that Oracle is the king of database software but isn't as strong in applications software. And "applications have to be successful, in our opinion, for the stock to make another meaningful move upward. In the applications space, Oracle is just a me-too player."
Ellison disagrees. At a
recent users conference in San Francisco, Oracle's vibrant and always-clad-in-black leader showed off
E-business Suite 11i
, the company's business software package that runs everything from accounting to corporate purchasing to supply-chain management at a company.
But so far, sales of 11i have come in lower than expected. They only grew 42% in Oracle's fiscal first quarter, below the 50% to 60% growth rate that analysts were looking for. In a dizzying display of fuzzy math, though, Oracle says it expects applications software to grow 50% to 100%.
The software also puts Oracle squarely in competition with fast young bucks like
, not to mention the more mature
. Then there are specialized firms like
, as well as traditional foes like
So Oracle potentially faces more intense competition than it does in database software, where it also fights from a much stronger position.
"They're passing the baton from an area where they're strong and kick a-- every day, to an area where they're just sort of also there," Upin says. "And in this environment, their products are going to have to be very good."
Oracle has always been known for dramatic finishes, because its fiscal fourth quarter is traditionally its strongest. And Jeff Henley, the company's CFO -- who also refuted rumors Thursday that he was leaving the company -- says Oracle isn't changing its hefty projections.
So Ellison and Oracle are going to have to run hard and fast to keep the company's stock alive and kicking.