Results bode well for future: analyst

Ovum pundit says things are looking good

David Mitchell, senior vice president for IT research at consultancy Ovum, says Oracle’s third-quarter results are a mixed bag, but overall are good.

“There are elements of the continued success in the latest results, but there are signs that the global fiscal problems are beginning to have an impact in the industry,” he says.

This means the fourth-quarter will be “more interesting”, with “more at stake than ever” says Mitchell.

He goes on to say: “In the US, the weakest area appeared to be in the applications business, posting a 1% shrinkage year-on-year in constant currency-based revenues.”

In the Asia-Pacific region, applications revenue grew 5%, he says.

Oracle sees growth potential in middleware, with the purchase of BEA Systems, he adds.

“With the impending close of the BEA acquisition, it is clear that database and middleware will be a battlefield where Oracle wants to fight more strongly — with IBM being the clear target.”

Oracle’s operating income rose 35% from last year’s third quarter to US$1.9 billion, a good sign, says Mitchell.

“Cash flow from operations is one area that is not frequently commented on, but it is becoming increasingly important for Oracle,” he says.

“It is this figure that gives Oracle the ability to continue its major acquisition programme, to invest in new R&D and to execute its stock buy-back programme.

“[Recently], Oracle obtained a credit line for US$2 billion from lenders that include Bank of America and Wachovia,” he points out.

“This, coupled with the very strong cash flow growth performance, gives Oracle plenty of headroom and its continued margin improvement — up to 41% — continues to show that Oracle is running a tight ship.”

Roughly half of the company’s Q3 revenues came from outside the Americas. Revenue in the Americas stood at US$2.7 billion, with US$1.87 billion coming from Europe, the Middle East and Africa (EMEA), and US$771 million from the Asia-Pacific region.

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Tags managementOracleovumThird-quarter resultsdavid mitchell

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