OK, here's our dinner. So where's the movie? Oracle (NASDAQ:ORCL) just delivered a predictably good earnings report, with every last number right about where Wall Street expected it. What was lacking was the usual bit of fireworks from CEO Larry Ellison, who mostly confined his comments to the business he controls, rather than attacking his rivals. I'd ask for a refund, but the ticket was free.
All kidding aside, the mercurial Mr. Ellison offered up a bit of insight on Oracle's customer situation, with a dash of his trademark bravado. The retail application business was singled out as an explosive growth opportunity that "should move the needle" on the bottom line by next quarter. Ellison noted that "eight out of 10 of the largest retailers in North America now use Oracle retail applications, where only one uses SAP (NYSE:SAP), and that one is now also using Oracle retail software."
Ah, yes, he got in a couple of digs at SAP -- it just wouldn't be cricket otherwise. For the record, the top-10 retailer using SAP software is Home Depot (NYSE:HD), while at least Wal-Mart (NYSE:WMT) and maybe others are using SAP's RFID management software today. And Ellison forgot to mention that BEA Software powers two other top retailers, which adds up to 11 companies in the top 10. I was going by market cap -- maybe he ranked his retailers by some other, unspecified, metric. But I digress.
Wal-Mart is the next customer coming into the Oracle fold, in a "very, very large deal" that didn't quite happen in the just-completed quarter. Oracle Co-President Charles Phillips added detail on a handful of middleware deals, which is closer to Oracle's comfort zone. Hewlett-Packard (NYSE:HPQ) chose Oracle's service-oriented architecture (SOA) platform over competing products from BEA, SAP, and webMethods; Korea Telecom picked Oracle instead of BEA and IBM (NYSE:IBM); and Xerox went with Oracle in a "win over SAP."
That's a lot of tough, competitive language. And Ellison wasn't done yet: "You may have noticed that IBM and Yahoo! (NASDAQ:YHOO) had an announcement in the search area, but again, we think we do the security job much better than they do. Again, theirs is called enterprise search. Ours is called secure enterprise search for a reason."
Yowza. But even with all of those little nags at the competition, this conference call was a far cry from the fire and brimstone Ellison usually musters. And CFO Safra Katz said that application revenues, for all the talk about big deals, grew only 1% over last year if you back out contributions from new acquisitions. The market seemed to sense weakness in this performance, dropping Oracle's share price by 4.5% in one day.
There is little doubt that Oracle will continue to grow for the foreseeable future. The real question is, how quickly? Internal goals are set for 20% annual EPS growth for another two and a half years, which makes the current trailing P/E of 25.7 look about right. But growing by acquisitions alone is an expensive plan, and Ellison and his gang need to come up with some organic growth outside of the mainstay database business. IBM, for one, looks cheaper in many ways, even though its stock price is nibbling at 52-week highs, whereas Oracle's isn't.
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Fool contributor Anders Bylund holds no position in any of the companies discussed here. He once had a nice Santa look going, but he jingled it all away. You can check out Anders' holdings if you like. Foolish disclosure is always entertaining.
