Over the past 24 hours, there's been plenty of real and digital ink spilled over Oracle
None of this is surprising, of course. Ellison is the Aaron Spelling of Silicon Valley. Faux drama follows him everywhere he goes. And all of it makes for good headlines. But should you, the Foolish investor, really care? Nope. I prefer to instead focus on comments made at yesterday's analyst day regarding expectations for "OracleSoft."
In short: Oracle upped its guidance for 2006, signaling high confidence in the success of the $10.3 billion merger with PeopleSoft. Specifically, Ellison said he expects sales to come in at $14.1 billion to $14.5 billion, with $4.3 billion to $4.6 billion of that to come in new license revenue. For perspective, consider that Oracle and PeopleSoft combined over the trailing 12 months generated $12.8 billion in total revenue, with $4.3 billion of that in new software sales. That means Oracle expects 10.2% growth overall but flat to 7% growth in new licenses over the next fiscal year.
That might seem downright tepid when compared with the 20%-plus per-share earnings growth predicted in Oracle's press release. But I think there's more going on here than meets the eye. For one, the gap between the expected growth rate in total sales and new licenses makes me think Ellison and his team believe they can convert a huge majority of PeopleSoft and J.D. Edwards customers. And the guidance on new license growth signals to me Oracle's willingness to remain conservative as it gears up for a "softwar" with SAP.
Call me crazy, but I take comfort in that. Indeed, it's exactly when Ellison comes under assault that he and his company perform best. Consider the past five quarters, which were dominated by its battle with PeopleSoft, as an example. In all but one quarter, Oracle exceeded the Street's earnings expectations. Do you really think SAP's offensive will stop that string? Yeah, me neither.
For related Foolishness:
- Oracle's good, but SAP is no slouch, either
- Did you see Ellison doing Trump? Let's hope he doesn't make a guest appearance on The Apprentice.
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Microsoft
(NASDAQ:MSFT) went on sale to lure Oracle's customers.
Do you crave drama? Fancy yourself a rebel investor? Enjoy breaking a few rules? Then Motley Fool Rule Breakers was designed for you.
To discuss these developments and others about Oracle, check out The Motley Fool's Oracle discussion board.
Fool contributor Tim Beyers owns shares of Oracle. To find out what other stocks are in his portfolio, check his Fool profile, which is here.