Separating SAP From Chaff

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Dennis Howlett's analysis

My recent post accusing Oracle of lying about its chief rival was close enough to the mark to get under Oracle’s skin. Still, it had some holes I couldn’t fill, not least of which because of different reporting periods for the two companies. But if I had half the accounting skills of my colleague at ZDNet, Dennis Howlett, I could have done a better job of proving my point. I shall endeavor to learn at the master’s feet.

At issue, Oracle took a largely specious shot at SAP, contending in the press release accompanying its earnings report this week that it “took market share from SAP in every region around the world.” My point, however awkwardly expressed, was that Oracle is comparing its entire revenue to that of SAP, while the companies don’t actually compete in all areas; the numbers, which don’t lie, show that Oracle’s growth is fueled chiefly by database and middleware, not business applications, which is the only area where the two companies compete.

Dennis does a great job of lining up the earnings reports of SAP and Oracle to create more of an apples-to-apples comparison, and concludes, “the revenue patterns look remarkably similar. SAP dipped more sharply at Q3 than Oracle but accelerated faster in Q4.” Moreover,

Oracle’s Q4 results represent two-thirds of as yet unannounced Q2 earnings for SAP on my basis for comparison. Also remember that while the percentages look starkly different, Oracle is assuming that its only competition is SAP. That’s simply not true. Neither is the converse.

In her comments to my post, Oracle’s Karen Tillman suggested the gap between Oracle and SAP’s numbers would be even more “dramatic” if I stripped revenue from Business Objects, acquired by SAP almost two years ago, out of its reported revenues. She didn’t suggest, however, that I strip out revenues from applications vendors acquired by Oracle, including, as Dennis notes as well, PeopleSoft, Siebel, JD Edwards, and Hyperion (also acquired two years ago).

[Image credit: Dennis Howlett of ZDNet]

Tags: Revenue, Oracle Corp., SAP AG, Operational Accounting, Finance, Michael Hickins

Michael Hickins is a professional writer and journalist with a passion for ferreting out the intersections between technology and culture.

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1

AbridgedMind

06/28/09 | Report as spam

RE: Separating SAP From Chaff

Can't imagine siding with Oracle on anything, but on the narrow point about the impact of revenue from Business Objects, I have to. SAP's last quarter does include some inorganic growth from BO. Oracle's last quarter does not, or at least not from Siebel, PeopleSoft, J.D. Edwards, and Hyperion, because they all closed long enough ago. That said, Oracle has done a bunch of smaller apps related acquisitions that are providing some inorganic growth, but many of the recent deals have been smaller private companies making it nearly impossible to back them out of Oracle's figures.

So what is Oracle boasting? In its most recent quarter it reported new license revenue in its apps business was down by 19%. In SAP's last reported quarter it reported Software revenue down 33%. Oracle wins. But add maintenance and support into the most recent quarter, and SAP wins. Or look just at license/software revenue over the last year, SAP wins again. More here: http://bit.ly/2q7pS1
2

karen.tillman2@...

06/29/09 | Report as spam

RE: Separating SAP From Chaff

Hi Michael - It's not wrong that SAP includes Business Objects (and presumably NeTWeaver) in their applications sales revenue. The point I am trying to make is that we don't include Hyperion in our apps numbers. See the difference?

Also, it's not that you came "close to the mark" the elicited my response. It's that I believe you didn't portray the entire picture.
3

vascruggs

06/29/09 | Report as spam

RE: Separating SAP From Chaff

I am currently an unemployed IT professional, and in my search for a job, I see a lot more openings for people with SAP skills than for PeopleSoft, et al. I just did some single keyword searches on Monster.com. The results: SAP, 4135 openings; PeopleSoft, 1207; JD Edwards, 33; Siebel, 487. Knowing the Dice.com is "the career hub for tech insiders," I ran the same searches - results: SAP, 3180; PeopleSoft, 1128; JD Edwards, 227; Siebel, 641. While not "scientific," I think these results show where the market demand is.
4

Michael Hickins

06/29/09 | Report as spam

RE: Separating SAP From Chaff

Hi Karen,
Thanks for responding... I do understand your point (which was news to me). That said, there are yet more numbers to belie the idea that Oracle is taking share from SAP (these are all full-year numbers from SAP's latest 10-K):
- number of customers went from 46K to 82K (+77%);
- software and software-related service revenues +16%
- net income +13.7%
- and to vascruggs' point, headcount +17.5%.
I'm not sure I see Oracle doing a lot of damage here.
That said, I'd be more than happy to talk and get a fuller picture, but for that to happen your team would have to answer my calls or something magical.