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By | Gavin Clarke 27th June 2007 01:14

Ellison rules out M&A breather

Got to circle around those SAP wagons

Oracle loves buying companies and it simply can't break/won't break the habit. It's got ambitious growth targets to meet and rivals' market share to take.

Chief executive Larry Ellison and president and chief financial officer Safra Catz today re-committed the company to more mergers and acquisitions to help it hit its goal of 20 per cent earnings annual growth for the next 10 years. In an earnings call today, they announced that Oracle had actually closed fiscal 2007 with a number closer to 30 per cent than 20.

"I expect the [acquisition] pace to continue," Ellison sharply told one curious Wall Street analyst. "Just because we are way ahead doesn't mean we are going to take a nap here," Catz told another sheepish analyst. "The overall goal is the 20 per cent annually. Because we are ahead is not an excuse for not hitting it next year."

The strategy is one of stealth - to surround SAP's applications with Oracle-owned software and convince customers to switch over time, Oracle president Charles Phillips explained. Oracle has bought 30 companies in five years.

SAP, of course, took its usual position along with BEA, IBM and Microsoft in the competitive shooting gallery that has become Oracle's quarterly results call. Oracle claimed growth at the expense of all four. New license revenues for Oracle's database and middleware increased 18 per cent and applications 13 per cent for the fourth quarter. For the year, database and middleware grew 16 per cent and applications 32 per cent.

Either management was bored or tired on Tuesday's call, as all three steered clear of the customary repeated and personal digs at rivals, and stuck instead to a well-rehearsed market share and customer win recital.

For the three months to May 31, Oracle reported a 23 per cent increase in net income to $1.6bn on revenue that grew 20 per cent to $5.8bn. New software licenses increased 17 per cent to $2.4bn while earnings per diluted share increased seven cents to $0.31. For the year, Oracle reported net income of $4.2bn, up 26 per cent, on revenue that increased 25 per cent to $17.9bn. New software licenses grew 20 per cent to $5.8bn with EPS of $0.81 - an increase of 17 cents.

Catz forecast software sales would grow between 20 and 30 per cent during the first quarter, more than double the number expected and excluding income from the Agile purchase. First-quarter EPS is expected at $0.21 per share, excluding charges.®

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