by Tom Taulli | June 21, 2013 1:48 pm
There was not much to like about Oracle’s (ORCL) fiscal fourth-quarter results.
Earnings of 87 cents per share — up from 82 cents in the same period a year ago — were in line with Wall Street expectations. However, unchanged revenues of $10.96 billion were a dud and short of the consensus mark for $11.1 billion … and marked ORCL’s second consecutive top-line disappointment.
Oracle has blamed the sluggish global economy and problems with its sales force, but investors apparently weren’t in the mood for excuses, hitting the stock by nearly 9% as of midday Friday.
But not everyone’s all that upset over ORCL’s flop. Where Oracle fails, other companies are put into a better place to succeed. For instance …
As of late, SAP (SAP) has been getting the edge on its longtime nemesis. In 2013, its shares are up 25% vs. just 9% for Oracle.
For the most part, both companies have great solutions for enterprise resource planning, which manages core functions like financials, human resources, inventory and supply-chain management. Oracle’s differentiation is its database business, which has allowed ORCL to find its way into mega-corporate accounts and generate massive cash flows, which in turn has fueled an M&A binge.
But this might be turning into a disadvantage. Oracle’s database technology is based on an approach, known as relational technology, that is looking to be a part of bygone age.
SAP has developed a much more modern system, called HANA, that uses in-memory software to allow for the processing of huge amounts of information — something especially critical for handling Big Data applications.
Launched in mid-2011, HANA is still a small part of SAP’s business, but this could change in a hurry. The company expects the software to generate between €650m and €700m in 2013, up from €392m last year. If it does, it’ll almost certainly be eating into Oracle’s market share.
Cloud computing has become a big force in business software. Some of the reasons include access to real-time data, which helps with analytics and mobile access; lower costs; and less need for ongoing maintenance. Such advantages have turned companies like NetSuite (N) and Salesforce.com (CRM) into major players.
But there is one cloud operator that has taken a direct shot at Oracle’s ERP business: Workday (WDAY).
Co-founders include Aneel Bhusri and Dave Duffield both helped to build PeopleSoft, one of the pioneers of ERP. At Workday, they have produced a growthy company that recently saw quarterly revenues grow 61% year-over-year to $91.6 million. It even sported robust operating cash flows of $17.3 million.
Workday has had little trouble convincing large customers to buy its software. In Q1, the company snagged big accounts like Bristol-Myers Squibb (BMY) and Levi Strauss to bring its customer count to more than 450.
WDAY’s focus on innovation has spawned 19 versions of the software. As should be no surprise, its priorities are in mobile apps and Big Data, though the company also has continued to build a professional services organization, which helps produce smooth implementations.
A variety of startups are creating new approaches to databases, too. Often, they are based on something called NoSQL, which is built to deal with complex data — like video — and to handle huge volumes of traffic.
Something else of note: The databases tend to cost much less than Oracle’s.
Smaller players in the space include Datastax, MarkLogic and Couchbase. While these companies still are in the early stages, they ultimately could tap the IPO market within a couple years or provide fuel for bigger players via buyouts.
Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO Strategies, All About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.
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