A New Approach to Earnings Calls?


I find the things I’d most like to blog about I unfortunately really can’t blog about (you’ll have to wait for my book). So I have to take advantage of industry events in which I don’t have a stake. The Oracle-SAP super heavyweight bout falls into this category except it hasn’t really turned into a bout yet – that would require SAP to fight back

So far, it’s more like Oracle coldcocked SAP in their most recent earnings call and SAP is stumbling around in a daze. SAP announces later this week and we’ll see if they ignore Oracle in their earnings call or counterpunch. In case you missed it, Oracle announced earnings on September 19th and were very “on message” versus SAP, claiming their applications business was growing ten times as fast as SAP’s and SAP’s strategy was flawed in a myriad of ways (including apparently not having enough investment bankers).  They barely mentioned their own results except to compare them with SAP’s.  They’ve been hammering away on this theme since then. There are not many companies that would include a quote like this in their earnings’ release:

“SAP appears to be rethinking their strategy as they lose application market share to Oracle and confront the difficulties of moving their application software to a modern Service Oriented Architecture (SOA),” said CEO, Larry Ellison. “They’ve just announced that they are delaying the next version of SAP applications until 2010. That’s a full two years behind Oracle’s scheduled delivery of our SOA Fusion applications. And now Kagermann is talking about an acquisition strategy to augment SAP’s slowing organic growth. These are major changes in direction for SAP.”

This is entertaining in multiple respects:

1.) This kind of brazenness is awfully rare.  Textbook Oracle: declare yourself number two (or in this case spend tens of billions of dollars to be number two) and turn your guns on number one. To come up with anything comparable, I have to go back to the ad earlier this year claiming “Computer Associates Runs SAP”, also coincidently from Oracle.

2.) SAP botched their immediate response and therefore the news cycle. They issued a statement that failed to address the share and growth accusations (which we’ll get to with below) but went after the more philosophical charges leveled by Oracle:

“Larry Ellison’s statements in today’s Oracle earnings press release about SAP’s product and acquisition strategy are a complete misrepresentation,” said Bill Wohl, vice president of product and solutions public relations, SAP. “Since January of 2003, SAP has consistently articulated and delivered on its vision for enterprise SOA following a course of organic growth combined with strategic acquisitions. SAP offers customers market-leading, enterprise SOA applications today while Oracle’s next-generation applications exist only in PowerPoint and won’t be delivered until 2008 or beyond. mySAP ERP 2005 gives customers and partners a world-class ERP platform with planned, regular functionality enhancements without the need for major upgrades through 2010, and has been shipping to customers since June of 2006. By contrast, Oracle’s statements about SAP and their own Fusion progress continue to be inconsistent and misleading. In January, Oracle claimed they were halfway to Fusion and two weeks ago they said they were not even halfway done — Oracle needs to adopt one version of the truth, and be honest with the market on its actual progress.”

Am not. Are too. Am not. Are too.

3.) They’re actually having a fight about who professes to like Service Oriented Architecture more: “No, we’re more SOA than they are…” The reality is neither of them come anywhere close to offering service-oriented applications today and if anything are slowing their march to SOA. Both have yielded to a distinct lack of customer interest in major new releases by pushing their big bang roadmaps further out and focusing on incremental releases. Oracle tells customers not to pay any attention to those Fusion apps and apparently plans to obfuscate the issue with their similarly named Fusion middleware. SAP begs its customers to upgrade to the latest version of SAP and in return they promise not force any more major upgrades any time soon. Given the costs, risks and unknown benefits of these major upgrades, the ERP space is now the paragon of a “good enough” market. But even more mystifying, neither of them really want to see a SOA world come to pass as liquefying all those business processes into individual services undermines their way of life and raison d’être (I apologize for my French).  Having to sell a bundle of services as opposed to the transactional monolith undermines their business models.  The world won’t unravel into an atomistic collection of best of breed services but customers will come at it the other way, chipping off important higher value functions in favor of best of breed solutions.  We’ve seen this inside Microsoft as the move to services has let us pull relatively more important/highly specialized functions like sales commission calculation or managing the Xbox 360 supply chain out of our big, monolithic enterprise applications.

4.) Finally, people are questioning Oracle’s actual growth and share claims.  You can see the influence of the investment bankers who run Oracle. They closed the Siebel acquisition exactly one year and one day after the PeopleSoft deal closed, which means Siebel revenues look to the casual observer like growth for a year. And they’ve reclassified some of Siebel revenue into their middleware line. Oracle’s quarter is a month offset from Siebel’s quarter so it is hard for analysts to do apples-to-apples comparisons. Most of the Wall Street analysts fell for all this and exulted in the apparent success of Oracle’s acquisition strategy, pushing Oracle’s stock is up two bucks.  But as people dig deeper, organic growth looks much lower (CRN, Smart Money, eWeek and Motley Fool all dig into the numbers), possibly even lower than SAP’s.

SAP probably won’t descend into the mud in their earnings call, but who knows, maybe they will follow Oracle’s lead and help liven up earnings calls in this drab, Sarbanes-Oxley world we live in.

2 responses

  1. I’m curious why you can’t blog about the things you’d most like to.I gather that these are things "in which you have a stake", but if you can’t blog about them now, how will you be able to publish them in a book?Is it that the book will be checked by Microsoft to ensure that nothing secret is being revealed?Whatever the requirement, I wonder whether it could be extended to your blog as well.If, for instance, the vetting process (if that’s what it is) involves too many people or takes too long, perhaps that could be streamlined.Or is it that, for instance, vetting necessarily involves senior people whose time would be available to vet a single book but not multiple blog posts?I ask because I very much appreciate your excellent insight in this blog – thanks! – and think it’s a shame if you can’t blog more, especially about what you’d most like to, and what you’re most expert on to boot.

  2. I wish I’d blog more too. Part of it is the lack of time, part of it is that ideas that pop up in my day job are often less valuable if shared with the entire world.The book would be historical by the time I get around to writing it. Whatever other parallels there may be between Microsoft and the CIA, there is no vetting process at Microsoft for blog posts or books.

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