While applications software companies were hit particularly hard throughout the IT industry recession, those whose software handles data – storing it, massaging it, delivering it – came through largely unscarred, something that put many of them on a solid footing for growth through acquisition.

The numbers from database market leader Oracle, in its second quarter ending 30 November, were even better than its bullish followers had predicted.

Revenues were up a solid 8% on the year-earlier quarter to $2.5 billion as database and application software sales rekindled.

Moreover, tight cost controls pushed profitability to almost obscene levels. At $617 million for the quarter, Oracle’s net income was up 15% to represent a net margin of 25%.

Behind the rosy numbers, though, there were a couple of weak spots. While new application licence revenues grew 27% to $137 million, that number still only adds up to less than a quarter of the revenue generated by the whole applications group – a measure of the stagnant nature of the market for business applications (at least at the high end). Making up the remainder of the applications business was revenue from upgrades, support and other services to existing customers.

The database side of Oracle’s business looked more rounded. Database licence sales were up 11%, but almost 40% of overall revenues from the database group came from new licences.

Less buoyant, though, the company’s $2 billion per year consulting business continued to shrink. Revenues generated by Oracle’s own consultants fell 13% quarter-on-quarter to $396 million – though the fact that a similar figure was reported in the first quarter may indicate that the consulting operation has reached a plateau.

But all these numbers need to be considered against the backdrop of currency fluctuations. The weakening of the dollar against other currencies during the period artificially inflated Oracle’s growth picture. In local currencies, Oracle’s growth rate was closer to 4% (rather than 8%) – even though that still represents its best (and only positive) revenue upswing in over 18 months.

Wider horizons

Others in the database market are showing an even more robust profile. Progress Software, which sells database and development tools largely to creators of packages for specialist industry sectors, reported revenues of $72.1 million, up a solid 13% in the closing quarter of its fiscal 2003 to the end of November, as software licence revenues rose to 17%.

Profits were equally strong, with net income jumping to $8.8 million from $6.9 million in the year-earlier period.

Unlike many of its direct peers, Progress managed to maintain both good growth and profitability over the two-year long IT recession. And that performance has inspired some expansion.

Just after its fourth quarter closed, the company announced it was acquiring DataDirect Technologies, a specialist in data integration components that enable developers to plug their applications into multiple data sources. That will eat into its cash reserves to the tune of $88 million, but with $219 million in the bank and annual revenues now totalling over $300 million, Progress seems to have carved out a market position that ensures it avoids the fate of other database majors such as Ingres and Informix.

Some of that stability comes through diversification. Through carefully selected acquisitions, the company has established additional operating units: the message bus integration software company Sonic; data integration vendor PeerLogic; and object database market leader, ObjectStore.

Despite that, Progress is reticent about spelling out the share of revenues these generate over and above the core database and tools business.

Managed performance

The growth in the demand for the handling of data is evident elsewhere. Data query, analysis and reporting software vendor Cognos continues to benefit from an awareness that organisations need to emerge from tougher times with a better understanding of the underlying data that drives their businesses. As well as that, they need to demonstrate greater transparency of business transactions and operations to shareholders, customers and regulatory authorities – a set of demands Cognos and others like to call ‘corporate performance management’.

Like its competitors in this sector, Cognos certainly seems to be meeting some of those requirements. In its third quarter, ending 30 November, revenues rose 25% to $138.1 million compared to the same period in 2002. That was driven by new product introductions – most notably its ReportNet tool which was snapped up by by 200 customers – and by many organisations’ desire to roll tools out to an ever wider group of users.

As a result, Cognos booked 95 deals worth over $200,000 in the quarter, up more than 28% on the year-earlier period, and 10 contracts valued at over $1 million – an all-time high for the company. Business was particularly strong in Europe and Asia/Pacific.

While revenues rose 14% in the Americas region, European growth hit 34% and Asia/Pacific was up 67%.

With that profile – and $321 million in available cash – Cognos must now be looking to support even faster growth with acquisitions that will rival the takeover of Crystal Decisions by its arch-competitor Business Objects.