Data companies unscarred

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.


Key supplier financial results – December 2003
Company   Main activity   Period   Period end   Revenue ($m)   Rev change   Net inc ($m)   Prev net Inc ($M)  
3Com Corp Networking systems 2Q04 28-Nov 181.9 -33% -139.0 -68.5
Adobe Systems Inc Document s/w 4Q03 28-Nov 358.6 22% 83.3 40.1
Advanced Digital Info Corp Storage systems 4Q03 31-Oct 118.0 40% 5.8 -1.2
Anite Group Plc* Services &s/w 1H04 31-Oct 154.0 -14% -24.4 -73
Aspen Technology Inc Supply chain mgmt s/w 1Q04 30-Sep 77.0 0% 0.5 -10.7
Atos Origin SA* IT services 3Q03 30-Sep 810.1 -2% n/a n/a
Cap Gemini Ernst &Young Grp* IT services 3Q03 30-Sep 1,510.8 -18% n/a n/a
CGI Group Inc* IT services 4Q03 30-Sep 499.8 21% 34.9 25.6
Cognos Inc Business intelligence s/w 3Q04 30-Nov 172.2 25% 24.2 19.9
DataMirror Corp* Data management s/w 3Q04 31-Oct 11.9 2% 1.4 -3.2
Descartes Systems Group Supply chain execution s/w 3Q04 31-Oct 16.0 -8% -4.2 -5.2
Electronics for Imaging Inc Imaging technologies 3Q03 30-Sep 97.3 5% 13.0 3.6
Fujitsu Siemens Computers* Systems &IT services 1H03 30-Sep 2,522.20 -9% n/a n/a
Geac Computer Corp Business applications s/w 2Q04 31-Oct 111.5 9% 10.7 11.6
Icon MediaLab Int’l AB* Internet development services 3Q03 30-Sep 13.8 -15% -1.6 -10.7
IFS Industrial &Fin Sys AB* Business application s/w 3Q03 30-Sep 59.0 -16% -10.2 -10.9
Int’l Business Sys AB* Business application s/w 3Q03 30-Sep 62.6 4% -2.9 -21.0
Intentia AB* Business application s/w 3Q03 30-Sep 72.1 -21% -8.9 -11.1
Intershop Communications AG* E-commerce s/w 3Q03 30-Sep 7.6 -27% -4.4 -8.7
Intuit Inc Personal finance s/w 1Q02 31-Oct 242.5 14% -54.0 -54.7
Kewill Systems Plc* Supply/demand chain mgmt s/w 1H04 30-Sep 17.0 -26% 0.8 -9.9
Keynote Systems Inc Internet performance services 4Q03 30-Sep 9.5 -2% 0.7 -53.9
Lawson Software Inc Business applications s/w 2Q04 30-Nov 84.3 -4% -1.3 -3.5
Manugistics Group Inc Supply chain mgmt s/w 3Q04 30-Nov 59.9 -4% -19.8 -26.0
MapInfo Corp Desktop mapping s/w 4Q03 30-Sep 30.0 27% 1.1 0.1
McData Corp Storage switches 3Q03 31-Oct 94.7 17% -50.0 2.3
Merant Plc Change/config mgmt s/w 2Q04 31-Oct 30.0 3% 1.4 -6.3
MRO Software Inc Maintenance &operations s/w 4Q03 30-Sep 46.0 0% 2.6 -2.0
Network Appliance Corp Storage servers 2Q04 31-Oct 275.6 28% 48.4 15.8
Northgate Information Solns Plc* Applns s/w &IT services 1H04 31-Oct 81.4 22% 0.5 42.4
Oracle Corp Database &applns s/w 2Q04 30-Nov 2,498.0 8% 617.0 535.0
PalmOne Inc PDA devices &op sys 2Q04 30-Nov 271.2 5% -4.1 3.5
Parity Group Plc* IT services 1H03 30-Jun 130.3 -18% -22.4 -1.5
Portal Software Inc Communications mgmt s/w 3Q04 31-Oct 25.3 -16% -15.0 -39.6
Progress Software Corp Appln dev &DBMS tools 4Q03 30-Nov 309.1 13% 27.1 20.6
QAD Inc Manufacturing s/w 3Q04 31-Oct 55.8 15% 3.6 0.3
QRS Corp Retail supply chain s/w 3Q03 30-Sep 31.3 -7% -3.5 0.6
Red Hat Inc Linux software 3Q04 30-Nov 33.1 36% 4.1 0.2
Sage Group Plc* Financial applns s/w 2H03 30-Sep 448.0 2% 85.3 71.2
Software AG** Database and development s/w 3Q03 30-Sep 112.4 -13% 4.4 6.3
Synopsys Inc Electronic design s/w 4Q03 31-Oct 316.5 2% 44.6 -97.8
Synstar Plc* Systems integrator 2H03 30-Sep 179.5 1% 5.3 5.5
Systems &Computer Tech Corp Computer services 4Q03 30-Sep 76.4 16% 8.8 1.0
Tibco Software Inc Appln integration s/w 4Q03 30-Nov 72.1 1% 7.6 3.4
Transaction Systems Architects Inc E-payment &ecommerce s/w 4Q03 30-Sep 71.8 1% 9.1 1.1
Ubizen* Managed security svcs &s/w FY03 30-Sep 81.0 -41% -63.5 -31.1
VA Software Corp Collaborative s/w dev prods 1Q04 31-Oct 5.8 14% -1.2 4.1
Verity Inc Text search, content, portal s/w 2Q04 30-Nov 28.9 26% 3.6 2.4
WM-data Group AB* IT services 3Q03 30-Sep 163.8 -7% 2.9 -11.8
Xansa Plc* IT services 1H04 31-Oct 363.4 -3% -18.5 -233.0
* Figures converted into $US at exchange rates averaged over the period

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Ben Rossi

Ben was Vitesse Media's editorial director, leading content creation and editorial strategy across all Vitesse products, including its market-leading B2B and consumer magazines, websites, research and...

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