Financial results focus

Over the past eighteen months, executives at Oracle have doggedly reiterated a ‘business as usual’ message, in order to underplay the negative impact on sales that its hostile takeover bid for PeopleSoft is having on both businesses.

Even with the latest news that the US Department for Justice failed to block the deal, the stakes remain high for Oracle, especially as an upgrade to its E-Business Suite, 11i.10, is scheduled for release in late 2004. At a recent conference call with investors, Oracle president Chuck Phillips said that the company’s salesforce is being asked to focus on articulating the benefits of Oracle’s E-Business and collaboration suites, rather than thinking about PeopleSoft.

But judging from the company’s financial results for its first quarter sales, staff have been distracted and customers less than impressed by the takeover fight.

During the period to the end of August, business application licence revenue crashed by 36% to $69 million, down from $107 million in the year-ago first quarter. A breakdown of those numbers shows that in Europe, the descent was even steeper, with sales tumbling 49% to a mere $28 million. Following on from a 12% decline in the region in the fourth quarter of 2004, that drop has analysts worried that there is something broken with the European applications business.

That performance also underlines how important the PeopleSoft deal is to Oracle, if it is to have any chance of fulfilling its goal of being a worthy competitor to applications market leader SAP. “We continue to believe it’s a very important thing for Oracle to complete that transaction,” Oracle chairman Jeff Henley told investors. The deal remains on hold while Oracle awaits the outcome of an antitrust review by European officials, and another trial in Delaware (see Analysis section).

Applications aside, there was more positive news elsewhere from Oracle. Database software sales rose 14% to $494 million, with the company’s executives attributing strong demand to its recent emphasis on grid computing. Outsiders point more to its dominant position in the Unix and Linux database markets. Those upbeat figures enabled Oracle to post overall revenue growth of 7% to $2.22 billion and a net income that rose from $440 million in the year-ago quarter, to $509 million – a profit that amounts to a hefty 23% net margin.

European services

In late 2003, Forrester Research analyst Andrew Parker reported that IT services companies in Europe were struggling to adapt to a rapidly changing market – and so it has proved, with a mixed bag of interim results from companies in that sector.

UK-based Morse, for example, is trying to increase its reliance on services, having once focused almost entirely on hardware reselling. The acquisition of management consultant CSTIM, which specialises in the investment banking sector, for up to £15 million in April 2004 was part of that push, but the proposed £50 million acquisition of struggling software services group Diagonal is a more ambitious step. In the second half of its 2004 financial year, Morse reported revenues of £202.9 million ($367.3m), up 23% from £165.5 million ($299.6m) in the comparable period of 2003. Net losses for the period fell to £7.4 million ($13.3m) from £10.4 million ($18.8m) in the year-earlier period.

Like Morse, Computacenter has attempted for years to shed its image as a ‘box-shifter’. For the first half of the current financial year, reselling revenues, at £1.25 billion ($2.2bn), were virtually unchanged from the previous year, despite a rise in sales volumes – the result of price deflation on commodity IT products. That has put pressure on margins in Computacenter’s core product logistics business. In addition, increases in IT spending in the financial services market were offset by a decline in government orders. Nevertheless, revenues from the company’s UK Managed Services business grew by nearly 19% over the period – enough to boost net profits by 8% to £23.4 million ($42.3m).

On the surface, first half revenues at Franco-Dutch IT services company Atos Origin looked stunning, up 72% to EU2.65 billion ($3.18bn). But that growth figure is not based on a like-for-like comparison: the latest figure includes the revenues of its 2003 acquisitions of KPMG Consulting in the UK and the Netherlands, plus the January 2004 purchase of Sema Group from Schlumberger; the previous figures were pre-acquisition. Masked by the 72% was an organic decline of 1.3%.

The acquisitions also sent costs at the company spiralling. The company reported a loss of EU22.6 million ($27.1m), compared to a net profit of EU24.3 million ($29.2m) in the year earlier period.

On a more specialist services level, the UK business transformation consultancy Axon turned in an improved set of numbers, with first-half revenues up 8.4% to £26.7 million ($48.3m). Net profits, meanwhile, rose 53% to £1.9 million ($3.5m).

The company, which operates across both public and private sectors throughout the world, works with companies that use SAP business applications as their strategic platform services. Strong demand for those applications have buoyed Axon’s business. In the three months leading up to 30 June 2004, SAP banked EU143 million ($172m) more business than in the same quarter last year.


Key supplier financial results – September 2004
Company   Main activity   Period   Period end   Revenue ($m)   Rev change   Net inc ($m)   Prev net Inc ($M)  
3Com Corp Networking systems 1Q05 27-Aug 162.3 0% -35.5 -106.0
Advanced Digital Info Corp Storage systems 3Q04 31-Jul 110.0 2% -1.3 2.6
Agile Software Corp Ecommerce manufacturing s/w 1Q05 31-Jul 26.5 45% -3.0 -2.7
American Software Inc Supply chain management s/w 1Q05 31-Jul 13.7 5% 1.2 1.1
Atos Origin SA* IT services 1H04 30-Jun 3,183.6 72% -27.1 29.2
AutoDesk Inc Computer-automated design s/w 2Q05 31-Jul 279.6 32% 39.2 32.6
Axon Group Plc* IT &mgmt consultancy services 1H04 30-Jun 48.3 8% 3.5 2.3
Beta Systems Software Limited* Data centre automation s/w 2Q04 30-Jun 34.3 123% -0.3 0.3
Capgemini SA IT services 1H05 30-Jun 5,375.1 -2% 244.4 -162.9
Chordiant Software Inc Customer management s/w 2Q04 30-Jun 16.8 -1% -1.7 -3.4
Cisco Systems Inc Networking products 4Q04 31-Jul 5,926.0 26% 1,380.0 982.0
Compel Group Plc* Systems integration 2H04 30-Jun 61.6 21% -0.1 2.0
Computacenter Plc* IT svcs &technology distributor 1H04 30-Jun 2,271.4 3% 42.3 39.2
DataMirror Corp* Data management s/w 2Q05 31-Jul 9.8 -7% 4.5 1.1
Descartes Systems Group Supply chain execution s/w 2Q05 31-Jul 11.1 -27% -22.7 -14.7
Exact Software NV* Business applns s/w 1H04 30-Jun 123.5 0% 17.9 17.2
Geac Computer Corp Business applications s/w 1Q05 31-Jul 106.9 5% 13.5 9.4
Hewlett-Packard Co Systems &IT services 3Q04 31-Jul 1,889.0 9% 586.0 297.0
Icon MediaLab Intl AB* Internet development services 2Q04 30-Jun 18.4 19% -2.3 -4.3
IDS Sheer AG* Business process consultancy 2Q04 30-Jun 80.5 47% 6.3 5.8
IFS AB* Business applications s/w 2Q04 30-Jun 67.2 -13% -11.8 -2.2
Intuit Inc Personal finance s/w 4Q04 31-Jul 275.9 13% -42.1 -24.7
ITNet Plc* IT services 1H04 30-Jun 189.3 15% -21.6 9.9
Logility Inc Supply chain s/w 1Q05 31-Jul 5.4 1% 0.4 0.4
Macro 4 Plc* Doc/output/sys mgmt s/w 2H04 30-Jun 11.1 41% 1.6 -3.3
Marlborough Stirling Plc* Financial software &services 1H04 30-Jun 86.1 -12% -8.1 -5.9
McData Corp Storage switches 2Q04 31-Jul 98.2 -8% -5.4 9.1
Morse Plc* IT services 2H04 30-Jun 367.3 23% -13.3 -18.8
Network Appliance Corp Storage servers 1Q05 30-Jul 358.4 38% 46.9 27.1
Novell Inc Networking s/w 3Q04 31-Jul 304.6 8% 23.4 -12.4
Open Text Corp Document management s/w 4Q04 30-Jun 105.0 98% 9.0 9.4
Oracle Corp Database &applns s/w 1Q05 31-Aug 2,215.0 7% 509.0 440.0
Parity Group Plc*   1H04 30-Jun 163.5 12% -0.4 -25.1
Portal Software Inc Communications mgmt s/w 2Q05 30-Jul 18.6 -44% -22.3 -26.9
Progress Software Corp Appln dev &DBMS tools 3Q04 31-Aug 89.3 15% 8.5 7.3
Psion Plc* Handheld computers 1H04 30-Jun 129.6 4% 170.5 -18.1
QAD Inc Manufacturing s/w 2Q04 31-Jul 56.8 2% 2.0 1.9
Royalblue Group Plc* Financial &CRM applns s/w 1H04 30-Jun 51.5 2% 5.4 4.8
SCO Group Unix s/w licensing 3Q04 31-Jul 11.2 -44% -7.4 3.1
SDL Plc* Globalisation s/w 1H04 30-Jun 55.5 -1% -1.5 -2.8
Serena Software Inc Change mgmt s/w 2Q04 31-Jul 52.0 109% 0.3 4.7
Software AG* Database and development s/w 2Q04 30-Jun 127.5 3% 47.3 13.5
Synopsys Inc Electronic design s/w 3Q04 31-Jul 281.7 -6% 41.8 48.5
TippingPoint Technologies Inc Intrusion prevention s/w 2Q04 31-Jul 6.7 1890% -3.2 -5.3
Ubizen* Managed security svcs &s/w 3Q04 30-Jun 12.8 -3% -1.5 -12
Unify Corp Appln dev/deployment tools 1Q05 31-Jul 2.7 -17% -0.5 -0.1
VA Software Corp Collaborative s/w dev prods 4Q04 31-Jul 7.3 12% -0.9 -2.4
Verity Inc Text search, content, portal s/w 1Q05 31-Aug 34.6 30% 2.5 1.8
Versant Corp Object databases 3Q04 31-Jul 6.1 12% -3.8 -0.2
WM-data Group AB* IT services 2Q04 30-Jun 275.6 28% 5.5 4.0
* figures converted to 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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