Oracle is expected to show a return to underlying growth in its applications software business when it reports its earnings on Monday, ending a troubled period that followed its contested takeover of PeopleSoft.
However, concern among customers about its future product plans following the acquisitions of PeopleSoft, Siebel Systems and other companies has prevented Oracle from reaping the benefits of the deals.
The company’s shares ended last week virtually unchanged from their level of June 2003, when the company announced its hostile bid for PeopleSoft, while rival SAP has seen its shares jump by 75 per cent.
“We’re still waiting to see the growth story from buying all these applications, and so far we haven’t seen it,” said Bruce Richardson, an analyst at AMR Research.
While Oracle has reported growth from application software sales in the past year, that has come from its acquisitions rather than organic growth.
“SAP has definitely benefited from what happened with the PeopleSoft merger, especially the uncertainty around that,” John Wookey, the executive in charge of Oracle’s applications business, said in an interview with the Financial Times. “There was an 18-month discombobulation in the marketplace. It hurt PeopleSoft; it hurt us.”
That has helped SAP gain ground in Oracle’s home market, with the German company’s sales in the US rising at an average annualised rate of 30 per cent since late 2002, said Bill McDermott, head of SAP Americas. “[Oracle’s] loss is directly comparable to our gains,” he added. Mr Wookey blamed Oracle’s problems in applications partly on its failure to convince customers at the time of the PeopleSoft acquisition about the effectiveness of Project Fusion, its plan to merge the companies’ products.
“The uncertainty which I think SAP really capitalised [on] over the past year in terms of exactly what is the plan for Fusion, is starting to go away,” he said.