Oracle CEO Larry Ellison
Friday morning Oracle told us in a press release that it is declaring itself to be the second-biggest software company in the world, taking over IBM's spot, thanks to IBM's declining revenues.
Oracle doesn't mention who's on top. That would be Microsoft.
The press release is funny because last week, one of the most respected Oracle Wall Street analysts, Nomura's Rick Sherland, issued a research note that dissected Oracle's business. If it weren't for acquisitions, Oracle's revenue from new software contracts declined about 1%, year-over-year, he said.
Oracle, (like IBM and other software vendors) makes almost all of its software money from customers making payments on their software licenses and buying something called "maintenance," meaning updates, patches, fixes and support for when things go wrong. (That's not a bad thing. Oracle's customers don't ditch Oracle's software lightly.) That's really the part of Oracle's software business that's growing.
But in the brave new world of cloud computing, Oracle seems to be losing software contracts to competitors like Salesforce.com and Workday, Sherland noted.
He thinks it may take Oracle 3 years – and maybe as long as 10 years – to "hit its stride" in cloud.
Not that IBM's software business is wonderful either. Year-over-year revenues were basically flat.
IBM CFO Mark Loughridge was forced even forced to admit to analysts during a quarterly conference call, "I agree we did not have the software quarter we’re looking for."
If Oracle really wanted to rub salt in IBM's face, it could point to the alarming declines in its hardware business. Revenues from IBM's third-quarter hardware dropped 16 percent, year over year. Profits from IBM's hardware business are down $1 billion, too, Loughridge said.
But then again, Oracle's hardware business is even more of a mess. It declined another 14% in its last quarter and is down about 40% since Oracle bought Sun in 2010.
We reached out to IBM for comment and will update when we hear back.
Here's the press release full of Oracle bravado that caused us to laugh:
Oracle Becomes Second Largest Software Company in the World
IBM Falls to Third
REDWOOD SHORES, Calif. – October 17, 2013
Given IBM’s recently announced quarterly results, we would like to take this opportunity to point out that Oracle’s software business has been growing faster than IBM’s software business and now Oracle has moved up to become the number 2 software company in the world while IBM has slipped to number 3. Over IBM’s last four quarters, they reported software revenue totaling $25.7 Billion, while during Oracle’s last 4 quarters, we reported software revenue totaling $ 27.8 Billion.
IBM Software and Oracle Software (in millions):
ORACLE Q2'13 Q3'13 Q4'13 Q1'14 LTM
GAAP $6,649 $6,672 $8,428 $6,084 $27,833
IBM Q4'12 Q1'13 Q2'13 Q3'13 LTM
External $7,915 $5,572 $6,423 $5,798 $25,708
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