Business & Technology Nexus

Those that follow Larry Ellison’s sailing adventures know about the alinghi, a great team & ship that often gets the best of Larry despite the unlimited amount of money he throws at pursuing being #1.

Perhaps it’s time to add SAP to that same list. Despite Oracle’s 20B spending spree to acquire Peoplesoft, Siebel, and many others, Oracle yet again lost share badly to SAP in this past quarter.

Larry used to attack others by saying “They write checks, we write software.” Oh the irony!

And speaking of irony, Oracle has been plastering print and net media with ads saying “no matter how you measure it, we’re gaining on SAP.” Well, most of us measure by license revenue thank you very much. And by that measure, you are getting toasted. But don’t expect Oracle to concede the point. With all their acquisitions they can and should continue doing “fuzzy math” as long as possible.

SAP posted license of 691MM Euros, @ 1.25 to the dollar that’s $864MM. That’s a little less than 4 times Oracle’s impressive 228MM quarter.

Here’s the graph that tells the story:

So why, you might ask, is Oracle stock up HUGE this year? Simple. They may not be getting closer to being #1 in Apps, but they are executing their business quite well and continue to throw great profits. At the end of the day, if you grow your earnings at 20% a year and your P/E stays constant, your stock price goes up very nicely – no matter what the competition is doing.

Lastly, I have said for awhile and will say again: enterprise applications are heating up. SAP’s 17% license growth, should it continue, means SAP may hit an average quarterly license sales of 1B. Wow. Maybe ERP isn’t so boring after all.

Now, SAP did offer very cautious guidance going forward. And that will likely keep a lid on SAP’s stock price despite this very good showing.