Yesterday's rather unpleasant IBM 3Q earnings report did little to shake the conventional wisdom that IBM is in need of some serious mojo to turn itself around as software and hardware revenue continues to decline.
So perhaps it seems a little cruel to take this opportunity to mention that in terms of strict software revenue, IBM just slipped to the No. 3 software company in the world, behind No. 1 Microsoft … and (now) No. 2 Oracle.
The claim was made in an Oct. 17 press release from Deborah Hellinger, Oracle VP of Corporate Communications. It was a quick blurb, with a few numbers to collaborate their statement thrown in:
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.
Oracle was pretty quick to point out that they had moved past IBM in terms of software sales. That's the thing about corporate sharks: if one starts bleeding, the others will turn on them in a feeding frenzy.
Confirming the numbers that Oracle sent on both the IBM and Oracle Investor Relations pages, it does indeed appear that Oracle's claims are true: over the past four quarters of reporting, IBM's software revenue totaled $25.71 billion, and Oracle pulled in $27.83 billion over roughly the same period.
That puts Oracle in the number two software company spot, if you only look at software revenue. So, in that sense, Oracle has a valid claim to the title of number two.
What Oracle fails to mention, however, that when you look at other elements of the business, such as hardware revenue, Oracle is still way behind Big Blue. For the same four-quarter period, Oracle's hardware revenue is $5.25 billion, just one-third of IBM's $15.87 billion from hardware.
Looking at total revenue, Oracle isn't faring much better: their $37.37 billion in total revenue is only 36.9% of IBM's $101.36 billion.
Based on that comparison, it's a little bit of a stretch for Oracle to make the claim that they are the "Second Largest Software Company in the World."
Another issue with the way Oracle is spinning this story is found within this particular statement: "…we would like to take this opportunity to point out that Oracle’s software business has been growing faster than IBM’s software business…"
Well, let's not get carried away. A chart that compares the last four quarters' worth of data (IBM's just-announced 3Q 2013 financials and Oracle's 1Q 2014 numbers announced on Sept. 18 are referred to as "Now") shows that Oracle's software revenues are indeed higher than IBM's.
Add some trend lines to the chart, and you can see that Oracle's success wasn't so much it's revenue growing so much as IBM's software revenue falling. But fair is fair, there is a slight growth in Oracle's software revenue over their last four reporting periods.
It is not clear how long Oracle will hold this lead. If IBM manages to pull up out of this dive the current difference in software revenue (now $2.13 billion) can be overcome. Oracle, thanks to a pretty good 4Q 2013 fiscal report back in June, is trending ever-so-slightly up for the past year. But just looking at the plummet they had in software revenue from 4Q 2013 to 1Q 2014, Oracle's fortunes and claim to fame could easily vanish.
One thing is certain: IBM's revenues are not heading in the right direction. It wasn't a good day when Microsoft became the world's biggest software company, and I'm sure no one in Armonk is celebrating Oracle's victory lap today.