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Oracle Expands in the Telecom Sector

Posted on Monday, Apr 1st 2013

Gartner’s report on worldwide enterprise IT spending projects enterprise IT spending to grow 4% over the year to $3.8 trillion during the current year. Spending on devices, which includes PCs and mobile devices, will grow 8% to $718 billion this year. Worldwide enterprise software spending is projected to grow 6% to $297 billion this year. Telecom services spending will remain the largest segment and will see growth of 2% over the year to $1.69 trillion. IT players are counting on the resurgence of IT spending to help drive their growth.

Oracle’s Financials

Oracle’s (Nasdaq:ORCL) Q3 revenues fell 1% over the year and 1.6% over the quarter to $8.97 billion. The market was projecting revenues of $9.38 billion for the quarter. EPS of $0.65 was also shy of the Street’s projected earnings of $0.66 for the quarter. Oracle blamed their weak performance for the quarter on the weak performance by their sales team, which has been expanded recently and is comparatively new on the ground.

By segment, new software licenses and cloud software subscription revenue fell 2% to $2.3 billion while total software revenues grew 4% to $6.67 billion. Services revenue fell 8% to $1.045 billion. Revenues from hardware systems continued to decline and fell 16% to $1.24 billion. After continuing to insist that the decline in hardware revenues will see a turnaround by May 2013, Oracle’s management is now claiming that the change may take longer than anticipated. They now expect hardware revenues to grow only by the August quarter.

By region, revenues from Americas remained flat over the year at $4.70 billion. Europe, the Middle East & Africa revenues fell 1.5% over the year to $2.75 billion, and revenues from Asia Pacific fell 1.9% to $1.52 billion.

Oracle’s Telecom Diversification

Oracle continues to grow through acquisitions and is now expanding within the telecom industry. Last week, they announced the acquisition of network signaling specialist, Tekelec. Tekelec provides network signaling, policy control, and subscriber data management solutions for communications networks. Through their tools, customers can measure the use of data in both broadband and mobile networks. Tekelec’s customers include the likes of AT&T and T Mobile in the U.S. The terms of the deal were not announced.

According to William Blair analysts, Tekelec owns nearly 80% of the $100 million diameter signaling market. The segment is projected to be worth more than $500 million by the year 2017. Oracle plans to cash in on this growth projection. Through the acquisition, Oracle will be able to deliver a comprehensive solution that will help organizations build and install communications service and better manage network resources.

This latest acquisition consolidates the earlier $1.7 billion acquisition of Acme Packet. Bedford, Massachusetts–based Acme Packet is a leading manufacturer of VOIP networking gear. Their products help with the delivery of voice, data and unified communications services and applications over IP networks. Acme’s offerings have been deployed by more than 1,900 service providers and enterprises globally. The acquisition will help expedite the migration to all-IP networks and Oracle will be able to provide end-to-end solutions to support the deployment, innovation, and monetization of all-IP networks.

These acquisitions suggest that Oracle is expanding beyond the routine cloud computing segment and looking at driving growth by entering the “emerging Applications layer area within service provider networks.”

Oracle’s stock is trading at $32.33 with a market capitalization of $153.06 billion. It touched a 52-week high of $36.43 earlier this year.

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