Oracle and SAP report strong revenues

Upbeat comments about the IT business environment from Oracle looked to have been echoed by rival software giant SAP on Wednesday when the German company reported strong fourth-quarter revenues.

But some analysts maintain that the return of major IT software spending is still a way off.

Jeff Henley, chief financial officer at Oracle, told analysts on Tuesday that the company, seen as a bellwether for the strength of corporate spending on large technology projects, was sticking by the upbeat guidance it issued in December.

This meant that the firm believed it had weathered the pull back in IT spending and that the market was picking up. That optimism saw Thomas Weisel Partners upgrade Oracle's stock rating on Wednesday to 'buy' from 'market perform'.

Oracle's optimism looks to have signalled a change in fortunes for the largest enterprise software companies.

This appeared to be underlined when SAP pre-announced strong fourth-quarter revenues on Wednesday revealing that its software sales had grown faster than analysts had expected.

The company said that software sales exceeded Eu1bn (£616.6m) in the fourth quarter and that total revenues in 2001 will have grown by more than 16 per cent against an earlier forecast of 15 per cent.

However, SAP remained cautious. "Based on current economic conditions, we anticipate that customers will continue to invest cautiously in ebusiness software solutions," the company said in a statement.

Industry analysts remained equally cautious, maintaining that a pick-up in IT spending by the largest corporations is some way off.

"We see no major recovery in the enterprise market starting yet and don't expect one until mid-2002. And then just a slow one," said Tom Topolinski, vice president at Gartner.

Meanwhile, other analysts noted that Oracle still faced some tough times ahead. A report from CurrentAnalysis said that, in an effort to sustain profits, Oracle had cut two per cent of its workforce to help offset sluggish sales.

Those layoffs will be concentrated in software sales and consulting as Oracle reduces sales redundancy and trims consulting to focus on software sales.