Oracle Earns Record Revenue While Quietly Raising Software Prices

Oracle this month raised software license prices by about 15% on average, according to a Forrester Research analysis.
As Oracle announces stellar fourth quarter revenues and profits despite a tough economy, it's also raised prices on its software -- by a lot, in some instances.

Oracle, which has a unique standard global pricing model, quietly raised its prices on new software licenses effective June 15. The price increases average about 15% across the board, according to an analysis by Ray Wang, an analyst with Forrester Research.

Oracle announced Wednesday that net income in the fourth quarter ended May 31 rose 27 percent to $2.04 billion compared with the same quarter last year, while revenue was up 24 percent to $7.24 billion. Sales of new software licenses rose 27 percent to $3.14 billion. For the full year, Oracle had net income of $5.52 billion, up 29%, and revenue of $22.4 billion, up 25%.

"Four years ago we publicly announced a five year plan to deliver non-GAAP earnings per share at a compound annual growth rate of 20%," said Oracle CEO Larry Ellison in a statement. "During the past four years we exceeded our plan and delivered a non-GAAP EPS CAGR of over 26%."

Oracle is doing exceptionally well in a tough IT selling market, and the pricing increase could be viewed as the acquisitive company starting to leverage its growing dominance, as alternative offerings in enterprise software shrink for IT buyers due to ongoing market consolidation.

But the price increases come with some good reasons, Wang said. Oracle is unique in that it charges all of its customers the same for software licenses, based on U.S. dollars, no matter what country they are based in. It's also one of few companies that publicly discloses the prices of its enterprise software. SAP and Microsoft, for instance, typically avoid public discussion of pricing, while Oracle readily makes price sheets available.

As a result, multinational companies have been buying Oracle software in euros, which provides them a discount when buying products priced based on dollars due to the current conversion rates between the two currencies. "They were getting hammered on the dollar drop against eruos," Wang said in an interview, and as a result many customers were getting a "great deal." With the price increases, most products are similarly priced, if paid for in euros, to what they would have cost in 2006. Oracle has not been able to talk details about the price increases with the analyst community because of the quiet period related to its earnings, Wang said.

"The main credit I'd love to give Oracle is they're the only major software company with a price list that's public," Wang said. "A lot of stuff is up front with Oracle. When I look at SAP contracts, I don't have as much guidance."

There are some hefty instances of price increases that don't seem related to the currency conversion rates, however. Oracle has increased the pricing on the BEA WebLogic Server by about 40% he said, perhaps a sign that Oracle is trying to better leverage its strong footing in the middleware market following the BEA acquisition earlier this year.

Meanwhile, Oracle recently restructured pricing on many of its business intelligence software products for small and midsized businesses to make them more affordable -- a competitive reaction since many BI software providers are pursuing the SMB market.