The same day that Oracle is touting itself as the world’s largest Enterprise Software company, Merrill Lynch gave the enterprise software space thumbs down.
After factoring in the overall economic outlook and slow growth performance from the first quarter, Merrill Lynch predicted lower sales for the industry in the coming quarter. The report terms enterprise software as an area of ‘discretionary’ spending that businesses would seek to minimize if the economy takes a turn for the worse.
The report cited Oracle and Microsoft as two companies that they see vulnerable to this trend. Merrill Lynch lowered their rating on both companies from a “buy”.
Merrill saw the financial industry as a key sales target for many Enterprise Companies, and after a few troubling weeks in the financial industry, the pain could trickle down to vendors who serve these markets.
Oracle has strong ties into the financial industry, so this could cause them a problem. Merrill also worried that Oracle has been beating estimates so consistently that they may have become overvalued and put onto an unsustainable path. Merrill also sees Microsoft’s heavily exposed to consumer spending — and the worry now is that this Christmas season may be slow time for spending.
Along with Microsoft and Oracle, Merrill also downgraded Red Hat, Sybase, Taleo, and Concur Technologies. Software companies that Merrill continues to value include VMWare, Salesforce.com, BladeLogic, and Lawson.
Big internet companies aren’t feeling the same pain as enterprise software vendors. Another report shows that in Q3 2007 that the four internet giants Amazon, Yahoo!, Google and eBay collectively added 5600 jobs.
