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TWST: Would you start with an idea of your coverage in the enterprise software
sector?
Mr. Goldmacher: I cover the application space. Loosely defined, enterprise
applications are anything you or I would use as a business user, as opposed to
infrastructure, which is something an IT guy would use to manage other
technologies. So I cover Oracle (ORCL), SAP (SAP), salesforce.com (CRM), WebEx
(WEBX), and my peer at Cowen covers Symantec (SYMC) and McAfee (MFE) - the more
IT management names. TWST: What has been going on in this area so far this year?
Mr. Goldmacher: There is always a lot going on. I think the most notable change
over the last couple of years is that Oracle is maybe 30% or so up in the last
eight to nine months, while SAP is actually down quite a bit. So you've seen
quite a reversal in fortune. Oracle had been a laggard for four years, SAP had
been on a tear for four years, and I think one of the themes we've seen in
software in general is that nobody lives forever. So I think we have gotten
ourselves into a situation here where SAP did a fantastic job of taking
advantage of Oracle's weakness, as they went out to buy other software
companies. Oracle was clearly distracted with figuring out how to buy these
companies and integrate these companies, and SAP did very well in the market by
spreading a lot of FUD (fear, uncertainty, and doubt) around the Oracle customer
base. But here we are, almost a year on from their most recent acquisition, and
Oracle is back with a passion.
They've got a very clearly articulated roadmap, and I think they are coming back
strong to take some share from SAP. I say that primarily because SAP missed its
first quarter in a number of years, and I believe it's directly attributable to
the strength in Oracle's business. That's in the large cap land. In the mid-cap
land, I think you have some really interesting changes going on with software
delivery, specifically software as a service. You've seen salesforce.com and
WebEx, which are the two largest software as a service vendors, really bring a
product to market that enables a much wider variety of users access enterprise
software that never before could have afforded enterprise software.
Both companies come at it quite differently. The beauty of salesforce.com's
approach is they have delivered customer relationship management software as a
service. Everybody in the market understands what CRM is, and salesforce's whole
pitch has been, "Hey, you know what CRM is, you know you have always wanted it,
and now you can afford it." They have done fantastic work around getting the
market to adopt their products at the high end and at the low end. So we
continue to like that name a lot.
WebEx is a little bit of a different story. They have created a brand new
product, leveraging an on-demand platform, and it has been a little bit of a
sales challenge for them, because they haven't had a product that has been
widely understood. WebEx dominates the Web collaboration market. They have two-
thirds of the market share, which tells me that with every dollar of revenue
they do, they are actively going out and selling. So they are doing a lot of
evangelical work to get the product understood. But we expect that story to
begin to evolve as the company starts rolling out on-demand e-mail and other
document management and project management functionalities. They will be coming
to market with a story that's similar to salesforce's go-to-market approach,
which is commoditizing well-understood functionality and selling it on the basis
of price, which is also a pretty compelling opportunity for WebEx.
I think other big changes this year include the fate of the BI vendors. In 2004
and in the early part of 2005, BI was absolutely hot as a pistol. Now, you have
seen a number of vendors miss quarters and it seems like that space has cooled
off quite a bit, but the stocks are actually performing quite well, because
there is a fair amount of speculation in the market that these are all take-out
targets. So there's generally never a dull moment in software, and we continue
to see that.
Tickers included in this excerpt: CRM, EPIC, LWSN, MSFT, ORCL, RHAT, SAP, WEBX, WITS
For more information call (212) 952 7433. The
Wall Street Transcript does not endorse any of the comments made by interviewees, and does
not make stock recommendations.
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