Oracle Software Licensing Sparks Upbeat Earnings Report

 
 
By Chris Preimesberger  |  Posted 2011-09-20
 
 
 

Oracle, led by its steady software sales, turned in an upbeat earnings report Sept. 20, showing gross and net income up for the most recent sales quarter.

The database, middleware and data center hardware company reported that its fiscal first-quarter 2012 total revenues were up 12 percent to $8.4 billion over the same period a year ago. Software licensing, both new and recurring, led company sales with about $5.5 billion of that total; license updates and product support revenues increased 17 percent to $4.0 billion, while new software license revenues were up 17 percent to $1.5 billion.

Net profit was up 36 percent for the quarter to $1.8 billion.

Oracle's hardware systems revenues were down 5 percent to $1.0 billion. First-quarter earnings totaled 48 cents a share, beating the average estimate of 47 cents of Wall Street analysts.

Lagging sales of Oracle's low-end servers and other hardware were the prime reason for the drag on the hardware numbers, Co-president Mark Hurd told a conference call of analysts, journalists and shareholders.

"Our high-end server business-Exadata, Exalogic and SPARC M-Series-delivered solid double-digit revenue growth in Q1," Hurd said. "In contrast, revenue declined in our low-end server business. By moving away from low-margin commodity hardware and focusing on high-end servers, we increased our hardware gross margins from 48 percent to 54 percent."

High-end servers and storage arrays are becoming more instrumental in handling so-called big-data-type workloads, which are choking more and more IT systems as time goes on.

CEO and co-founder Larry Ellison said, in answer to a question about Oracle's approach to big data workloads, that "big data is just one of the feeder systems into the Oracle database. We have announced new interfaces that allow you to take your Hadoop system and connect them to Oracle systems, so you can load your data into Oracle. This will just increase the usage of Oracle."

Ellison Leaks New-Product News

Ellison also said that Oracle will introduce four new systems-one of them a "super-cluster" SPARC-based system-at Oracle Open World, set for Oct. 2 through 6 in San Francisco. "We're also going to introduce a 'big-data'-engineered system," Ellison said.

"[Oracle's] hardware revenues reflect a combination of macro headwinds, but also a conscious effort by Oracle to clean out the bloated mix of zero profit boxes that Sun started selling as the firm rolled over-and before Oracle bought them [in January 2010]," Canaccord Genuity analyst Richard Davis told eWEEK. 

"Software revenues were at the high end of the range in terms of growth. This reflects good execution. Calling out Europe as 'strong' is nice, but this was more for Wall Street/Investor consumption; few companies, Oracle included, sell a lot of software to Greece, Spain, Portugal. The fear is about contagion, and that hasn't occurred, at least yet," Davis said.

Is Oracle really ready for big data-type Hadoop analytics systems? Most Oracleware was designed and built long before these much-larger data sets came rolling into data centers.

"Not according to competitors who are focused on the space," Davis responded. "Mark Logic, Endeca, Quantivo, 1010data and Opera Solutions, for example, respect Oracle for its account control and size, but they're less generous when it comes to comparative technology."

No doubt that big data will be a key focus of Oracle's annual conference.

Davis pointed out a reference during the conference by Ellison to Workday, a cloud-based service provider that specializes in HR and financial services.

"It was interesting that Oracle called out Workday, a company that is less than 1 percent Oracle's size in terms of revenues," Davis noted. "They did the same thing with Salesforce back in 2007, during which they dismissed [CEO Marc] Benioff's company as a nice niche business. 

"Salesforce, by my reckoning, has done pretty well since then. I think the shout-out for Workday, even if Oracle says they're beating them, is pretty good validation."


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