Eye on Oracle

Jun 23 2011   9:56PM GMT

Oracle’s revenue up 13%, hardware division still struggling

Mark Fontecchio Mark Fontecchio Profile: Mark Fontecchio

Oracle announced its fourth-quarter earnings today, with every division reporting increased revenue except for hardware systems.

Oracle tried to put a positive spin on Oracle Sun hardware, saying there are now more than 1,000 Oracle Exadata machines installed. Among them are big companies like PG&E and Apple. Oracle executives said the company hopes to triple that in the next year. They also said Exalogic is selling well but didn’t say how many of those Oracle has sold.

It’s no mystery that hardware sales have struggled since Oracle took over Sun Microsystems last year, and Oracle knows it. But the company’s apparent plan to almost completely abandon the commodity server market has sliced deep gashes in its hardware revenue. To give you an idea of which way revenue streams within Oracle are going, total Oracle revenue in the fourth quarter was up 13%. Software licenses up 19%. Software license updates and product support revenues up 15%.

Wow, looks great, right? And then hardware: down 6%.

Here’s the thing: Oracle doesn’t care that much about total revenue. It certainly doesn’t care about server shipment numbers, which have dropped steeply over the past year. That is especially the case when those shipments and revenue come from low-margin commodity server hardware. What it cares about most of all is profit margins, and with the high-priced Exadata and Exalogic, profit margins they have.

“We are selling fewer units at higher prices and higher margins with higher attach rates,” Co-President Mark Hurd said. “These are the signs of a solid hardware business.”

Oracle remains bullish – or at least acts bullish – on Oracle Sun server hardware. Co-President Safra Catz said sales of Exadata and Exalogic “sold extremely well,” though neither she nor anyone at Oracle has yet said how well exactly Exalogic is selling. Co-President Mark Hurd said “the ramp” for Exalogic, whatever that means, looks better than “the ramp” in the early days of Exadata.

Catz added that “later this year I expect the growth of the Sun hardware business to be quite obvious.”

CEO Larry Ellison added that Oracle plans announcements around Exadata and Exalogic this fall, presumably at Oracle OpenWorld. It seemed like Ellison couldn’t wait to spill some of the details. He said the company plans on announcing some kind of in-memory accelerator for Exadata in the fall, as well as a big data accelerator for Exalogic. From how Ellison was speaking, it seemed like the big data accelerator will have something to do with Hadoop, and the in-memory accelerator will have something to do with TimesTen.

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