Total revenue for the company was down about 1.5% compared to last quarter, and down about 1% compared to the same quarter last year. Even if you were to take hardware revenues off the ledger, the company’s revenue was still down compared to last quarter and only up 2% since last year.
Hardware revenue declines are sure to take up the bulk of the media reports. They are down about 8.5% just since last quarter, and down close to 23% compared to the same quarter last year. President Safra Catz said that in part had to do with Sparc customers waiting for new servers to come out before buying.
CEO Larry Ellison has repeatedly said that the company will see “growth in our hardware business” by the end of its fiscal year, which is the end of next quarter. (Edit: Ellison said during today’s earnings call that the big hardware turnaround would now happen in the second half of this calendar year…) Ellison may end up being right just because hardware revenues have hit such a long and extended valley. At some point you would think it has to level out and go up again. Its $1.24 billion in hardware systems and support is the lowest since the first quarter of 2010, which non-coincidentally is the same quarter that Oracle completed its acquisition of Sun Microsystems.
Here’s a quick line graph of Oracle hardware system and support revenues since it acquired Sun:
But hardware products and support continued their revenue decline. They brought in $1.3 billion, down 16% since the same fiscal quarter last year, according to Oracle’s filing today with the U.S. Securities and Exchange Commission. Profit on the hardware side was down from $745 million to $727 million since last quarter, and down from $849 million in the same quarter last year.
In a statement, CEO Larry Ellison said that engineered systems like Exadata and the SPARC Supercluster will “drive growth in our hardware business” by the end of Oracle’s fiscal year, which is mid-2013. It’s a statement he has repeated since this summer.
Ellison and other execs will be holding a conference call on the earnings later today.]]>
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.]]>
First, a few quotes from the call.
“The pipeline for Exalogic is building rapidly with customers building out their private clouds with both Exalogic and Exadata,” President Mark Hurd said. Regarding Exadata sales in the last quarter, Hurd said it was “pretty broad-based. There were a good number of quarter-racks in the quarter, which we look at as very positive in terms of seeing the future. We did see some adoption of (Exadata V2-8) in the quarter.” Finally, Hurd said this about Exadata: “It’s just good stuff. There is no secret here. The stuff works.”
In the U.S. Securities and Exchange Commission (SEC) filing Oracle filed for the quarter, it showed that Oracle’s hardware revenue increased 263% year over year. Wow, that seems great, doesn’t it? I guess, but you have to remember that it compares to the same quarter last year. That quarter was a time of turmoil, when Sun was on its last legs and Oracle had just acquired it.
As it turns out, the most recent quarterly hardware revenue numbers are the lowest Oracle has had in the last four quarters. Take a look at this chart I put together using SEC filings. It looks at Oracle hardware revenues, expenses and profit over the last four quarters (click for full-size):
As you can see, hardware revenues are down. But hardware profits are up. Why? Because Oracle has slashed operating expenses on the hardware side, both with systems and support. Over the last four quarters, Oracle hardware revenue has gone down 9%. But hardware expenses have dropped almost 23%. The result? Hardware profits are up about 6.5% over the last four quarters.
Now those are total hardware revenues. Oracle isn’t just selling Exadata and Exalogic. It is still selling commodity x86 and Sparc servers. And Oracle doesn’t break down the numbers specifically enough to know what servers are selling and which aren’t. So it’s possible that Exadata and Exalogic are selling while their commodity x86 and Sparc hardware are dive-bombing.
What we do know is that Oracle’s hardware revenue overall has declined over the last year. For more perspective, check out my colleague Barb Darrow’s post about how Oracle hardware remains a mystery over at the Channel Marker blog.]]>