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Oracle Targets Competition with Q2 Results

Rocela, an independent Oracle consultancy, analyses the significance of Oracle’s continued financial success

Edinburgh, 20 December 2010 – In the second quarter, Oracle’s revenues grew by a stunning 47%, to $8.6bn. Sales of new software licenses were stronger than expected, with a rise of 21%, and the company also crucially cited improving profitability for the Sun Microsystems business it bought for $7.4bn nearly a year ago.

Oracle Corporation’s second quarter net profits of $1.9bn represent a 28% rise on last year’s $1.46bn, the biggest rise in over two years. This defies market expectations, which were recently dented by Cisco and Intel’s latest earnings reports, while its strategy gravitates toward fully integrated hardware and software solutions for the enterprise using Sun machines and its Exadata and Exalogic appliances.

Martin Mutch, CEO at Rocela comments: “These results beat the high end of analyst expectations in all major categories and buck the trend within the industry for uninspiring performance. Coming so quickly after the Sun acquisition, this is a pivotal moment in Oracle’s history. Of the 60+ acquisitions in recent years, the Sun deal was undoubtedly the one generating the most questions around the fit of the two organisations. Any doubts are now essentially eradicated, particularly with announcement on the earnings call of a recent doubling of the Exadata sales pipe to nearly $2bn.”

“Oracle’s goals are clear; it aims to take top position in the high-end server business for both online transaction processing and data warehousing. As a result Oracle is in direct competition with market leaders IBM and HP in these key, high-margin segments. A determined Larry Ellison continues to point out HP’s vulnerabilities, in particular highlighting slow and expensive server technology as a weakness, as well as their inability to provide truly integrated verticalised hardware and software solutions.”

Exadata
Oracle’s latest results reflect its strengthening position in the software market, but also hints at accelerated performance of new hardware operations. In addition to the doubling of the sales pipeline for Oracle’s new line of Exadata storage appliances, it was confirmed that between 70-75% of Exadata wins are from competition displacement, with 20-25% coming from greenfield projects.

Mutch explains: “Some of our biggest clients had stated that they wouldn’t commit to Sun platforms. Recently, however, they have changed their minds on Exadata as they can now see clear value. This is very exciting for Rocela as this increasing reliance on Oracle software and hardware in enterprise deployments will require very careful management in order to maximize the value of these significant investments, an area in which we are the clear leaders.”