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Recurring Revenue: Article

Oracle Has Good Numbers

Safra Catz Touts Momentum, Larry Ellison Knocks Autonomy

Oracle narrowly vaulted Wall Street's expectations Tuesday when it reported its first fiscal quarter. Its results encouraged people to think budgets aren't in lockdown mode. Revenues were up 12% to $8.37 billion returning a non-GAAP EPS of 48 cents a share, up 14%, against estimates of 46 cents on $8.35 billion.

On a GAAP basis EPS was 36 cents, up 36%, for a total net of $1.84 billion. Although there were no large deals, new software license revenues, a key metric, were up 17% to $1.5 billion. Analysts had predicted a 15% rise. The company's all-important software license updates and product support revenues were also up 17% to $4 billion.

Oracle co-president Safra Catz claimed "company-specific momentum." Despite the turmoil over there, European sales were up 60% in the quarter, an important number because Oracle gets 30% of its revenue from Europe.

However, hardware sales slouched 5% to $1 billion. Oracle still has faith though; it said it hired 350 salespeople in the quarter.

In a statement co-president Mark Hurd said, "Our high-end server business - Exadata, Exalogic and Sparc M-Series - delivered solid double-digit revenue growth in Q1. 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% to 54%. Our strategy to grow the profitable parts of our hardware business is paying off."

That means selling widgetry that's based solely on Oracle IP and that won't happen until fiscal year 2013, according to Oracle CEO Larry Ellison, when hardware should start showing top-line growth.

Meantime, he said, he doesn't care if "our commodity x86 business goes to zero." Oracle's not making any money selling other people's IP. He did not address Sun's server losses to competitors.

In a step towards Ellison's nirvana Oracle next week is supposed to announce a new high-performance Sparc microprocessor and a new high-end, Solaris 11-run, fault-tolerant server called a Sparc SuperCluster. Ellison said the new Sparc T4 chip is up to five times faster than the T3 part it replaces, and the new all-Oracle SuperCluster, engineered to use the T4 along with Exadata's flash and disk storage system, is supposed to be cheaper and faster than anything IBM's got. It'll apparently do data analysis in-memory.

Evidently Oracle is about to put out three other purely Oracle "engineered systems" at OpenWorld in a couple of weeks. The issue of unstructured data came up during the conference call, which gave Larry the chance to take out his switch blade and go for HP. He said Autonomy, the unstructured data company HP is buying, was shopped to Oracle and he was "shocked" by HP's "absurdly high" bid of $10.25 billion for the British software company.

He then explained that the Oracle Database hadn't been simply an RDBMS for 20 years and had absorbed object database methodology when it came along, then text search and XML, and now it's supposed to integrate unstructured data too and process it as well as Autonomy.

For its next trick the database will interface with anybody's Hadoop appliance and process the Big Data that Hadoop feeds it. After starting the widgetry six years ago Oracle is supposed to go GA with its Fusion apps by Christmas. Evidently Fusion already has 200 customers. Oracle is also going to start pushing CRM cloud apps (SaaS stuff like Salesforce) this quarter.

Oracle shares were tickled 3% after-hours after falling 2.3% during the day. It closed at $28.35. Nothing was said during the conference call about the court-ordered negotiations Ellison had Monday and Tuesday with Google CEO Larry Page to resolve Oracle's Java infringement suit.

Oracle guided to non-GAAP revenues up 4%-8% to $9 billion-$9.34 billion this quarter on new software license revenue up 6%-16% and hardware flat to down 5%. Non-GAAP profits should be 56 cents-58 cents a share. The Street figured revenues at $9.36 billion.

More Stories By Maureen O'Gara

Maureen O'Gara the most read technology reporter for the past 20 years, is the Cloud Computing and Virtualization News Desk editor of SYS-CON Media. She is the publisher of famous "Billygrams" and the editor-in-chief of "Client/Server News" for more than a decade. One of the most respected technology reporters in the business, Maureen can be reached by email at maureen(at)sys-con.com or paperboy(at)g2news.com, and by phone at 516 759-7025. Twitter: @MaureenOGara

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