Oracle Revenues Climb Despite Sun Hardware Drag

By Jessica Davis  |  Print this article Print

Oracle's fiscal third quarter revenue climbed 37 percent, driven by software license revenues. Meanwhile, new hardware products such as Exadata and Exalogic saw strong growth. But legacy Sun hardware continued to suffer.

Oracle Corp. (NASDAQ:ORCL) reported revenue growth of 37 percent to $8.8 billion in its third fiscal quarter, driven by software license revenues, which grew by 29 percent to $2.2 billion.

And while some of the company's newer hardware products showed strong growth, a sluggish overall hardware business was believed to be dogged by Sun's legacy hardware products.

"The only blemish on the quarter was hardware systems products revenues, which we believe was likely weighed down by Sun's legacy business, as engineered systems' (Exadata, Exalogic) sequential revenue growth of over 50 percent was strong and in line with our bullish expectations," noted analyst firm FBR Capital Markets in a report following Oracle's earnings announcement.

Some observers have speculated that the struggles of the Sun hardware business is behind Oracle's announcement March 21 that it would cease supporting servers based on Intel's (NASDAQ:INTC) Itanium high-end server platform which competes with Oracle/Sun's SPARC systems. The announcement set off a firestorm of words among Oracle, HP and Intel. (NYSE:HPQ)

For its part, Unix competitor IBM (NYSE:IBM) noted that in the Unix space, market research firm IDC said that IBM’s Power systems had 53.9 percent share of the by revenue in Q4 2010, gaining 5.9 points of share over competitors and leading the second-place vendor in the quarter by more than 30 percent.

According to IBM, nearly 400 customers migrated from competitive systems to IBM Power Systems in the fourth quarter, including 235 from Oracle/Sun and 135 from HP. There were nearly 1,200 competitive displacements to IBM Power Systems from Oracle/Sun, HP and others throughout 2010.

Oracle reported net income growth of 78 percent in its third quarter to $2.1 billion with earnings per share at 41 cents, up 75 percent year over year.

Oracle President Safra Catz said the company is "completely confident that we will exceed the $1.5 billion profit goal we set for the overall Sun business for the current fiscal year."

Oracle President Mark Hurd noted that revenue from Exadata and Exalogic products grew sequentially by more than 50 percent.

And Oracle's CEO noted that Oracle products underlie one of the most successful SAAS (software-as-a-service) implementations around today.

"In Q3 we signed several large hardware and software deals with some of the biggest names in cloud computing," said Oracle CEO Larry Ellison in a statement. "For example, Salesforce.com’s new multi-year contract enables them to continue building virtually all of their cloud services on top of the Oracle database and Oracle middleware. Oracle is the technology that powers the cloud."

Jessica Davis covers the channel for eWeek and Channel Insider. Her technology journalism career began well before anyone heard of the World Wide Web and has included stints at Infoworld, Electronic News/EDN, and the Philadelphia Business Journal. Her work has also appeared on CNN and Forbes.com. She has covered hardware, software and networking, as well as the business side of technology. She has won several journalism awards, including a national ASBPE award for best staff-written column, and was named Marketing Computers hardest working tech journalist on their inaugural list of top tech journalists. Jessica can be reached at jessica.davis@ziffdavisenterprise.com