Thursday, 17 September 2009

Oracle bigs up Sun

(By Philip Carnelley, 17 Sep 09 09:00) Oracle’s first quarter results are always a bit of a let-down after a very back-end loaded Q4. But even so, Oracle’s FY10 Q1 results last night weren’t great, below expectations on sales. Revenue was down 5% overall, and down 1% at constant currency (ccy). The main cause was new licence sales, a keenly watched indicator, which fell 17% (14% ccy). Database and middleware were down 22% (19% ccy). That said, operating margin rose a full 5pp to 34% - a very strong performance. And, applications revenues held up well: new licences fell 4% but just 1% ccy, and overall applications revenues were flat (+4% ccy). Things were worse in Europe than the US, with database/middleware down 26% but applications up 3% (both ccy). The company commented on the earnings call that it believed it was taking share from SAP, at least in the Americas. We think that’s probably right. Ironically, though, weakness from SAP hits Oracle's database revenues.

As is usually the case on an Oracle call, Larry Ellison gave a short speech on a topic of his choosing. As was to be expected (see Oracle takes up the Sun server cudgels), this time he chose Sun, attempting to talk it up, to ensure its business holds up while the regulatory hurdles to acquisition are overcome – or not. So he focused on the Exadata product – a “database machine”. Version 2, jointly launched with Sun, was released last Tuesday. (Ironically, and not mentioned on the call, the first version was launched in collaboration with HP …) This parallel database engine will, according to Larry, blow the socks off all its competitors - in OLTP as well as data warehouse applications. He especially focused his guns on IBM. But there are alternatives from specialists Teradata and Netezza as well as IBM’s DB2. We’ll await the market’s reaction. Meantime Larry did his best to boost Sun’s prospects. A further push for Sun is expected at OracleWorld next month.

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