Exadata Channel Sales Boost Oracle Earnings

Written by The VAR Guy 1
March 24, 2011

Maybe Oracle CEO Larry Ellison is a miracle worker. Or maybe Ellison somehow sold his soul to revitalize Sun Microsystems' business.

Maybe Oracle CEO Larry Ellison is a miracle worker. Or maybe Ellison somehow sold his soul to revitalize Sun Microsystems’ business. Either way, Oracle’s hardware product gross margins are rising — yes, rising — amid strong channel demand for Exadata and Exalogic solutions. Indeed, Oracle’s quarterly revenues rose 37 percent to $8.8 billion, while net income rose 78% to $2.1 billion, fueled in part by Exadata and Exalogic sales. Here’s the update.

According to a prepared statement from Oracle President Safra Catz: “Our hardware product gross margins increased to 55% in the quarter so we are now completely confident that we will exceed the $1.5 billion profit goal we set for the overall Sun business for the current fiscal year.”

Added Oracle President Mark Hurd: “The sequential revenue growth for Exadata and Exalogic was up over 50%. And we expect to see an even higher growth rate for these two game changing technologies in Q4.”

Also of note, Ellison said Oracle’s technology powers the cloud — noting that Salesforce.com runs atop Oracle’s database and middleware solutions.

Hardly Surprising

Growing demand for Exadata and Exalogic solutions across the channel does not surprise The VAR Guy. In mid-March 2011, Piper Jaffray published a research note stating Exadata database appliance sales were “building at a phenomenal rate.” The research was based on Piper Jaffray interviews with 32 Oracle channel partners. Once again, the best financial insights always come from channel partners…

Meanwhile, Oracle Channel Chief Judson Althoff is busy formulating an ISV (independent software vendor) strategy for Exadata and Exalogic solutions, according to a recent interview with The VAR Guy. Althoff also predicted Exadata and Exalogic would emerge as top platforms for building public and private clouds (see TalkinCloud). Watch for the ISV partner strategy to debut somewhere around Oracle OpenWorld (Oct. 2-6, San Francisco), The VAR Guy suspects.

Despite Oracle’s momentum, competition looms around every corner.

IBM just announced a server-storage-network integration strategy called Pre-Engineered Technology Service Model.
VCE (the company launched by VMware, Cisco and EMC) is working on similar server, storage and network integration.
And Hewlett-Packard is preparing to announce new channel initiatives — perhaps even a cloud partner strategy — at the HP Americas Partner Conference (March 28-30, Las Vegas). In the meantime, HP and Oracle are slinging mud at each other in the server market.

The VAR Guy concedes: He’s surprised by Oracle’s momentum. Our resident blogger assumed Oracle would not be able to revitalize Sun’s hardware business. Looks like The VAR Guy is eating a little crow.

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