Oracle Q3 Results Deliver Upside Earnings Surprise
Oracle Corp. delivered Q3 results today that beat Wall Street’s expectations. The news may silence some critics (at least temporarily) — many of whom wonder if Oracle lost focus and momentum by pushing into hardware. Somewhere, Oracle Channel Chief Judson Althoff is emerging from Oracle’s latest financial quiet period. The VAR Guy wonders: Will Althoff describe how the channel assisted Oracle’s Q3 performance? Hmmm… Here’s the preliminary update…
Oracle will host an earnings call within about 20 minutes to share more details about its earnings. Lots of folks have openly wondered if Oracle could rebound after a disappointing Q2 showing. The short answer: Yes, Oracle delivered an upside surprise today, including:
- Q3 revenues rose 3 percent to $9 billion.
- New software licenses rose 7 percent to $2.4 billion. That’s a particularly important stat, considering some skeptics think SaaS and cloud computing will squeeze Oracle’s traditional software licensing business.
- Hardware systems products revenues fell 16 percent to $869 million. But hardware revenue for engineered systems rose 139 percent this quarter. The obvious question: The VAR Guy needs to determine what percentage of engineered systems represent Oracle’s overall hardware revenue.
- Bottom line: Net income rose 18 percent to $2.5 billion, beating Wall Street’s expectations.
In a prepared statement, CFO Safra Catz suggested that Oracle this year is on track to deliver its highest operating margins in the company’s history. And CEO Larry Ellison pointed to the Exalytics In-Memory Machine as a key source of innovation, slamming SAP’s Hanna in-memory appliance along the way.
Meanwhile, The VAR Guy is having flashbacks to meetings with Oracle Channel Chief Judson Althoff in 2011. During multiple sit-downs over the past year, Althoff described how Oracle engineered systems — hardware and software — would catch on with channel partners and customers. Althoff pointed to the Oracle Database Appliance as a key harbinger of things to come. That appliance apparently has generated some momentum among Avnet Technology Solutions resellers. Though The VAR Guy still has questions about Oracle’s top-line hardware revenues.
Memo to Althoff: How did the channel figure into those Q3 results? The VAR Guy is all ears.
Let’s take a look at the big picture on Oracle, for some reality:
In the big picture, every large business line Oracle has is under fire from low cost alternatives:
– SPARC hardware and Solaris – tough battle with x86 based systems and Linux – they even build their own Exa-systems on x86 Linux.
– Middleware – tough slog against JBoss, Spring and PaaS alternatives. The BEA and Oracle Middleware is bloated, expensive, and long in the tooth (like Webshspere)
– Applications – who wants to buy and build old crusty Siebel, Peoplesoft, JD Edwards and Oracle Apps anymore. Some folks are trapped for awhile, but SaaS alternatives are, and will, eat them over time.
– Storage – who will trust Oracle/Sun for disk or tape storage that is broad based. Fewer and fewer over time. Cloud options and new x86 based commodity storage solutions will rule the day.
– Database – this is their core position, but new data (NoSQL) and Big Data (Hadopp) will put some dent into this franchise. And Microsoft continues to chew into them from the bottom up. This will take time, but this beast is mature and greying. They will hold onto the $20K+ per cpu pricing for awhile, bit folks are onto this and pursuing alternatives.
– Virtualization – Oracle is trying to keep VMWare out and push their own Xen based stuff. But no one is buying it, at all. I think this Wim guy is charge of this also, and it is a major 3+ year effort flop. Expect them to have to cave on this topic and give up their own weak offering.
– x86 hardware – they have stated they don’t care about it, but the reality is that it has been, and will continue to eat their SPARC lunch. They can’t compete with the Intel machine – no way.
– Exa-systems – this will be a failed approach at over-priced lock-in. Their sales reps will all quit from having to push this stuff so hard that their customers won’t let them in the building anymore. Total BS.
– Linux – they have been trying for 5+ years to take over Enterprise/Quality support Linux, and they have barely made a dent. All the while giving it away and/or charging less than half of Suse or Red Hat. Looks like “this dog don’t hunt”, as much as they would like it to. The reality is that the operating system is such a small % of cost of an overall system, yet is valuable for providing choice of underlying harware, cloud hardware, and middleware and applications, is that the last thing smart people will do, is give that piece to Oracle. The jig is up – the people ain’t buying it, and the world is moving forward.
These guys need to stop trying to drag people back into the caves.
Apparently they’ve lost some of the financial basis for the SUN buyout too:
http://www.groklaw.net/article.php?story=20120319191637551
…and the Court tells the top dogs to get together and fix it:
http://www.groklaw.net/article.php?story=2012032323250553