Oracle's Roaring, But Not Yet On Hardware

There’s the first reference to hardware. “We’re running the Sun business in a more profit-aware manner than previously.” Hardware gross margins were 56 percent. Later this year I expect the growth in the Sun products to be “quite obvious.”

Number of cloud computing deals

This number we did a number of cloud computing deals. We did a deal with Salesforce.com this year. We did a deal with the biggest and best names in mobile devices and cloud computing

Our sequential growth in Exadata was more than 50%. PG JP Morgan Chase and Apple have helped us cross the 1,000-system line.

First question from Morgan Stanley: The hardware business: How material was the headwind relative to the shift in the model. What gives you confidence that you can get it growing again? And a question about attach rates.

Larry jumps in: The attach rate to Exalogic and Exadata is 100%. They are becoming a bigger part of our overall hardware business. That improves our profitability. Exadata is growing faster than our traditional Sun line. We sell more and and more engineered systems and fewer undifferentiated systems. This allows us to increase our sales of Middleware because it runs better on Exalogic.

Question about Hadoop boxes

He’s now answering a question about Hadoop boxes. He says they don’t replace databases. The Big Data accelerator includes some of the open source elements like Hadoop and some other Oracle peices that can speed up the MapReduce process that Hadoop does. Oracle has always followed database research trends ….and kept up and quite often led on technology.

Question from JPMorgan: Hardware margins were strong. The higher margin business was better than the low margin. Nevertheless this is the second quarter in a row that hardware has decrased. Is it because the commodity business is shrinking faster?

Hurd: Its just the fundamentals of building a business. We are putting more coverage out in the market. Making sure we attach all the periferals. We want to grow the top line, however we want to grow it right. Getting these high margins sales is key. You’re going to see material growth in Exadata and Exalogic. We’ll be focused on some competitors that have some key vulnerabilities.

Hurd: You see the same thing in the server business. The higher margin products have higher growth rates, and the x86 line is slower.

Ellison: We have a number of Fusion clients that are live, and it’s being rolled out completely. We’re the only application vendor that offers the same research on our cloud or you can put it on your private cloud. And if you want we’ll run it for you.

Catz: Every one in awhile we find a jewel. Price does matter to us. We just want to make sure its a good business case when we do it. Prices have recently been quite ridiculous.

The software business

With the software business and the enormous installed base who renew with us every year, there’s for all that a lot of room left in our model.

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