Oracle's Ellison: 'I don't care if commodity x86 business goes to zero'

Summary:Oracle didn't meet expectations for its hardware revenue stream and Larry Ellison wasn't happy about fielding questions.

When Oracle reported its first quarter earnings Tuesday, there was only one major sore spot: hardware. Naturally, investors honed Oracle's declining hardware revenue and started asking questions.

See also: Oracle's Q1 strong, but hardware sales lag; New SPARC chip on tap.

The company line is that Oracle is transitioning from low-margin---more like no-margin server sales---to higher end systems like Exadata.

Oracle president Mark Hurd said the company is not as focused on the hardware growth rate so much as "growing the right things in the product line." Specifically, Hurd said Oracle wants to focus on "the things that are attributable to long term profitability, long term positioning with the customer (and) long term positioning in the datacenter." Oracle is more concerned with pushing its own Exadata, Exalogic, and the core SPARC product lines.

"I think you are seeing some of the momentum, and if you see the market share charts, they send tend to show you the facts that we are gaining share in that core part of the product line," said Hurd, trying to reassure investors.

However, CEO Larry Ellison didn't mince any words. Ellison sounded annoyed with analysts who questioned Oracle's hardware strategy.

Let me add a little bit to that just so we're really clear. I don't care if our commodity X86 business goes to zero. We don't make any money selling those things. We have no is interest in selling other people's IP. X86 includes Intel IB, Microsoft IB. We don't make money selling that. Sun sold that stuff and we are phasing out that business. We have no interest in it whatsoever. We have interest in selling systems that include our IP. That's how we're going to drive the profitability of our overall hardware business. Eventually I think actually in fairly short order our engineered systems will be -- are growing at such a high rate that the overall hardware business top line will grow also. But what's really important is to continuously grow our margins in the hardware business and our profitability in the hardware business so we can meet [Oracle CFO Safra Catz's] goal, which is getting back to our pre-Sun acquisition overall margins.

Perhaps Ellison was bitter over having to show up in court to talk Java settlements with Google CEO Larry Page all day. If you had to sit in court for a few days, you might be a bit grumpy too.

Nevertheless, Oracle is most likely making the right move with its hardware business. It's just common sense: If something isn't making you money you're better off cutting it sooner than later.

Related:

Topics: Oracle, Banking

About

Rachel King is a staff writer for CBS Interactive based in San Francisco, covering business and enterprise technology for ZDNet, CNET and SmartPlanet. She has previously worked for The Business Insider, FastCompany.com, CNN's San Francisco bureau and the U.S. Department of State. Rachel has also written for MainStreet.com, Irish Americ... Full Bio

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