Oracle's hardware worries surface again as analysts eye Q4

Oracle's hardware worries surface again as analysts eye Q4

Summary: Wall Street's hardware handwringing comes a week after Oracle rolled out its master cloud services plan.


Oracle will report its fourth quarter earnings June 21 and the worries about whether the company can bolster its hardware business continue.

The company is expected to report fourth quarter earnings of 78 cents a share on revenue of $10.9 billion. Wall Street analysts, however, project a mixed quarter ahead. Based on channel checks from analysts, Oracle's hardware sales were weak while software was mixed, but in line with expectations.

Wall Street's handwringing comes a week after Oracle rolled out its master cloud services plan.

Jefferies analyst Ross MacMillan said that Oracle is seeing the effects of conservative IT spending. MacMillan said:

Our most recent field work suggests F4Q12 business trends were mixed, with license likely in line while hardware again sounded weak. The deal activity that we heard of was mostly transactional but we did catch wind of one very large transaction (around $50 million)...Many of the partners we spoke with commented that biz continues to be impacted by customers’ conservative IT spending behavior. From our conversations with EMEA-based partners we think that biz likely slowed somewhat in Europe as macro factors impacted close rates.

The wild card for these Oracle prognostications is that the company's direct sales force is taking more deals from its partners. That reality may mean that Oracle's results handily outrun any partner pessimism. Oracle's first quarter outlook should be solid given the company will get a revenue boost from recent acquisitions like Endeca, Taleo and RightNow.

Barclays analyst Raimo Lenschow said that Oracle's risks are largely balanced, but the company is facing economic concerns as well as a headwind from a strong U.S. dollar.

Morgan Stanley analyst Adam Holt was more positive. He noted that almost 80 percent of Oracle's operating income comes from existing customers. That means that new product cycles---Fusion, Exalytics, Exadata---can fuel better than expected gains.

Holt said:

Given a significant recurring revenue stream coming from software and hardware support, as well as its existing OnDemand business, we can ascribe value to the company’s highly visible recurring installed base, which represents nearly 80% of the company’s operating income. We value the current recurring revenue base in Oracle at ~$22.43/share — which along with $3/share in net cash represents >95% of the current trading price.


Topic: Cloud

Kick off your day with ZDNet's daily email newsletter. It's the freshest tech news and opinion, served hot. Get it.


Log in or register to join the discussion
  • to fix the HW sales

    Oracle must put Linux and android on those Sun servers.
    The Linux Geek
    • Oracle already does.

      Oracle is a heavy supporter of Linux. They even have their own version.
    • Oracle have their own OS

      Oracle have Solaris, which is every bit as good as Linux. I run Solaris machines at home, and most FOSS software compiles well on that system. Oracle need to push their OS as well as their application software.
      • The next thing you'll tell us is

        your wife uses Solaris also :-) ...........
        Over and Out
  • For Oracle to beat VmWare they need to do much more

    Big enterprises buy millions of dollars of cloud storage hardware from VmWare, If Oracle wants to be in the cloud hardware business too, they will need to proove their hardware is better than those companies solutions, which is difficult, Oracle has always been a software RDBMS company, they now offer software and middleware solutions, but the big money is still on big hardware on datacenters, other companies have built hardware for decades, so Oracle needs to rethink their hardware strategy soon if they don't want to sell their hardware division in a few years.
    Gabriel Hernandez
  • Oracle is a terrible company

    Oracle is a terrible company and it made a big mistake in buying Sun Micro and their current battle with HP doesn't bode well for both the companies. Oracle has very less competition in the database market. But there is a chance SAP could give them a run on the ERP market if Oracle stumbles badly.
  • Oracle's hardware worries surface again as analysts eye Q4

    my classmate's sister-in-law makes $84 hourly on the laptop. She has been fired for 7 months but last month her income was $9078 just working on the laptop for a few hours. Go to this site[N][u][t][t][y][R][i][c][h].[c][o][m]
  • Evosys bags the deal to implement Oracle Ebusiness Suite at DELMON POULTRY, Bahrain

    11th June 2012: Evosys wins Oracle Ebusiness Suite Project for Delmon Poultry Company in Bahrain. The Delmon Poultry Company, established in 1981, produces poultry, and hatchery products in Bahrain under the world famous brand, Farm Chicken. With this win, we will enable web ERP, SCM & EBS solution in Delmon. This has provided us with an opportunity to showcase our expertise and augment our delivery area. While improving the management and employee experience, the solution also opens an opportunity for smoother functioning and in turn persistent rapid growth of DELMON. About Evosys: Evolutionary Systems Pvt. Ltd. (Evosys) is an Oracle Platinum Partner with dedicated focus on Oracle Application. We specialize in ERP, EPM, CRM and Fusion Middleware Implementations in Middle East & UK. Evosys has a pool of highly talented & professional consultants, who hold expertise across Financial Management, Human Capital Management, Manufacturing, SCM, Business Intelligence, Hyperion, Siebel CRM and many other solutions. We are known for combining speed of implementation with the quality of delivery. For more details, please visit our homepage at