Oracle's Q2: Six themes to watch

Oracle's Q2: Six themes to watch

Summary: Exadata sales, hardware revenue and the outlook for 2012 IT spending will be closely watched when Oracle reports its latest quarter.

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Oracle reports its fiscal second quarter results on Tuesday and the financials and outlook will be closely watched. Why? Oracle will be among the first tech giants to provide hints about what it sees for 2012 enterprise technology spending.

Wall Street is expecting Oracle to report fiscal second quarter earnings of 57 cents a share on revenue of $9.23 billion.

Here are the six themes to watch: Cloud strategy. Considering that Oracle recently announced the acquisition of RightNow, the company is likely to talk a lot about its cloud strategy going forward.

The outlook. Oracle will be among the first large software companies to talk about 2012 IT spending. Many analysts are betting that growth will slow. Exadata: A new go-to market strategy? JMP Securities analyst Patrick Walravens said that partners indicate that Oracle is changing its Exadata strategy. Walravens said:

While we didn't get a specific read on Exadata sales, we did come across two data points that suggest Oracle may be adjusting its go to market strategies for Exadata. First, our checks suggest that at least some Oracle technology sales representatives are now required to sell a certain number of Exadata boxes (in the range of 1 to 3) in order to qualify for commission accelerators and in order to attend sales club this year. This requirement has caused quite a bit of consternation among certain technology sales representatives who may be well ahead of plan but now have to overcome a new hurdle in order to achieve the compensation they had expected. Second, it appears that at least in certain regions Oracle is looking to build out an Exadata specialist salesforce.

Slower growth possible. Piper Jaffray analyst Mark Murphy said in a research note that 41 Oracle partners surveyed indicated that second quarter sales were 1.5 percent above plan. Previous quarters featured more growth and Oracle is approaching a tough comparison in the fiscal third quarter.

Solid middleware sales and Fusion upgrades on tap. Evercore analyst Kirk Materne is expecting software license growth of 10.6 percent in the second quarter compared to a year ago.

How's hardware revenue? While Oracle talks non-stop about its Exa- product line the total hardware sales picture will be watched closely. Materne wrote:

We remain cautious around hardware product growth (we’re at -2.9% for 2Q and -2.4% for FY12), and expect guidance to remain conservative for both 3Q and FY as Oracle pursues its strategy to target the high end of the market. However, we expect growth rates should improve in FY13 as Oracle cycles out its lower margin hardware products.

Topics: Enterprise Software, CXO, Hardware, Oracle

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