Oracle's Q2 to be plodding: Can hardware ever cushion the blow?

Oracle's Q2 to be plodding: Can hardware ever cushion the blow?

Summary: Oracle's second quarter results are expected to be lackluster and analysts aren't expecting much. It sure would be nice if Oracle's hardware revenue could start growing to cushion the cloud transition.

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Oracle will report its second quarter earnings on Wednesday and much of the focus will revolve around cloud competition from the likes of Salesforce and Workday as well as sluggish revenue growth from selling new software. Given that reality it would be a good time for Oracle's hardware business to actually turn around.

exadata mug

The company is expected to report second quarter earnings of 67 cents a share with flat revenue of $9.2 billion. Morgan Stanley and RBC both cut their ratings last week. Oracle's third quarter earnings estimates fall into the "more of the same" category at 70 cents a share.

Add it up and Oracle's transition from licensing to the cloud is going to take awhile. For a company that lives and dies by big licensing deals, the cloud model and subscription revenue is disruptive. Oracle's database business will chug along, but open source options can nip at the company's heels too.

The problem for Oracle is that it doesn't have any other business to minimize the pain.

For instance, hardware has been nothing but a pain for Oracle. Last week, Oracle launched its fifth-gen Exadata Database Machine X4. The system focuses on online transaction processing (OLTP), database as a service and data warehousing. The X4 touts better performance and increased storage capacity.

These new systems hold promise for Oracle's hardware sales and profit margins. Oracle CEO Larry Ellison and president Mark Hurd will also talk up hardware wins. Oracle's numbers, however, are brutal. The line to date has been that Oracle is phasing out the legacy products acquired from Sun Microsystems.

Today, Oracle's new hardware lines need to more than just partially offset declining businesses.

This chart from Oracle's annual report tells the tale (2011 was a baseline year and first that included all of Sun Microsystems).

oracle hardware 10K1

 

Topics: Data Centers, Hardware, Oracle, Servers

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3 comments
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  • Oracle is on the outs

    Over priced and undervalued its the most expensive software on the planet. The market is changing as it did for Blackberry... it will be interesting to see if the bigoted tactics of the past will fly in this new environment. I don't think it will and expect Oracle to fade fast just as Sun has.
    greywolf7
  • The problem is how they treat you..

    The treat you like a criminal with their draconian audits.
    The beat you up with stupid rules to maximize there profits
    a) Non-VMware or cloud friendly rules.
    b) Rules favor their vm platforms drastically.
    c) Charge you for cold site DR licenses(Unlike about everyone else on the planet).
    Their service really stinks.
    Even there top products are really getting to be a mess like EBS.
    And on top of all of that you pay top dollar for the privilege of everything above.

    All it takes is one software company to change the rules and they are out of business. Get your act together oracle!!
    Johnpford
  • Oracle's decline is irreversible

    Oracle's sales people are up in arms refusing the new hardware quotas imposed on software sales reps. This has created a lot of frustration among the sales force, many of whom have left, driving hardware and overall sales figures down. Add to that that Oracle, essentially a database company, is so far unable to articulate a cogent cloud proposition (the article rightly mentions Salesforce and Workday eating Oracle's lunch) and it doesn't take a rocket scientist to figure out that Oracle's best days are behind it.

    To further understand what is going on at Oracle, and what its future prospects are, a good read is "High-tech planet" written by a former Oracle executive. I think you can read the first chapters for free on Amazon
    antoinehepburn