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.
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).