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Oracle Profits Rise On Software, Hardware Sales

CEO Larry Ellison took shots at SAP, telling analysts Oracle's rival made a 'colossal' mistake challenging his firm in the database market.

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Oracle reported Thursday that profits rose 20% in its fiscal first quarter, as the company sold more software and hardware to businesses that are increasing spending on information technology.

The world's second largest software maker said net income based on generally accepted accounting principles increased to $1.4 billion, or 27 cents a share, from $1.1 billion, or 22 cents a share, in the same period a year ago. Revenue rose by 48% to $7.5 billion from $5.1 billion a year ago. Analysts polled by Thomson Reuters had expected revenue of $7.3 billion.

New software license revenue, a key indicator of the success of a software company, increased 25% from a year ago to $1.3 billion.

But following the $7.3 billion acquisition in January of hardware vendor Sun Microsystems, Oracle has made it clear that the company going forward is no longer just a software maker building on top of its flagship database programs. Instead, its focus is to sell database and storage software integrated into hardware to deliver a complete package.

"There really is no software business or hardware business," Oracle CEO Larry Ellison told financial analysts during a conference call Thursday. "We're in the systems business."

Ellison assured analysts that Oracle has already turned the once money-losing Sun around, and said he believes Oracle can double Sun's hardware sales.

"It's already making a substantial contribution to our profitability," Ellison said. "We're profitable and we want to make it more profitable. It's going to get better."

Among the achievements most touted by Oracle is its Exadata database machine, which is a platform tuned towards delivering fast online transaction processing (OLTP). Ellison reiterated that he expected Exadata to be a "huge" hit for Oracle.

Ellison also threw some jabs at SAP, its biggest competitor in the business software market. SAP has entered Oracle's database turf with its plans to release by May 2011 an in-memory database that the company claims will execute real-time predictive analytics and multi-step queries faster than Oracle's relational databases.

"It's a colossal mistake for them to take us on in database technology," Ellison said of SAP.

He promised that Oracle would beat SAP in releasing an in-memory database. "We'll deliver our product well in advance of their product," Ellison said.

Oracle released earnings three days before the start of Oracle OpenWorld in San Francisco. Ellison promised that attendees of the user conference would see a major overhaul of Oracle's Fusion middleware that links all its software products together, saying the new version would be written 100% in Java and have integrated Web 2.0 technology and other "brand new stuff."

"SAP is going to compete with us with 25-year-old technology," he said.

Also on the conference call was Mark Hurd, whom Oracle hired Sept. 6 after Hurd resigned as chief executive of Hewlett-Packard. HP filed a lawsuit the next day to try to convince a court to prevent Hurd from taking the job of co-president of sales, marketing, and customer support. HP claims Hurd can't work for Oracle without disclosing HP's trade secrets.

During brief remarks, Hurd praised his new employer, saying Oracle is "well positioned in the industry and where customers are heading."

"I'm really excited about the opportunities," he said.

For Further Reading

Ellison: Oracle Plans To Be No. 1 In On-Demand Software

Oracle's Exec Swap Portends Near-Term Change

Hurd In, Phillips Out As Oracle President

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