"The deal volume was spread across companies of all sizes and we had a very healthy number of customer wins in the public sector as well," Hurd said. "The strength in the quarter was very broad-based. Our customers are reacting to the fact that we're delivering game-changing technologies that matter to our customers now. Exadata and Exalogic are creating tremendous buzz in the industry and among our customers."
Now, terms like "game-changing" are fairly fungible, and you could make the point that Oracle's goods are almost old-fashioned in comparison with some of the new new software models coming from companies like SAP or Salesforce.com and Workday, all of which Ellison called out by name in his comments.
But what cannot be disputed about Hurd's comments is the financial impact Oracle's products are making on the company's top and bottom lines: "Our earnings grew 33% this quarter and our margin performance made clear there's a ton of leverage in this business." Those are not the sorts of results some competitors and so-called experts were forecasting when Oracle acquired Sun a year ago—quite the opposite.
The naysayers harped on Ellison's acquisition, saying it was misguided and short-sighted because Sun was nothing but a financial sinkhole whose key people would bolt instantly from Oracle, leaving Ellison with nothing but a bunch of hardware nobody wanted and his own far-fetched day dream of turning Oracle from a software company into a "systems" company. One wag at the Motley Fool investment site went so far as to say it was "simply bad business," which a position with which we took great exception in our column called Global CIO: Oracle-Sun A Bad Deal? Only A Fool Would Say That. Here's an excerpt:
"No, the Sun deal is simply bad business," writes MotleyFool's Anders Bylund. "Oracle knows little about hardware, which is what Sun is good at. This deal positions Oracle closer to IBM and Hewlett-Packard as an all-around provider of everything, and I suppose there might be some synergies in there somewhere. But mashing together two very different corporate cultures often spells disaster, and when you sell everything including the kitchen sink to your customers, you end up competing with old partners like HP and Dell."
But instead of being "simply bad business," Oracle's acquisition of Sun triggered a huge wave of reactions across the industry as all the leading hardware and software players, seeing the customer value behind the Exadata model, rushed to emulate the approach. As Hurd noted in his comments to analysts, "Exadata and Exalogic are creating tremendous buzz in the industry and among our customers. All of our competitors as Larry mentioned are reacting to us (inaudible) and all are trying to buy or partner their way into integrated systems."
3) Becoming #1 in OLTP and Data Warehousing. Ellison opened his remarks by saying this about Oracle's overall strategy: "Our goal is to become #1 for both online transaction processing and data warehousing—both of those segments. We are not interested in the low-margins commodity segment of the server business; we are focused on high-end OLTP, high-end data warehousing, where the margins are good and we can have a highly differentiated product."
Citing Oracle's 3:1 OLTP performance lead over IBM and its 7.5:1 lead over HP, Ellison also touted Oracle's dominance in database performance: "In data warehousing, it's not uncommon for our Exadata machine to be 10 times faster than the best of the competition."
Ellison also specifically discounted the ability of IBM and EMC to use acquisitions to close that performance gap: "And IBM's purchase of Netezza and EMC's purchase of Greenplum technology is not likely to threaten Exadata sales for lots of reasons, but mainly because Exadata is much faster than either of those two technologies.
"And both in the case of Exadata [Ellison said "Exadata" but clearly meant Netezza] and in the case of Greenplum, the customer has to rewrite their applications to run on those machines."
4) Oracle-Sun Hardware Revenue Is Rising: the vision pays off. In her opening remarks, Oracle president Safra Catz said that "this quarter we saw sales growth for Sun hardware products as well as higher gross margins, which were 53% for the quarter."
On top of that, Hurd later added this perspective on the supposedly moribund Sun hardware business: "We've made more announcements relating to Sun's core technologies, specifically Solaris and Sparc. As an early indicator, we entered the quarter with a record hardware backlog."
Again, "record backlog" might be based on some relatively easy comparisons, but I'd suggest it would be prudent to view those two specific data points from Hurd and Catz in the context of the booming systems business cited in items #1 and #2 above. Oracle's not trying to sell commodity servers at rock-bottom prices; instead, it's looking to gain ever-greater entre' into the data center with the fastest and most-powerful integrated systems in the world.
And that's a whole new strategy for a hardware business—and it's one that Oracle's competitors will need to watch very closely.
Next is a look at the power behind Oracle's surging profit margins: