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6/25/2009
02:35 PM
Bob Evans
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Oracle's Larry Ellison Touts Company's New Hardware Chops

In Tuesday's eagerly anticipated earnings call, Oracle CEO Larry Ellison might have been expected to talk about the company's $23.5 billion software business or its Q4 operating margins of more than 50%. But in a sign of the changing times, he talked not about software but instead about a hardware-based Oracle product that "is shaping up to be our most exciting and successful new-product introduction in Oracle's 30-year history."

In Tuesday's eagerly anticipated earnings call, Oracle CEO Larry Ellison might have been expected to talk about the company's $23.5 billion software business or its Q4 operating margins of more than 50%. But in a sign of the changing times, he talked not about software but instead about a hardware-based Oracle product that "is shaping up to be our most exciting and successful new-product introduction in Oracle's 30-year history."That would be the Exadata database machine, featuring Oracle software running on HP hardware, and in his brief presentation, that is the one and only Oracle product Ellison talked about. In his comments about Exadata customers, Ellison -- without specifically mentioning Apple by name -- clearly indicated Apple had recently bought two of Oracle's Exadata systems and found they ran "about 100 times faster in some cases than their standard Oracle environment."

Ellison also touted other Exadata wins around the world in telecom, media, financial services, and insurance, emphasizing repeatedly that the primary competitor is Teradata, according to a transcript of the earnings call on SeekingAlpha.com.

And at the end of his brief prepared comments, Ellison came back to the H word (hardware) and touted its value in the Exadata deals: "It was just a great quarter for Exadata, a product that is relatively new to the marketplace that is persuading people to move from their existing environments because Exadata is faster and the hardware costs less."

That nascent Oracle hardware advantage was also highlighted a few minutes later by Oracle co-president Charles Phillips, who said this about the company's acquisition of Sun Microsystems, which is expected to close in the next 3 months:

"We have been working hard to stay close to customers and we're becoming a lot more important to those customers as our product line grows. So the Sun acquisition is a continuation of that strategy and we've had very positive response from lots of customers because they know we'll make it all work together at the factory and we'll lower their cost and if Exadata is any indication of what can happen when you optimize hardware and software together, they're pretty excited."

Think about that line: "what can happen when you optimize hardware and software together." With every CIO on the planet searching for the best ways to lower the cost of infrastructure, optimized blends of hardware and software would seem to be one of the elusive prizes they're seeking.

So it's not surprising that we're seeing HP blend more software into its mix, whether in partnership with Oracle on Exadata or within its own massive software business; or IBM outline its plans to remain in or jump into hardware categories where margins are solid and the company's vast software expertise can be deeply leveraged; or Cisco move aggressively to become a full-line IT supplier.

So just wait til next quarter when Oracle will likely have completed the acquisition of Sun - maybe Ellison will continue to sing the praises of hardware's role in the ongoing strategy of Oracle, one of the world's largest software (and hardware!) companies.

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