Oracle CEO Larry Ellison is betting all his hardware chips on the emerging category of optimized systems, at the expense of the commoditized server business Oracle took control of when it acquired Sun Microsystems. That's the clear message I get by juxtaposing the shocking slide of Oracle's Sun servers against Ellison's intense emphasis on optimized hardware-software combos, notably Oracle's Exadata Database Machine.
Yet I believe this is all good for Oracle.
First, let's unravel some data points. Gartner recently released its worldwide server shipments numbers for the third quarter of 2010. Those figures are good news for the economy as a whole--worldwide Q3 shipments grew 14.2% year-over-year, and revenue was up 15.3%.
The totals also show that HP's executive-suite distractions have not impacted its server business. Hewlett-Packard remained the market leader, topping IBM with a 32.1% market share, as compared to 30.2% for Big Blue.
Note that HP's dominance was stoked by a year-over-year shipment bump of 16.3%, driven largely by HP's ProLiant family. ProLiant is an industry standard commodity line. That's not to denigrate it, just to note that it plays in tiers with tight margins, where a company can never rest on its laurels. (Indeed, in commodity markets, laurels don't matter. Low price does.)
Which brings us back 'round to Larry Ellison. Here's the money quote from Gartner's Q3 server press release:
"Oracle was the only vendor of the top five to show a decline year over year. 'Following the acquisition of Sun’s hardware business, the company now faces the challenge of preventing further declines in the hardware segment,' Gartner research director Adrian O’Connell said."
At first glance, this reads as bad news. In Gartner's Q2 figures, released in August, Oracle was number four server by revenue--after HP, IBM, and Dell--with an 8.1% market share. Going by shipment volume, Oracle was number five in Q2--after HP, IBM, Dell, and Fujitsu--with 48,000 units shipped for a 2.2% market share.