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3/2/2006
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Oracle Gets Behind Itanium

Later today, Oracle will announce special per-core licensing for dual-core Itanium-based systems and pledge versions of its software for HP's Unix operating system, HP-UX, on Itanium.

Top executives from Hewlett-Packard, Oracle and Intel are set Thursday unveil a plan that ensures Oracle products are readily available for HP's Itanium product line.

Oracle will announce special per-core licensing for dual-core Itanium-based systems and pledge versions of its software for HP's Unix operating system, HP-UX, on Itanium at the same time it releases software for other major platforms, said Rich Marcello, senior vice president and general manager of high-end server business at HP, Palo Alto.

In the first such release, he said, Oracle's E-Business Suite will be available for HP Integrity Servers running HP-UX by the end of 2006.

Oracle CEO Larry Ellison, HP President and CEO Mark Hurd and Intel President and CEO Paul Otellini will hold a Webcast at 8:30a.m PT to discuss the moves.

The deal with Oracle is particularly important for the high-end Itanium because a majority of HP Integrity customers run applications with database backends, Marcello said. "I would say roughly two-thirds of our servers that go out the door run some kind of large database," he said.

Oracle will also support HP's Virtual Server Environment, which allows customers to purchase licenses only for the number of CPUs they are using for a particular partition. That is especially important for HP's Itanium servers, which supports up to 128 processors, said Marcello. HP designed the software specifically to track changing CPU resources used for partitions, he said. "From an Oracle perspective, you are just paying for what you are using" he said.

All Oracle software licenses for multicore Itaniums will be charged at 50 percent of a full license price per core, according to Marcello. This is on par with Oracle's policy for multicore x86 processors. But Marcello added that the Oracle's move is for Itanium only. Competing RISC chips from IBM are not included.

Oracle previously had set software licenses for multicore chips at 75 percent per core of a full license fee. It has since made adjustments Sun's eight-core T1 processors at 25 percent of the price of a full license per core as well as the changes for x86.

Solution providers have said reductions in Oracle's multicore licensing policies are necessary to effectively sell servers that use any of the variety of multicore processors now on the market. Otherwise the cost of the database and other software licenses necessary to run on the servers would squelch upgrades and consolidation services.

Though IBM does not currently appear to have a special deal with Oracle, it did announce a year-long promotion to knock 50 percent off its own middleware, including DB2, sold with its quad-core pSeries servers.

HP, a co-developer of Itanium with Intel, is generating the lion's share of sales based on the chip. Last year IBM and Dell decided to stop selling the ultra high-end systems. Itanium systems sales took a hit in 2005, with North American shipments falling by 6.8 percent and revenue falling by 1.8 percent, according to Gartner, though Hewlett-Packard saw growth in its Itanium sales.

Marcello said HP's fourth quarter Integrity server business grew 94 percent over the same quarter in 2004. Year over year growth was 70 percent. He points to an IDC report, that projects Itanium based servers will grow a compound annual rate of 35 percent over the next five years, topping off at $6.6 billion in sales by 2009. Gartner, which calls its estimate conservative, expects the market to reach $8 billion in 2010.

Marcello said currently 7,100 applications run on the Integrity servers and HP expects to reach 9,000 in the next 12- to 18-months. With 9,000 applications, Marcello said any application available for other RISC or Alpha processors will also be running on Itanium servers.

Solution providers are generally receptive to downward price moves for dualcore and mulitcore processors. But in the case of the Oracle announcement today, partners seemed more stunned that they weren't briefed on the news than pleased about the changes.

One of HP's largest Itanium partners, Agilysys, said it was caught off guard by the news. And an Oracle partner, who asked to remain anonymous, said he had not been briefed on the changes and feared that, like a similar Sun/Oracle deal announced recently, it would introduce more channel conflict.

Before Oracle resellers worried mostly about competing with Oracle's own aggressive sales force and Dell, which has had a tight relationship with the software vendor. Now they'll also face off with Sun and presumably HP sales forces as well, he said. HP's Marcello said the company's Itanium server line is sold about 50 percent direct and 50 percent through channel partners.

Oracle's partner said he fears Oracle's intent is to devalue resellers altogether. "They want ISV partners, and they want resellers out of the license sales," he said.

For it's part Oracle has said it is building partner relationships but has put new focus on "segmenting" partners into value-add and fulfillment tiers. Last week, Oracle channel chief Rauline Ochs acknowledged that it is doing precisely that in terms of partners involved in "price hold" deals. Those who merely fulfill an order--as defined by Oracle--will get half the margin (five percent) as value-add partners in those deals, she said. That change took affect March 1.

Barbara Darrow contributed to this report

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