Why Oracle will continue to win

I was somewhat shocked by the stellar results Oracle recently reported, considering the sorry state of the economy. I even called an analyst friend to find out if maybe there was some house of cards ala Computer Associated that explained the consistent rise in revenue and margin. But I was reminded of two simple facts explaining why Oracle remains dominant:

1. Applications drive database sales
2. Oracle owns pretty much everything

Oracle's acquisition streak has given the company an enormous breadth of offerings (say what you will about quality of the software) and the attempt at offering it's own Linux variant gives it an OS that's passable if not meaningful. But, I don't know that owning the operating system is important to the growth of sales in applications or databases. (Note: Matt Asay wrote a very good post about why Ubuntu should be Oracle's Linux of choice.)

Oracle applications and databases have to run on an operating system, but the operating system doesn't necessarily drive software sales, or sell databases. The OS may be a point of influence, but doesn't drive the dollar values that you get from software.

Meanwhile, Oracle has amassed such a wealth of software that it can not only drive it's own database sales through upgrades and replacements (JD Edwards or Siebel running on DB2 seems unlikely) but it can up-sell databases to customers of BEA or any of the other myriad applications it now owns.

Add MySQL into the equation and Oracle can sell you a database pretty much anytime for any purpose, to support any application (which you can probably buy from them too.)

This leads into some questions regarding Cisco's strategy, based on the idea that hardware should sell applications, as well as IBM's strategy, where services have often sold software and hardware. The future is of course a mix of all of these strategies, but it's not clear that another company is as well positioned as Oracle.

While certainly not unstoppable, Oracle's execution has been very impressive, especially in a down economy.

Author: Dave Rosenberg @ http://news.cnet.com

Read more ...

Oracle's Earnings: A Good Omen for Tech?

Fiscal fourth-quarter results from the software behemoth fueled optimism that a rally in tech stocks may continue. Wall Street took heart from a report showing better-than-expected earnings from Oracle (ORCL), the Silicon Valley software giant. Technology stocks have been on a roll this spring, and investors eyed Oracle's fourth-quarter report on June 23 for signs the rally might continue.

Sales, profits, and new software bookings for Oracle's fiscal fourth quarter ended on May 31 exceeded Wall Street's forecasts. That sent shares of Oracle up 2.7% in extended trading, after closing on June 23 down 10¢, or 0.5%, at $19.87. The shares have gained 8.8% in the past three months.

Profits declined 7% and revenues fell 5% in the period, though results would have been better if not for the effects of translating overseas sales into a rising U.S. currency. On Wall Street, analysts said Oracle's recurring revenues from technical support contracts and prudent control of expenses during the quarter helped offset currency-related declines. "Oracle continues to be a high-quality investment," says Andy Miedler, a senior technology analyst at Edward Jones who rates Oracle a "buy."

Pickup in Software Sales

Investors are lifting the shares of tech outfits including IBM (IBM), Google (GOOG), Microsoft (MSFT), and Adobe Systems (ADBE) that reported relatively healthy results during the recession by taking advantage of companies' need to buy products that can boost productivity, Miedler says. "Investors see tech companies posting fairly decent results in this environment, and they're rewarding them for it," he says. The Nasdaq composite index has risen 13.4% since Mar. 24, outpacing other indices.

Oracle executives told Wall Street analysts in a conference call that customers are beginning to buy more software, and pointed to deals closed during the quarter with Wal-Mart (WMT), American Express (AXP), Vodafone Group (VOD), and Perry Ellis (PERY). "The sense of panic and deer-in-the-headlights kind of feeling" has subsided, said Oracle President Charles Phillips.

For the fourth quarter, Oracle earned $1.9 billion, or 38¢ a share, compared with $2.03 billion, or 40¢ a year earlier. Excluding stock compensation and one-time charges, earnings were 46¢ a share, exceeding Wall Street analysts' estimate of 44¢. Revenues were $6.9 billion, vs. $7.2 billion a year earlier. Analysts had expected sales of $6.47 billion. Sales of new software licenses, a closely watched measure of future revenues, were down 13%, to $2.7 billion, but also exceeded analysts' expectations.

Weathering the Recession

Looking ahead, investors are still waiting for more clarity from the company about how quickly it can cut costs after its $7.4 billion acquisition of computer and software maker Sun Microsystems (JAVA) closes this summer, and whether it will keep Sun's server and storage business.

Keeping lower-margin hardware operations would be a strategic departure for Oracle, which generates healthy margins from sales of database, middleware, and business applications. Oracle executives indicated during the conference call with analysts that they will take a run at the hardware business. Oracle has spent more than $30 billion on 55 acquisitions since 2005 to compete with SAP (SAP) in applications software, and with IBM in the market for application-connecting middleware.

The company has withstood the worst effects of the slow economy because of recurring revenues from support contracts. Excluding stock compensation and charges for acquisitions, Oracle's operating margin was 51% during the quarter. Annual fees paid by customers for the rights to new versions of Oracle's software and for technical support accounted for 44% of Oracle's fourth-quarter revenue, and the contracts are considered highly profitable. "The margin story has to do with our enormous installed base of customers who renew their agreements with us every year," Oracle President Safra Catz told analysts.

The company's profit margin will undoubtedly fall after the Sun deal closes, but analysts say the expected declines are reflected in Sun's stock price, and that investors view the acquisition as a positive. "Oracle is a pretty boring story without Sun," says Yun Kim, an analyst at Broadpoint AmTech (BPSG), who has a buy rating on Oracle's stock.

Sun's Hardware Business is Promising

Catz told analysts to expect a decline in sales of 1% to 4% for the first quarter that ends in August, and earnings of 29¢ to 31¢ per share. Oracle also declared a dividend of 5¢ per share payable on Aug. 13.

Brent Thill, director of software research at Citigroup (C), who also rates Oracle a buy, told clients in a June 22 research note that although investors usually fear a "seasonal drop-off" in sales during Oracle's traditionally slow summer quarter, prospects of an economic recovery and the imminent closing of the Sun acquisition "will outweigh those issues." When Oracle announced the deal on Apr. 20, it said Sun would add at least 15¢ per share to its non-GAAP (generally accepted accounting principles) income in the first full year after closing.

Despite calls by some investors for Oracle to sell Sun's hardware business and keep its software products, Oracle executives said they have the opportunity to deliver products that combine Sun computers with Oracle software in a way that gives information technology departments more confidence that the hardware and software will work well together. To underline the point, Oracle Chief Executive Larry Ellison spent half his speaking time on the conference call talking up the virtues of a product called Exadata that runs Oracle's database on Hewlett-Packard (HPQ) hardware.

Ellison's willingness to jump further into the computer hardware market by buying Sun has deep roots, says John Wookey, an executive vice-president at SAP, who left Oracle early in 2008. Ellison used to personally fix errors in programs running on old IBM mainframe computers, according to Wookey. "Larry likes hardware," he says.

If he demonstrates that affection by keeping Sun's hardware assets, investors will focus on whether he can run a hardware business as well as the software juggernaut he's assembled.

Author: Aaron Ricadela @ http://www.businessweek.com

Read more ...

Why Oracle Wants Solaris

With its future apparently secure, the benefits of Sun's operating system become compelling. Oracle praised the Solaris operating system when it agreed to acquire its creator, Sun Microsystems, but the actual beauty of this fine piece of engineering was left unexplained. Here's a look at the advantages of Solaris for business computing and insights into what Oracle's long-term intentions may be for the operating system.

No matter what your attitude is toward Oracle's products, management style and strategy, anyone running a large or small data center should breathe a sigh of relief now that the long-term viability of Solaris is assured. Without an acquisition by Oracle or Cisco ( CSCO - news - people ), Solaris might have been put on the proverbial shelf, a tribute to what the fine engineers at Sun could do back in the day. But now that Solaris will receive the marketing support that it deserves, information technology staff should be taking a close look at the operating system for the following reasons.

Superior virtualization: In the Linux world, virtualization is performed by multiple parties. One organization or company does the hypervisor (Xen, VMware ( VMW - news - people ), Citrix, Parallels), the virtual layer on top of the hardware. Another organization (the Linux community) adapts the operating system to better support virtualization. What Solaris offers IT is a top-to-bottom engineered approach to virtualization where the hardware, the hypervisor, the OS and the ZFS file system are all designed to deliver optimal performance and manageability. Solaris Containers are a lightweight but powerful virtualization option with very low processing overhead (2% vs. about 20% for a hypervisor). Linux will get there but at a slower pace as the multiple parties involved negotiate with each other. Microsoft ( MSFT - news - people ) also offers a unified virtualization stack but it remains to be seen if Windows can ever achieve as wide adoption in the server space.
Scalability for Large Scale Multiprocessing: Benchmarks shows that Linux stops providing benefits at four processors. You can add more, but performance won't get much better. Solaris has been engineered to support massive multiprocessing. If you need to scale a single box, you can add dozens of processors, and Solaris boosts performance accordingly. Solaris also has the most scalable networking support of any operating system on the market.

Reliability: Linux has long been successful in data centers because it is less error prone than Windows, which frequently requires machines to be rebooted. Solaris takes reliability to a new level. A feature called predictive self-healing allows failed hardware components to be swapped out without rebooting.

Security: The security in Solaris benefits from the same engineering quality as the rest of the operating system. Sun's security DNA comes from its experience supporting financial services computing and e-commerce. Solaris was designed for secure networking and provides many security features, including role-based access control, a firewall and secure out-of-the-box settings.

Administration: Solaris has administration functions that allow mass changes to be made to many instances of an operating system at once and features that allow one master machine to be replicated to many other machines running a copy of the operating system. The administration capabilities have been expanded to cover the challenges of running a large number of virtual machines.

Flexible Deployment: Solaris is offered both as a fully supported commercial product and as OpenSolaris, a leading-edge open source version where the latest features are tested. Solaris 10 can run Solaris 8 and 9 apps in containers. Further, Solaris runs on a huge range of hardware from x86 Intel platforms to high-end RISC servers. Solaris can run on any hardware platform, not just on Sun hardware.

Green IT: As they say at Sun, "You can't be green without the Sun." While that may not be always true, it is true that Sun's SPARC chip set and its servers are among the most energy efficient on the market, in some cases qualifying for utility rebates. Performing a server consolidation using Solaris and Sun hardware provides an easy way to lower carbon footprint but maintain high performance.

With Sun at the helm, you could easily get the idea that Solaris was created as a public service. Sun has never seemed like it was in business solely for the money. At Oracle, green is always a top priority, as it should be, and Larry Ellison is swooning about Solaris because he sees it as key to a new kind of offer to Oracle's customers. But what is that offer?

My guess is that the "Industry in a Box" vision mentioned by Charles Phillips, Oracle's co-president, will actually become the next wave of cloud computing. In a previous column, I recommended that Google ( GOOG - news - people ) get into the appliance business. My guess is Oracle will follow this path with a vengeance. Solaris will power Oracle's cloud offerings, but through appliances, Oracle will bring the cloud to the data center.

Remember that Google, the leading provider of large-scale computing services in the cloud, does so by building its own hardware and software that is integrated and optimized for the task. I believe that Oracle recognizes that there are limits to the amount of enterprise IT that can be put into the cloud. Problems such as security, disaster recovery and moving huge amounts of data are significant barriers to cloud migration. But many of the same economic and operational benefits of the cloud can be achieved through remotely managed appliances that integrate software and hardware in one box. Oracle can run these over the Net using the Smart Services model I wrote about in Mesh Collaboration. The customer gets all the benefits of the cloud without having to move data off premise.

With the acquisition in place, the installed base of Solaris will grow as more companies discover the brightly shining benefits of this operating system.

Author: Dan Woods

Dan Woods is chief technology officer and editor of Evolved Technologist, a research firm focused on the needs of CTOs and chief information officers. He also consults for many of the companies he writes about. For more information, go to www.evolvedtechnologist.com.

Read more ...

Oracle Launches Asia Pacific Virtual Tradeshow

Oracle Corporation is inviting everyone to join the interactive conversations at Oracle’s Applications Unlimited Experts Live! virtual show.

The action-packed day kicks off in high gear on June 16, 2009, 10AM to 4PM with a compelling keynote from Ed Abbo, Oracle’s Senior Vice President of Applications Development.

This FREE virtual show provides convenient access to valuable product updates and the chance to learn more about the trends and technologies that can help companies gain competitive edge in today’s uncertain times. Drop in and attend what interests you, when you like, without leaving your desk.

During this one-day virtual show, attendees can visit Oracle Applications booths, interact with Oracle experts, experience the latest product demos and network with peers.

Attendees can expect to get a better understanding of how Oracle Applications can benefit their organizations through customer case studies featuring companies in the Asia Pacific region such as Maruti Suzuki, LG Electronics, Australian Vintage, VicUrban, Sinosteel, Yarra Valley Water, HPCL and STX Shipbuilding.

Relevant presentations for both the regional and local market include the value of business process outsourcing (BPO), Software-as-a-Service (SaaS) and customer relationship management (CRM) on Demand in the region.

For more details, please visit www.oracle.com.

Read more ...

Oracle Insurance introduces Oracle Revenue Management and Billing for Insurance

Oracle Insurance today introduced Oracle Revenue Management and Billing for Insurance, providing insurers the robust billing capabilities necessary to deliver streamlined, convenient billing, payment and collections processes, and improve service to customers and distribution channels.

Oracle's new solution enables insurers to meet the market demand for multi-channel strategies and increased cross-selling abilities by providing comprehensive and consolidated billing management capabilities.

The solution also helps insurers to improve enterprise revenue management, while efficiently supporting diverse lines of business on a single platform to reduce cost of ownership.

Oracle Revenue Management and Billing for Insurance is part of the Oracle Insurance solution footprint ? a complete, end-to-end offering that includes support for core insurance operations, distribution channels, corporate operations, IT and enterprise performance management.

Oracle will demonstrate Oracle Revenue Management and Billing for Insurance this week at the IASA Educational Conference & Business Show, booth 1011.

Built on an open, standards-based architecture, Oracle Revenue Management and Billing for Insurance minimises the manual back-office activities required to process bill inquiries and bill adjustments. It also easily integrates with existing policy administration, financial accounting and payment solutions to streamline business processes while incurring minimal costs.

The solution enables consolidated billing, providing a complete view of customer billing interactions to enable easy cross-policy adjustments that drive better customer satisfaction and retention.

Comprehensive Account Current and Group Bill Processing capabilities enable strong support for distribution channels and easy reconciliation for group bills, allowing faster cash realisation and lower write-offs.

Oracle Revenue Management and Billing for Insurance provides configuration-driven business rules that enable business users to quickly and easily implement changes to the billing system ? minimising the cost of bringing new offerings to market.

Web-based self-service and e-billing capabilities give customers, agents and brokers improved access to information and a choice of channels for conducting business with insurers ? helping to reduce the overall number of billing inquiries and bill adjustments, and increase overall customer satisfaction.

The solution provides comprehensive support for call centre operations. It gives call centre agents easy access to customer information, minimising average service call times. In addition, the application includes access to online help resources and scripts that model best practices, helping to lower training costs for call centre staff.

The system incorporates built-in business process management tools to ensure consistent interaction with customers and accelerate billing reconciliation.

Oracle Revenue Management and Billing for Insurance supports continued business growth for insurers by providing the scalability to handle customer bases ranging from a few thousand to millions in size.

In today's competitive insurance market, insurers must balance multiple challenges, including the need to improve revenue management and reduce IT total cost of ownership, while providing enhanced customer service that is critical to developing and maintaining long-term customer relationships and satisfying the agents and brokers that manage these relationships,” said Chuck Johnston, vice-president, Strategy and Alliances, Oracle Insurance Global Business Unit. “Oracle Revenue Management and Billing for Insurance delivers a robust and flexible solution that helps insurers to expand and optimise use of distribution channels while supporting diverse lines of business on a single, cost-effective billing platform. As important, the solution supports delivery of universal, best-in-class service that today's customers demand.”

Source: http://www.itweb.co.za

Read more ...

Sun investors to vote on Oracle on July 16

Tune in on July 16 to see whether Oracle actually becomes the new parent of Sun Microsystems.

Sun's board of directors has set up a special shareholder meeting for that date to vote on the proposed merger with Oracle, according to a statement Sun released Monday. Sun's board, which has already okayed the merger, is urging stockholders to approve the deal--a majority vote is needed to push it through.

Shareholders can vote on the merger in person, at Sun's Web site, or through a proxy card received by mail. Assuming approval, it expects the merger to be completed over the summer.

The company has sent a proxy statement dated June 8 with full disclosure to all shareholders. Besides providing details on the vote and stockholder meeting, the statement reveals other interesting tidbits.

Severance pay
No details have been revealed about what will become of Sun management, though the proxy statement does discuss potential severance packages for Chairman Scott McNealy, President and CEO Jonathan Schwartz, and other high-ranking execs. If termination were to occur in August, McNealy would receive $9.5 million in total compensation, including severance, health benefits, and equity, while Schwartz would walk away with $12 million.

The courtship of Sun
The proxy statement also reveals blow-by-blow details of the battle to buy Sun, with other suitors besides Oracle in the mix. IBM had been widely rumored as a likely buyer of Sun, but the proxy material doesn't mention any suitors by name.

On November 6, 2008, the CEO of a Sun competitor, known in the statement as "Party A," approached Schwartz about a possible business combination. After initial discussions with Party A, Sun started shopping for other potential buyers, including "Party B." Sun continued its discussion with Party A, entering into a confidentiality agreement and permitting Party A to investigate Sun's finances.

By late December, Sun was serious enough about a potential merger to hire Credit Suisse as its financial adviser to help it consider different offers. On January 28, Party A proposed acquiring Sun for $8.40 to $8.70 a share. In early February, Sun discussed the proposal with its legal and financial advisers.

But by February 12, 2009, Party B was back in the picture as Sun resumed discussions with its other suitor, signing a confidentiality agreement and permitting due diligence for Party B to check into Sun's finances. On February 20, Party A boosted its offer for Sun to $10 a share, predicated on exclusive negotiations between the two companies.

By February 23, Oracle had entered the picture. McNealy spoke with Oracle CEO Larry Ellison about a possible transaction. Between February 22 and 26, Sun's board was busy setting up special meetings to discuss the proposal from Party A and the interest from Party B and from Oracle. Further conversations were held between McNealy and Ellison. But by February 26, Sun had decided to enter into an exclusive agreement with Party A and end discussions with all other companies.

Over the next month, Sun held lengthy meetings with Party A. But negotiations dragged on, and there was talk of ending the exclusivity agreement with Party A and resuming conversations with Party B and with Oracle. On March 12, Oracle sent Sun's board a letter expressing an interest in a limited takeover of certain Sun assets. However, Sun management opted to continue its agreement with Party A.

On March 29, Party A reduced its bid to $9.40 a share. After review, Sun management was worried about Party A's offer for various reasons, especially antitrust issues. Concerned about the price and terms of the agreement, Sun decided on April 4 to reject the offer from Party A.

By April 6, the board was back discussing potential deals with Party B and with Oracle. But on April 8, Party A jumped back into the ring, still interested in Sun. Now the board was at work again to discuss offers from all three companies.

By April 10, Sun and Oracle had entered into a confidentiality agreement, and the two met soon thereafter to hash out a possible transaction. On April 17, Party B opted out of the race. On the same day, Oracle sent Sun a draft merger proposal for $9.50 a share.

After the price per share became a sticking point between Sun and Party A, Sun's management finally approved a merger agreement with Oracle on April 19.

Now it's in the hands of the stockholders.

Author: Lance Whitney @ http://news.cnet.com

Read more ...