Ellison on Oracle's Future

Near the close of his keynote speech at Oracle's biggest conference of the year, the ever-colorful CEO Larry Ellison reminisced about the software company's "stressful" early days. Ellison said he'd work until 1 a.m., "come home, open up a can of pea soup, turn on CNN Headline News to see what was going on in the world, have my soup, and go to bed."

About a quarter-century later, Ellison is worth $21.5 billion, and Oracle (ORCL) is one of the world's largest technology companies. And while his diet has no doubt improved, the company still faces pressures any CEO would find stressful. In particular, customers and investors showed up at Oracle's annual OpenWorld conference in San Francisco with questions about a critical product launch due next year and the threat of a deepening slump in corporate tech spending.
Aiming at VMware

During the Nov. 14 speech, Ellison tried to put those anxieties to rest, pledging to deliver a key piece of the ambitious new product a half-year early—in the first part of 2008. He also took one of his trademark shots at an emerging rival. Oracle is nearing the home stretch of a period when, according to analysts, the company shrugged off an economic malaise that's causing customers to curtail IT purchases and prompting investors to unload tech stocks.

The accelerated product timetable is for Fusion, a project that aims to knit together the best parts of Oracle's homegrown software and the array of products amassed through its acquisitions of PeopleSoft, Siebel Systems, and dozens of other companies. Until now, Oracle had maintained the suite would arrive by late 2008 despite market speculation the complex launch might slip into 2009. But on Nov. 14, Ellison said a key element will arrive during the first half of 2008, though he conceded that customers will move to Fusion products over a "long transition period." With Fusion, Oracle is trying to close ground on archrival SAP (SAP) in the market for the software companies use to plan budgets, manage payrolls, and track customers.

Ellison is stalking new quarry as well. On Nov. 12, Oracle introduced a virtualization software product, dubbed Oracle VM. The new software will help companies make more efficient use of their servers—much like the software from industry highflier VMware (VMW). "It's a direct assault on VMware," says Brian Stevens, vice-president of engineering at Linux vendor Red Hat (RHT). Said Ellison: "Some companies say, 'We're the only ones that can do that.' …Not any more." VMware shares declined in the wake of Oracle's announcement.

A buy?

After giving his sales spiel at the convention hall, Ellison headed a few blocks uptown to address analysts at a swank hotel. Wall Street is on the lookout for any indication that a pullback in U.S. companies' technology spending (BusinessWeek.com, 10/15/07) will effect Oracle's fiscal second quarter, which ends Nov. 30. So far, that appears unlikely. Oracle's tight rein on expenses and strength in the flush energy sector could immunize it from the ills that have afflicted companies more closely tied to the beleaguered financial and automotive industries. Oracle also benefits from the quarterly maintenance fees customers pay to keep their software up to snuff. During the meeting, Chief Financial Officer Safra Catz said Oracle is poised to increase revenues faster than the 20% a year Ellison promised investors three years ago. Contract sizes are also getting larger, she said.

Some tech titans aren't faring as well. Tech stocks took a dive after Cisco Systems (CSCO) CEO John Chambers said Nov. 7 that soft IT spending—particularly in banking—would likely slow the company's growth (BusinessWeek.com, 11/8/07). Made during a conference call with investors after Cisco's fiscal first-quarter earnings announcement, Chambers' comments triggered a sell-off in shares of tech companies, including Oracle, Apple (AAPL), IBM (IBM), Intel (INTC), and Dell (DELL).

But analysts expect Oracle to meet its second-quarter targets, and some are telling clients to buy the stock. Peter Kuper, a vice-president and research analyst at Morgan Stanley (MS), expects Oracle to meet, though not exceed, its forecast that new software license bookings will grow by 15% to 25% during the second quarter, and that earnings per share will come in at 20¢ or 21¢, up from 18¢ a year ago. That could be good enough for investors who have already built the risk of lower-than-expected earnings into Oracle's stock price.
Keeping it together

"If they put up a decent quarter, the stock's going to snap back very nicely," says Kuper. "As an investor, your downside is very low." Oracle shares tumbled about 15% in the days following Chambers' comments; the shares hadn't lost more than 13% during a two-month period during the past five years, according to Kuper's analysis. Shares of Oracle closed Nov. 14 down 34¢, or 1.7%, at $20.18. The shares pulled back 20% compared with their 52-week high of $23 on Oct. 11. Oracle's stock could recover, to $24, if the company meets second-quarter expectations, Kuper says. "If you bought at $19, you've just made yourself a very nice 25% return" if the stock returns to its levels before the November tech sell-off.

Other analysts moved Nov. 14 to upgrade Oracle's stock. Analysts at CIBC World Markets and Broadpoint Capital (BPSG) said the company is equipped to ride out a possible downturn in technology spending due to its recurring revenue streams from software maintenance. They cited lower stock prices as a potential benefit for Oracle, since cheaper shares could mean cheaper acquisition targets for the software giant. Oracle has acquired 41 companies, for more than $24 billion, since the beginning of 2005.

Oracle's prospects for future growth may hinge on whether it can keep its largest customers in the fold as it launches the Fusion project. Analysts and customers have questioned how robust the first version of Fusion software will be (BusinessWeek.com, 11/5/07) and whether compelling Fusion products will be delivered on time.

Ellison's remarks on Nov. 14 may quell those concerns, making life for Oracle investors a lot less stressful, at least for now.

Author: Aaron Ricadela @ businessweek.com

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Sun to herald virtualization plan at Oracle show

The strategy to be described at the OpenWorld conference enables multiple OSes and apps to run on same computer. Sun President/CEO Jonathan Schwartz will focus on Sun's virtualization strategy during a keynote presentation at the Oracle OpenWorld conference in San Francisco on Wednesday.

Schwartz will emphasize software to run multiple operating systems on the same computer and increase the percentage of compute cycles in use. Specifically, details will be shared on products in Sun's xVM (x Virtual Machine) line, including the xVM Server hypervisor and xVM Ops Center, providing management software, Steve Wilson, vice president of xVM at Sun, said. A hypervisor provides a virtualization layer for running more than one operating system and applications simultaneously, Wilson said.

With its hypervisor, Sun looks to aid users who might have a datacenter full of small servers, each running a separate application and perhaps in use only at a certain time of the day or month, said Wilson. The average utilization of these machines is very low with customers only using 10 percent of available compute cycles.

"The idea is that the xVM Server software, which is the hypervisor software, will allow customers to take various workloads, including applications written to Solaris and Linux and Windows, and run them simultaneously on the same hardware," Wilson said.

Featured in xVM Server is work from the Xen open-source community. Through xVM Server, Sun will extend Solaris technologies, such as Predictive Self-Healing and ZFS (Zettabyte File Server) to Windows and Linux.

Sun previously has offered its Logical Domains (LDOMs) hypervisor, but it only supported SPARC CPUs. The new hypervisor extends to x86/64 systems.

Ops Center enables management of multiple operating systems and the attendant hardware, including systems from Sun, IBM, HP, and Dell.

Sun also plans to announce support of its strategy by vendors, such as Microsoft, MySQL, AMD, and Quest Software. "We have an agreement with Microsoft where they are going to be supporting Windows running inside our hypervisor," Wilson said.

A preview version of xVM Server will be available from the new OpenxVM.org community this week; general release is planned for next spring. The Ops Center product is due for a general release in December.

Also, Schwartz plans to tout the company's efforts in "eco-computing," involving microprocessors, servers, and storage, during his keynote.

Author: Paul Krill @ InfoWorld

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Cisco protocol to boost Oracle

Cisco has launched a protocol it has jointly developed with Oracle that it claimed would help users running databases over larger server clusters.

The two vendors developed the RDS (Reliable Datagram Sockets) protocol and will make it part of an industry-developed open-source software distribution called Open Fabrics Enterprise Distribution, said Pramod Srivatsa, a product line manager for Cisco server fabric switches. It is intended for Cisco switches using Infiniband high-speed data-centre technology.

Growing data centres and demands for processing have driven the development of new forms of connectivity, such as Infiniband and 10-Gigabit Ethernet, between servers in data centres. But pure networking speed - up to 20Gbit/s in the case of Infiniband - isn't all that's needed to make data centres run faster.

Enterprises that want to set up a very large deployment of the Oracle 11g database software once had to do it on a single large server, Srivatsa said. Oracle already offers RAC (Real Application Clusters) 11g software for distributing that deployment over multiple, smaller Intel-based servers running Linux. But that only works up to a cluster of about four servers, and RDS makes it more scalable, he said. RDS has been tested successfully with as many as 16 servers and is designed to work for clusters of as many as 64 using Infiniband, according to Srivatsa.

Infiniband is well-suited to Oracle database software because it has to quickly exchange many messages of varying sizes, Srivatsa said. Mellanox, which supplies some of Cisco's chips for Infiniband switches, helped develop RDS. In the future, customers will probably be able to use RDS with 10-Gigabit Ethernet too, Srivatsa said.

RDS was designed for clusters of servers in one data centre, which could include blade as well as rack servers, he said. Customers of both Oracle and Cisco can request the software from the companies now and start testing it. Cisco will start providing RDS for commercial use in its Infiniband servers after it is certified by Oracle, probably next month, Srivatsa said.

Author: Stephen Lawson @ Techworld.com

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