Oracle profits boom as Sun shines

Oracle has reported fourth-quarter revenue– the first complete quarter to include Sun - up 39 percent to $9.5 billion (£6.4 billion).

Share

Oracle has reported fourth-quarter revenue– the first complete quarter to include Sun - up 39 percent to $9.5 billion (£6.4 billion).

For the year, Oracle had earnings of $1.21 per share, a jump of 11 percent. Revenue rose 15 percent to $26.8 billion.

New software license revenues, which are considered a prime indicator of growth, rose 14 percent to $3.1 billion in the quarter.

Oracle also sold $1.2 billion in Sun hardware during the period. Excluding special charges, Sun contributed more than $400 million in operating income during the quarter, Oracle President Safra Catz said in a statement. Sun had lost money in the same period last year when it was still independent from Oracle, she added.

Armed with Sun's hardware, Oracle has embarked on a strategy that involves selling integrated systems that span hardware, storage, middleware and business applications.

Commenting on the results, TechMarketView analyst Philip Carnelley said, "Speculation that Oracle would soon hive off the hardware business because it only wanted Sun for its Java software was clearly way off the beam."


Cost cutting and workforce reductions have helped Oracle make Sun turn a profit. In a regulatory filing this month, Oracle indicated it would be making significantly more Sun-related job cuts than originally announced. HOwever, commenting on the results, Larry Ellison also said that he planned to more than double the Sun sales force.

Oracle now has "increased confidence" that Sun will contribute $1.5 billion or more in operating income, excluding special charges, in Oracle's fiscal 2011, according to Catz.

A number of factors are helping the Sun business, Catz said during a conference call Thursday.

Users have also been reassured by Oracle's ownership of the company, she said.

"Customers are buying a lot of hardware now. They are very, very loyal to technology they love," she said. "Now that they know it has a future ... they are much more comfortable making those investments again."

Also, a new support policy for Sun products, which includes attractive pricing models, has been "very well-received" by customers, Catz said. "A lot of customers that had not been on support have come back to Sun," she said.

However, Oracle also requires that when customers purchase hardware support, they must do so for all systems. Observers have viewed the move as an attempt by Oracle to stop Sun customers from using patches from supported machines on unsupported ones.

Oracle is planning to double the size of Sun's sales force, said CEO Larry Ellison. Oracle has been snaring salespeople from competing companies and is impressed by the quality of those candidates, said co-President Charles Phillips.

Meanwhile, Oracle also has high hopes for its Exadata line of transaction-processing and data-warehousing machines. Some of IBM's largest customers began purchasing Exadata machines during the quarter instead of large IBM servers, according to Ellison. The Exadata sales pipeline for fiscal 2011 is approaching $1 billion, he said.

That success will grow "as long as we can demonstrate and benchmark we are a lot faster than IBM," Ellison said. "People are sceptical about any new product," he added. "They buy a couple of new machines and test them, and if they're successful, they make standardisation decisions."

"Recommended For You"

Oracle rings up the profits Oracle Q4 profits up 10 percent, but revenue flat