Oracle Q3 net income rises 78 per cent

New software license sales and a more profitable hardware business help Oracle post strong numbers

Oracle's net income for the third quarter ended Feb. 28 rose 78 per cent to $US2.1 billion over the same period last year, helped by strong software sales and an improving hardware business, the company said Thursday. Revenue for the quarter jumped 37 per cent to $8.8 billion.

Revenue from new software license sales, which provide a key insight into a vendor's growth and how customers are feeling about IT spending, rose 29 per cent to $2.2 billion year-over-year.

Hardware systems sales were $1 billion, down slightly from the second quarter's total of $1.1 billion. No comparison to the same quarter last year could be made, as Oracle only completed its purchase of Sun Microsystems on Jan. 27, 2010.

However, Oracle's "hardware product gross margins increased to 55 per cent in the quarter so we are now completely confident that we will exceed the $1.5 billion profit goal we set for the overall Sun business for the current fiscal year," co-president Safra Catz said in a statement.

All geographic regions had revenue growth of 30 per cent or more, with strong sales for the Exadata and Exalogic appliances, co-president Mark Hurd said in a statement.

Oracle also signed a number of large deals "with some of the biggest names in cloud computing," including, CEO Larry Ellison said in a statement.

With the purchase of Sun Microsystems, Oracle has embarked on a strategy to sell customers on integrated systems spanning hardware and software, a la the IBM of old.

Oracle has been aggressively going after IBM as well as Hewlett-Packard, with the latest salvo being its decision, announced this week, to stop developing software for Intel's Itanium chips. HP's Integrity servers are based on Itanium processors.

The company of late is feeling its oats down to the salesperson level, one expert said in an interview Thursday, prior to the results' release.

Oracle has been "reacting in a lot more confident way when it comes to pricing and proposals to clients," said Eliot Arlo Colon, president of Miro Consulting, a Woodbridge, New Jersey, firm that helps companies negotiate licensing agreements with the vendor. "Clients who are waiting and holding out for a better deal are finding that next offer is no better, or a little worse."

Miro customers are buying hardware from Oracle, too. "Every client as part of the negotiation wants to have a hardware discussion," Colon said.

The company is seeing deals for Oracle's Exadata database machine "jump substantially," he added. "I don't know if anyone would have predicted it would take hold as quickly as it has," Colon added.

Miro knows of roughly 20 multimillion dollar Exadata deals that have closed in the past 10 to 12 weeks, both for its own clients and others, Colon said. The firm has even added specialized staff to deal with Exadata-related sales.

Oracle is known for giving significant discounts on software licenses' list price. However, "they're a lot tighter on Exadata than on their other products," Colon said.

But Miro is not hearing a buzz about Oracle's second integrated system, the application server Exalogic, apart from the company's own marketing presentations, he added.

Oracle executives are expected to discuss the results further during a conference call later Thursday.

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Chris Kanaracus

IDG News Service
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