Oracle's Q2 profits down 1 percent, revenue up 2 percent to $9.3 billion

Annual maintenance revenue rises 6 percent to $4.5 billion

By Chris Kanaracus
Wed, December 18, 2013

IDG News Service (Boston Bureau) — Oracle's second-quarter revenue rose 2 percent to US$9.3 billion while net income dropped 1 percent to $2.6 billion, with new software license and cloud subscription revenue flat and hardware product revenue continuing a long slide.

New software license and cloud subscription revenue remained at $2.4 billion for the quarter ended Nov. 30, Oracle said in its announcement Wednesday. But revenue from the annual maintenance payments its on-premises software customers make to Oracle grew 6 percent to $4.5 billion.

Hardware product revenue fell 3 percent to $714 million, with total hardware systems revenue flat at $1.3 billion.

Since getting into the hardware business with the purchase of Sun Microsystems, Oracle has maintained it has no interest in selling commodity servers against the likes of Dell and Hewlett-Packard. Instead, it is focused on selling specialized "engineered systems" such as Exadata, which also hold plenty of lucrative software licenses. That said, earlier this year CEO Larry Ellison said Oracle expected its hardware business to start growing this fiscal year.

In fact, hardware growth will occur in the next quarter, Oracle co-president Mark Hurd said in a statement. Oracle's Exadata, Exalogic and Exalytics systems experienced "double-digit" revenue growth, while the SPARC SuperCluster and Big Data Appliance product saw revenue grow a triple-digit rate, Hurd said.

Oracle's "billion dollar" SaaS (software as a service) business saw bookings grow 35 percent in the quarter, with the strongest sellers being Fusion HCM (human capital management) and Fusion Salesforce Automation, Ellison said in a statement.

In the quarter, database sales were strong thanks to Exadata and optional modules, Hurd said during a conference call Wednesday.

Version 12c of Oracle's database is generating more interest among customers than "any database version in recent memory," Ellison said on the call. The multitenancy and in-memory options for 12c will spark "very rapid uptake in 2014 and 2015," he said.

With 12c and engineered systems, Oracle is presenting a couple of positive scenarios to customers, Ellison said. "It's not just a matter of one Exadata machine providing extreme performance to one application," he said. Customers can also use that power to consolidate large numbers of database applications to a single machine, lowering their costs, he said.

"Our customers spend a fortune" managing many smaller Oracle installations, he said. The multitenancy option in 12c can make this job simpler and more reliable, according to Ellison.

Meanwhile, not every engineered system Oracle will sell is aimed at extreme high performance, Ellison said. He pointed to the recently released Virtual Compute Appliance, which links commodity servers using InfiniBand and runs Linux and virtualization software.

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