Should be fun for anyone about to under go an Oracle software audit, as anyone who's suffered one in the past will attest!
Software behemoth and systems player Oracle missed its projections for both hardware revenues and new software license sales in its second quarter of fiscal 2012. While Oracle was facing a very tough compare, the miss is something that will make Wall Street and the rest of the IT community jittery for a spell – at least until …
The real reason software is down is subsidizing hardware
Oracle sales teams are not allowed to discount the hardware. They have to take the 40-60% off the whole deal out of just the software. While a clever trick to prop up hardware revenue and profit margin it has the nasty affect of killing the sacred cow of software sales.
The meek Exa-crap sales cannot make up for the disaster of SPARC and now that they finally admitted that SPARC64 is dead only a daf customer would buy an M-class system which is end of life. (albit long before Itanium is end of life....but I believe Hurd when he says Itanium has a end of life contract...he should know)
Still curious what this 200+300+400 = 1,000 exa-crap systems means. Do they count every two socket intel box used in exalogic or the exadata storage node AND the exadata datbase node?
When you count that way they might have 150 customers. And why is Larry so coy about talking about Apple buying exadata for itunes? Is it because they use Power systems to run their business?
Interesting, it would not surprise me if that is the case. I have not heard of a single Exa-xxx deal that was not part of some larger software deal. Oracle just wraps them into the price of the larger software contract and basically tells the customer that their price is the same, with or without the Exalock-in.
And the way the price is broken out behind the scenes is 0% discount on hardware....that is how we prop up the hardware number at the expense of software. I am so sick of helping out the old STK reps who think they can sell a solution which is application focused. They don't have a clue.
Oracle Software Audit = Exa Customer
Yes, Oracle will haul out the auditors and lawyers. It will be the standard, "we think you owe us $2 million in licensing true-up. If you disagree, please feel free to bring a lawsuit... which will cost you $2 million in legal fees. Alternatively, you can buy an Exa-xxx and load it with EE software."
hm. seems like if you buy a company that excels at loosing market share (SUN). then hire a president to be in charge of that group that excels at cutting costs and r&d efforts to improve the margin if you sell any... and don't forget that the same president's secondary skill of losing market share..
Seems like the numbers are right on target. The question is can either fowler or hurd do anything different.
In the words of the farmers cat (watership down) " I think not"
Whilst I'm not worried for the software side of Oracle, if I was an ex-Sun customer buying Oracle hardware then the alarmbells would be ringing:
".....Hardware support revenues came to $625m, falling 2 per cent, but operating expenses for support fell by 27 per cent to $258m...."
So, less money being spent on hardware support, and less revenus coming in from hardware support, which - with the ongoing decline in Oracle hardware sales - means less money to plough back into hardware support and development. It's the Sun hardware deathspiral all over again.
sounds like the same argument to leave Itanium
Cheers and Merry Christmas
Agree, it seems that Oracle has slashed everything in the HW support model. Regardless of what you think of Sun servers, almost everyone agreed that support was good if not excellent at legacy Sun. Not any longer. Oracle has reduced the number of part depots around the US, and presumably the world, to consolidate them into regional distribution centers. It is great from a cost perspective, but if a Sun part breaks in your server and the tech doesn't have it on hand, they have to have it shipped in from who knows where. As Oracle has reduced the amount of inventory in the support system, who knows where may be 2-3 days away. They have simultaneously increased the cost of support and decreased the quality of support.
Re: sounds like the same argument to leave Itanium
RE: sounds like the same argument to leave Itanium
...or Pee-series, or IBM mainframe. But then of those at least mainframe and Itanium have good support revenue generation, which is the difference. And IBM can shaft their mainframe customers to prop up the Pee-series range, as they have been doing for years. Meanwhile, hp simply use the strategy of common components and chassis between Proliant and Integrity to reduce the costs of Integrity. Shall we compare? IBM price-gouge one set of customers to make a profit, whilst hp use cleverer design and x64 marketshare to reduce costs to their Integrity customers. I know which one sounds better to this customer.
RE: Re: Matt
".....almost everyone agreed that support was good if not excellent at legacy Sun...." Erm, NO! I can still remember back in 2001, at their supposed peak, having blazing rows with Sun as to why it took them three days to replace a failed disk in a mission critical SPARC cluster server, or why we had to sign an NDA before they'd replace all the faulty Broadcom NICs they'd supplied. And that's when they were telling us we were in their list of the ten most important customers in Europe! I could give other examples of fluffed support calls, mismanaged escalations and - frankly - idiotic hardware engineering work, but they'd be too specific to my company and would probably give the Sunshiners too much ammo to go cyberstalking with.
I kind off have some of the same experiences as Matt here, but again I have bad experiences with pretty much every vendor .)=
Some more than others. But I do remember the "Performance tuning gurus" from SUN, I once worked with together on a client, not really being that guru like.
Basically there were more interested in blaming the disk vendor (think it was EMC and it wasn't the DMX that was the problem), than fixing the problem.
RE: sounds like the same argument to leave Itanium
Yes, very similar in the sense that they are completely opposite situations. Power is up 27% at the end of a chip cycle (no refresh revenue). Itanium (aka HP) is down 23% the last two quarters and will continue to be down by a similar amount for quarters to come without Oracle. HP may be able to leverage their large x86 services group to soften the impact on hardware break/fix, but who is going to pay for HP-UX, OVMS, NonStop and all of the related utility software maintenance? As there is a smaller and smaller install base funding upgrades, HP will either have to cut back or lose money. I think they will choose to cut development and support resources. Similar situation to Sun only that Oracle is a hugely cash rich company and Larry can decide to throw money from his extremely profitable software businesses at Solaris-Sparc if he feels like it. HP is $24 billion in long term debt and doesn't have Oracle money to throw around.
Oracle != RedHat
Exalogic != IBM Watson
And, your point being?
Oracle número uno for IT security headache
Poor IT, next to Adobe and it's products Oracle is a huge security nightmare. Multiple database and java security issues never patched for multiple years on end. They think it's Android or Google that is the reason for their woes when it's their customers losing their appetite for wearing huge security risks from an uncaring commercial organisation with regards to its products.
Ok, this post is immature but....
...Oracle in trouble?
Karma is a bitch isn't it.
Oracle is in decline in the SME arena and they are doing nothing about it.
In the past, Oracle was the latest greatest. To some extent, that is still true and their capitalization on hardware and its own flavour of Linux is an excellent strategy.
The problem they have is that for an SME that just uses Oracle as 'mainly a standard database' and doesn't use a great deal of the fancy higher end features, everything is moving more in the Microsoft SQL Server direction. In the past, councils etc would have site licences for Oracle - they now have site licences for Microsoft technology. In univesities, they teach Microsoft or OSS. In existing business deployments, SMEs can't extend into hosted services because Oracle's policy of not allowing Oracle applications to sit on VMWare without licensing all the CPUs in the physical box rather than just the CPUs used in the VMWare sectioned off for the application. As trading conditions become tough, SMEs want to extend into providing the entire hosted solution service, and with Oracle, this becomes problematic.
So overall, I would say that the above all contribute towards Oracle's failed bottom line and that trend will continue.
I agree that Oracle has lost their "cutting edge" luster. It is largely the database and a collection of acquired odds and ends. Nothing they have acquired or built has been up to the standard of the DB and the RDBMS market is becoming pretty commoditized outside of high-end.
I think the hardware and OEL/OVM may have worked, but now Oracle is being so heavy handed about it that they are starting to backfire. If OEL/OVM was one supported option, maybe with some enhanced features for their DB, but VMware, Red Hat, SuSE, etc were equally supported, it would have been fine. Likewise, if Oracle offered Exa-xxx as one option, but all other options were equally supported, no problem. Oracle has chosen to basically ram OEL/OVM down peoples' throats, which is troublesome because they probably use VMware for everything else. Likewise, they are getting pretty aggressive on the hardware front to try to scare everyone away from using anything but Oracle. Of all the vendors in the world, Oracle is probably the least trusted to keep support costs consistent in a lock-in situation, which is what they are after.
Having declared war on their customers
just what the hell did they expect!
Their decision to stop supporting one of their major sources of income has made a lot of significant customers very wary.
About those Fusion thingies...
Anybody take the new Larry Fusion ERP apps out for a spin? For real-world use, not eval.
Paris, because even she can develop standards-based applications, without those nasty proprietary languages like SAP, PeopleSoft, Salesforce.
Peoplesoft is a Language ?
All you listed appear to be vendors, some of which have proprietary languages such as ABAP, in addition to more common languages such as Java.
re. Peoplesoft is a Language ?
Aren't you being a tad pedantic?
Of course PeopleSoft isn't a language, it's both the vendor and its application framework. There is one programming language, PeopleCode. And a menagerie of about half a dozen programming frameworks going by different names. PeopleCode isn't even necessarily where a PS coder like myself spends most of his time when coding - most of my time is in SQL and Application Engine, followed by Application Designer Pages, PeopleCode is a distant 4th. You are, of course, familiar with all of these, aintcha?
Salesforce is Apex, IIRC. And, along with SAP, I expect lots of dev time is spent in declaring object definitions in metadata.
To put it differently, would I have more clear by saying "nasty proprietary languages like ABAP, PeopleCode and APEX"? Perhaps to some, but how many people know mainly the application vendor name, which I used on purpose, rather than the dev language?
As far as standards based development goes, as a vendor you can go a long long way in marketing without making the lock-in any less. Take for example Oracle's Java-based stored procedures. Std-based, right? OK, now try porting your Java-based procs to another database vendor... You might succeed with Postgres's Oracle compatibility version, but that's about it. What's the gain then?
About those Fusion thingies...
I have seen Fusion HR in action at a beta user site. Meh, was the reaction. It probably would have been impressive five years ago, when they were originally slated, but at this point they look like Workday. Besides, it is HR, how much new functionality do companies really need in HR, financials, etc? I think Oracle is going to have a difficult time convincing users that there is enough in Fusion to justify the huge migration project from EBS, PeopleSoft, JDE.
Where is Gartner and IDC
Oracle co-founder and CEO, Larry Ellison, said that the company sold over 200 Exadata and Exalogic systems in the second fiscal quarter – by systems, Oracle appears to mean "racks" – and added that the company will do 300 machines in Q3 and 400 machines in Q4
"appears to be systems" what does that mean? Full racks? Quarter Racks? or are they counting every compute node and storage node as two?
Now is the time for real numbers and the truth to be told. Larry didn't seem to know what to say when asked what happened to the 3,000 number you guys said before.
Watch that analyst not be invited to the next earnings call.
Re: Where is Gartner and IDC → #
Yes, in addition to that comment. Oracle is very careful not to say they "sold" x number of Exadata/logic. It is always we "shipped" x number of Exadata/logic. That is because they are including demo gear (i.e. here large bank, try this in your dev environment) and PoCs. Also, they are wrapping these boxes into licensing true-ups and renewals, so it isn't so much that they sold them as they gave them away with the price of the software.
Legacy Sun Collapse
Oracle is expecting Exadata/logic to be above $1 billion on an annualized basis by Q4. Lets assume then, conservatively, that the Exa business is running at about $200 million per quarter in sales. Now if you go back before the Oracle acquisition, two years ago to 2009, Sun's systems sales were running at over $2 billion per quarter, obviously without Exa. The server sales were $1.6 of that $2 billion. This was 90% plus Sparc servers with a few x86 servers mixed in. If we assume Oracle sold $0 in storage/switches/accessories, obviously not the case but lets assume, that means that there Sparc server business has dropped in half in two years. $1.6/2 = $800. Oracle has $950 million in HW, more or less, today, minus $200 for Exa = $750 million in legacy Sun. As a significant amount of that $750 in legacy Sun is storage, it is probably closer to $550 (assuming storage/Pillar and other misc is $200 million) or a 2/3s drop off in servers in a little over two years. That is pretty astonishing. It is almost hard to lose that many Unix installs, given how embedded the OS is, in 2 years.
If you follow the financial decisions of the State of California, it is no surprise they are buying giant Sparc boxes.
The legal department is going to be more and more profitable going forward.
Squeezing the customer...
Having worked for a very large Oracle customer, I think some of the moves that Oracle are taking are looked on with a lot of suspicion. Declaring something close to war on HP is going to cause massive disruption to many customers as migrating massive enterprise apps and, especially databases, between hardware platforms is a massively expensive and disruptive. Whilst Oracle are continuing to support x64 and Linux, it's notable that they are explicitly not releasing some of the software technology used in the Exadata OEL cluster into their general releases. I was also in receipt of all sorts of FUD from Oracle sales staff over the support for Linux on x64 vs Oracle on SPARC. The reasons are clear - just compare the price of virtually any standard component on a SPARC server versus an x64 one (memory is a good place to start).
That leaves customers with the distinct (and not unreasonable) impression that Oracle are hell-bent on locking in customers for the entire hardware and software stack. Once a customer finds themselves in this position, costs start ratcheting up and the price of extricating yourself is huge. The industry has seen this before, and new projects will be put onto more cost-effective platforms. That's what killed DEC when they over-priced VAX and what drove almost all new applications off of IBM mainframes.
Also, I find El Register's lionising of the T4. Unfortunately Oracle have declined to publish the sort of low level benchmarks that allow customer's to work out if these are practical alternatives to M series machines. There are a bunch of carefully selected application benchmarks which tell you very little save a very strong suspicion that they've been chosen because they fit the heavily threaded multi-threaded nature of the T4. However, many large corporations will have had some apps which perform disastrously on T series due to the very slow single thread performance.
The advice for anybody looking at large scale future projects is to be very wary about lock-ins to proprietary architectures. Given that, I expect that Oracle will continue to lose ground.
I started reading your comment and the first company that popped into my mind was - as you point out - the venerable Digital Equipment Corporation ... but that disaster was probably long enough ago that everybody at Oracle has forgotten the lesson.
The Millstone Business Unit
It appears Mr Ellison bought one company too many this time. He either has to cut them down to virtually zero or see the ex-SUN (now "blackhole") business drag them under.
One assumes Mr Ellison knew about the relative weakness of SUN hw vs Linux hw, but it seems he is either on an ego trip or on a sentimental trip. Both bad for business...
RE: The Millstone Business Unit
"It appears Mr Ellison bought one company too many this time....." Larry's problems seem to stem from his decision to buy all of Sun when he originally only wanted the software toys, Java, MySQL and Slowaris, probably in that order. This also appears to be the origin of the schism in the relationship between hp and Oracle, which up till then had been cosy and warm. When hp declined to partner up with Oracle and take the hardware bits of Sun, Larry was left with the unwanted bits as well as the software. The smart decision would have been to dispose of the hardware bizz for whatever he could get, keep any hardware patents, and just keep on partnering with as many hardware vendors as possible. Instead, I suspect that Larry let John "Foul-up" Fowler talk him into the fantasy of Sun hardware having a future.
The good news for Snoreacle shareholders is Larry likes profits, and he's proven pretty ruthless with underperfroming Oracle products in the past. As long as Larry gets to the right conclusion before he retires and hands over the reigns to Mark Hurd, Oracle should go back to being a software powerhouse rather than a software powerhouse with a hardware millstone. If Hurd gets control before then I'd say the millstone's drag will only increase.
Amazingly, I agree with you. Oracle should have sold off the legacy Sun business for whatever they could get for it. HP, in retrospect, probably wishes they would have just bought the legacy gear to keep Oracle from going thermonuclear on them. As Oracle bought all of Sun for $5.5 billion net of cash, they probably would have been willing to part with the HW for $1-2 billion. IBM would have probably picked it up if the price was right and just added Solaris to Power. The issue was probably that Oracle wanted to keep Solaris, ZFS and the rest of the OS software, which would make the servers pretty worthless.
I do think it does not just hurt HP, it also hurts Oracle that they artificially limit the sale of their database server. HP does have a powerful sales organization, who loves to sell Oracle+HP9000 packages.
Also, if HP takes it personally, they could aggressively push alternatives - from Sybase to an "Allbase 2012", if they so desire. They certainly have all the financial resources they need to do that.
I think this is more the case of an old man becoming increasingly stupid.
9000? HP killed 9000 four years ago.
HP should be pushing, and should have been pushing before the Oracle situation, IBM DB2 on Itanium. IBM took the high road and did not discontinue DB2 when Oracle, MS, RH announced EOL on Itanium. Sybase is still working on a port to Itanium. I do not believe it is there yet. Regardless, Sybase has about 1% of the DB market. There are no skills to administer it and it is expensive. SAP may increase the interest in Sybase, but I think they are looking past Sybase to HANA. SAP would have a hard time selling Sybase, as they refused to certify it for SAP for the past 15 years.
"rising on optimism about the European debt crisis being resolved and housing starts in the US"
Who comes up with this kinda sh*t, apart from people sniffing cocaine from rolls of penny stocks?
Our optimism or pessimism about the condition of the global economy varies from day to day.
But today's big players are making money betting on the volatility of the markets, not on future growth of the global economy or the absence thereof.
Am I missing something here?
"In the quarter ended November 30, Oracle's overall sales were up only 2 per cent to $8.79bn,"
There's a world recession on yet its sales are still UP. Wtf is the problem?? How is this being "hammered"??
When the hell are these financial types going to come down out of their ivory towers and back into the real world where hopefully they might finally twig the fact that neverending growth in sales or overall output is an impossibilty anyway for a company or a country since there isn't an infinite number of people out there to buy shit. The best that can be hoped for one day is a steady state where you seell replacements for older kit.
I agree with you - they are being "reported" as terrible results by many, and while they did miss the projected growth targets, they are still firmly in positive growth.
The reason the world and his dog are shrieking, I think, is because Oracle has always been seen as a bellwether (as the story suggests) for the market, and the wider economy to a degree, so if Oracle are starting to see slippage, then all is is not rosy with the economy.
RE: Am I missing something here?
To put it simply, yes! Investors look at the performance before the Sun acquisition, when Oracle was just about pure software, and then compare the dividends to what they get now with the Sun hardware millstone dragging on the rest of Snoreacle. To them, it looks like the business would have been better off not having the hardware millstone so they look at other companies to see if their stocks are performing better. Remember, Larry was gushing on about how he planned to make $2bn out of the Sun hardware bizz in a year and failed, so they will look at his other projections with scepticism.
I agree, this is not as bad as it has been reported. Sales were basically flat and profits increased by 12%. Oracle missed their targets, but it is hardly a disaster.
Drop in hardware sales.
So, Oracle tear up the traditional support options and only offer premium support with a platinum support price tag. But that means all dev/uat boxes now have have the support cost of a Plat prod box??
Then the premium SLA's are not as transparent as they were with Sun (a 2 hour engineer to site from the moment Sun picked up the phone and answered is a distant dream) and the chances of you having an onsite Engineer dimished to another pipe dream unless your into coughing seriously high cash for that pleasure. And allowing any other engineer to work on that kit if you centralised your support?
The responses to repeatedly failing systems (which happens to all vendors equipment) is now met with repeat "certification" that a box is clean, to be followed by another failure. Sun would take it offsite while loaning a replacement so the original was diagnosed in a Sun lab, not in the customers server room where it had a function.
And come to the actual support, you could pick up the phone and speak to someone, now you wait for a callback or web response which may come from a suitably knowledgeable engineer or may come from someone who can't comprehend the actual problem & require many levels of frustration while they realise it needs to be escalated.
The original support folks are still there, in a backline function far removed from you unless escalated fairly sharply through account managers who have to jump through flaming hoops to find those few valuable nuggets of knowledge still inside the mothership.
I can ignore hardware costs/features totally. Why would you purchase a Sparc machine unless for M-series high-end /legacy apps (or an Itanium box from HP for that matter) to get such diabolical treatment. Solaris is great & kicks linux but thats only one part.
Comparing the same cost spent buying 2 or 3 x86 machines and vmware'ing/clustering/DR'ing them so you can cope with the poor x86 diagnosability but still achieve the same overall service availability on RHEL/SUSE/x86. Or spend your cash on intelligent storage offerings instead that genuinley assist with DR.
Sun sold slow but reliable kit with good tiered support that justified the cost. Oracle suck out your cash with promise of a feather bed while you actually lay in a bed of thorns.
Just need x86, Linux & dedicated support contracts with each respective vendor (not one combined 'cheap' support offering from an x86 vendor who promises but also can't deliver, ie: HP/IBM)
Fingers crossed for Sybase/SAP to take out some of the monopoly. Maybe they can buy SUSE at some point and complete the software offerings.
We bypassed all that garbage and moved to IBM. Now we play Oracle and IBM off each other to keep them in check. It's the old Amdahl dual vendor strategy play
The problem was ORCL's predictions...
The stock market rides largely on predictions. Oracle had guided the stock market to larger numbers and then missed. That will ALWAYS cause the stock to drop. It doesn't mean that Oracle will be going out of business, just that they don't know how to predict where they are going.
When Oracle put T4 out there and then couldn't deliver it anytime soon, they 'froze' their market. People were incentivized to defer purchase until T4 came out. Many ridiculed IBM because they 'missed' their Power 7+ window (in Aug/Sep), but everyone knew that IBM then-wouldn't rush out that notification in Oct/Nov/Dec. It is bad business to cause customers to defer purchases to 2012, when you can get them in 2011.
That being said, it was quite aggravating for IBM to 'miss' on Power 7+, they did get the stock-hammer affect, too.
I don't think they missed on Power7+
They delivered the Power7` (power7 prime) in October and will deliver power7+ next year. The +'s come out depending on when the fab is ready so anywhere in the 18-24 month timeframe.
The problem with Oracle hardware is IT has more discretion in buying hardware. Business units want the software and applications and the CIO's don't want to be held any more hostage by larry
T4 - Not a factor
The T4 announcement was Oracle's excuse this quarter, replacing x86 losses the past few quarters, as the reason HW fell by double digits again. Very few customers are biting their nails waiting for the latest Sparc chip to hit the market so they can buy it the day it is available. Most Sun installs are legacy installs that people are working on getting rid of, not worrying about upgrading a month after the new chip hits the market. Sparc is plummeting. If Oracle would just say that they have this legacy HW (Sparc) that people are dropping because it is not competitive, but don't worry about it, Wall Street, because we are selling Exa-xxx and we purchased Sun dirt cheap because we knew this would happen, they would be better off.
Agree, IBM hasn't missed anything with Power. We cover this in another forum, but Power 4 - 2001, Power 5 - 2004, Power 6 - 2007, Power 7 - 2010. IBM releases a clock speed kicker 24 months into the cycle. Compare that to Sparc or Itanium.
You can argue about Power7+...
But the IBM stock took a beating in September when there was no significant advance announced. Don't be anonymous if you want to cite their timelines. The Reg was surprisingly informed on IBM's product cycles, over the summer.
I don't think the financial analysts covering IBM are too concerned about Power 7+ (I doubt any of them can even tell you what it is). Power's sales have been up 27% in the most recent quarter (Q3) while Power competitors (Sparc and Itanium) were both down 20%. Also, Power is one part of one division in IBM. Not even going to register with the financial analysts, especially if sales are great.