Oracle Q2 net income rises 28 per cent

Oracle said its Exadata sales leads have grown to almost $2 billion

Oracle's net income for the quarter ended Nov. 30 rose 28 per cent from a year earlier to $US1.9 billion, buoyed by strong software license sales and an improving hardware business, the company said Thursday. Revenue was $8.6 billion, a jump of 47 per cent.

New software license revenue, a key indicator of a company's performance and the mood of customers, rose 21 per cent year-over-year to $2 billion.

Hardware system product sales were $1.1 billion, while hardware systems support revenue was $641 million. No comparison could be made to the same quarter last year, as Oracle had not yet completed the acquisition of Sun Microsystems at that time.

Software license updates and product support remained a crucial part of Oracle's business, producing $3.6 billion in revenue for the quarter, a 12 per cent increase.

The steady income from support contracts can keep software companies humming even when new license sales slow, as happened during the recent economic downturn. Oracle's new license sales in the quarter show customers are starting to invest more aggressively in software.

Oracle's software business could get an additional boost next year, when the first generation of its Fusion Applications is expected.

Meanwhile, with the purchase of Sun, Oracle has started selling integrated systems like the Exadata family of database machines and the more recently announced Exalogic, a powerful application server it has dubbed a "cloud in a box."

Customers have reacted well to the strategy, according to Oracle President Mark Hurd.

"Since joining Oracle I've met with and visited many customers that have expressed a high level of enthusiasm around our strategy of engineering hardware and software that works together," Hurd said in a statement. "That enthusiasm translates into an Exadata pipeline that has now grown to nearly $2 billion. That number is a good leading indicator that customers are planning to increase their investment in Oracle technology."

During a conference call, Oracle CEO Larry Ellison once again stressed that the company is focused on becoming the industry's number-one name in high-end servers, not commodity systems.

He also made the latest in a string of jabs against Hewlett-Packard, calling the company's systems slow compared to Oracle's and IBM's. Hurd was CEO of HP before leaving the company this year after a scandal involving his relationship with a contractor.

Oracle's integrated systems will allow it to win "significant share" at the high end and become number two in the hardware business behind IBM "very, very soon," Ellison claimed.

HP has started firing back at Ellison's criticism, however. In a statement sent via e-mail recently it said Oracle bought "a money-losing business that had steady market share declines for years, and which still ranks at the bottom of the market."

As in the past, Oracle said it had a strong pipeline, or backlog of sales leads, for the Exadata system. Asked how many were translating into closed deals, Ellison said the situation is "definitely improving" and will accelerate in the next quarter.

"This pipeline grew very, very rapidly, but because it's a new product people were running a lot of benchmarks," he said. "They bought a small machine first. We are seeing a lot of re-buys and customers translating their interest into purchases."

Exalogic should benefit from Oracle's experience in selling Exadata, as well as the presence of a large installed base already using its WebLogic application server, according to Hurd.

Turning to Oracle's Fusion applications, the executives claimed Oracle will have an advantage over competitors because the software can be deployed either as SaaS (software as a service) or on-premises. "You decide where you want to put this. You can't do that with Salesforce.com, can't do this with Workday," Ellison said, referring to two prominent SaaS vendors.

Ellison took repeated jabs at SAP, as is his habit. But perhaps surprisingly he made no mention of the US$1.3 billion verdict Oracle recently won against SAP in its corporate-theft lawsuit.

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