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Oracle's Earnings Growth Powered by New Software Licenses

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Posted September 16, 2010 By David Needle     Feedback

The database giant reports revenue from new software licenses was up 25 percent to $1.3 billion in the first quarter.

Database giant Oracle (NASDAQ: ORCL) reported a big first quarter today, including a 38 percent rise in earnings to $2.1 billion or $.0.42 per share, easily topping analysts' estimates of $0.37 per share.

Total first-quarter revenue grew 48 percent to $7.5 billion on a GAAP basis, while non-GAAP revenues ballooned 50 percent, reaching $7.6 billion.

New software licenses, an important indicator of future growth, were a chief contributor to that performance, up 25 percent in the quarter and contributing $1.3 billion in revenue. Overall, Oracle said software license updates and product support revenues were up 11 percent to $3.5 billion.

Oracle president Safra Catz said the company's software business saw strong growth across all regions. "Our hardware business also grew faster than we expected with Sun Solaris servers and Exadata leading the way," Catz said in a statement.

The earnings news comes as Oracle continues its transition to a supplier of integrated hardware and software following its acquisition of Sun Microsystems.

Oracle CEO Larry Ellison made note of sales of Oracle's Exadata servers in the first quarter. "Our Exadata database machine continued to win new customers in Q1," he said in a statement. "The worldwide Exadata pipeline now exceeds $1.5 billion for the full fiscal year."

The company also worked new president Mark Hurd into the earnings announcement.

"Next week at Oracle OpenWorld, we will announce two new high-end systems that combine Sun hardware with Oracle software," Hurd said in a release. "We will invest over $4 billion in research and development this year, so our already robust product portfolio is only going to get stronger."

Hurd, who now shares the title of president with Catz, had formerly served as chairman and CEO at HP, and was shown the door in a controversial decision by the company's board of directors earlier this summer. Oracle has long had a close partnership with HP (NYSE: HPQ), but the computer giant is suing to stop Hurd's hiring, claiming that his move to Oracle will inevitably lead to improper release of trade secrets.

Until its acquisition of Sun, Oracle wasn't a systems competitor with HP. But even with Sun in the fold, in public statements by Ellison and marketing by Oracle, the company has primarily gone after IBM (NYSE: IBM).

Ellison announces in-memory database project

Oracle has long competed with SAP (NYSE: SAP) on enterprise applications, and SAP upped the ante earlier this year with the http://itmanagement.earthweb.com/entdev/article.php/3881836/SAP-Acquires-Sybase-for-58-Billion.htm">$5.8 billion purchase of database provider Sybase. Well before the Sybase acquisition, SAP has touted its development of in-memory database technology, which speeds access to data exponentially.

"Let me announce today that Oracle has had in-memory technology that's part of the database under development and we will deliver it to the market before SAP delivers theirs," said Ellison. "We've been following this and working on this for a very long time ... and I believe we'll do a much better job than SAP.

"We beat them badly in middleware and I think they have even less of a chance to beat us in database; it's a colossal mistake to take us on."

But SAP has already delivered in-memory technology in its business intelligence software. SAP co-CEO Bill McDermott showed off in-memory technology earlier this week using an Apple iPad to manipulate hundreds of millions of records using one of the new SAP BusinessObjects analytic applicationsas part of an onstage demonstration at the DEMO conference.

"We already have in-memory technology in our products; have had it on the market for a year in products like SAP Business Objects Explorer. SAP Business ByDesign has in-memory today," a spokesperson for SAP said in a statement emailed to InternetNews.com.

"Larry Ellison's comments, as usual, show his tendency to try to rewrite history to his advantage. The fact of the matter is they are way behind SAP in in-memory technology, and no amount of bluster or bravado is going to change that," SAP said.

Oracle also said on the call that it would be introducing new Exadata systems at its Oracle Open World conference in San Francisco next week.

Updated to include comments from Oracle's conference call and comments by SAP.

You can read more about Oracle ERP here.

David Needle is the West Coast bureau chief at InternetNews.com, the news service of Internet.com, the network for technology professionals.

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