That’s why I hope to be glued to my laptop next week (Structure permitting) when Oracle announces its fourth quarter earnings. And this is what I want to hear about:

1: Hardware momentum (or continued lack thereof). Can Oracle finally crack the hardware code? Given its new alliance with Dell that will, in essence, let Dell offer its own version of an “engineered system” running Oracle database and applications, I’ve got to think that tepid hardware sales are starting to take their toll in software license sales as well.

2: HANA envy. It’s been a long time since we’ve seen an enterprise product with a halo as big as SAP’s HANA in-memory database and analytics offering which will soon be made into a cloud service. SAP has been basking in that glow for more than a year. That’s got to bug Oracle CEO Larry Ellison and co-presidents Safra Catz and Mark Hurd. What will Oracle do to steal some of that good feeling for its own in-memory and analytics plays?

3: Fusion traction: Are users of Oracle’s legacy applications moving to the new-generation Fusion versions, sitting pretty on existing versions, or jumping ship to alternatives? In February, Forrester Research surveyed 139 enterprise clients and found they were not wild about Fusion. Of those surveyed, 65 percent had no plans to move to Fusion; 24 percent were indecisive. But perhaps most scary for Oracle, 29 percent said they planned to defect to another vendor. Oracle blasted the findings as inaccurate and out of date but Forresteranalyst Paul Hamerman stuck to his guns.

4: How big is Oracle in big data? What traction is this company, the undisputed king of relational databases, doing outside that realm with its Big Data Appliance and other less SQL-y gear? Can Oracle parlay its strength in legacy databases in this new territory?

5: Support and maintenance re-ups. Are business customers paying for support and maintenance or are they balking? Oracle has traditionally seen these fees — it typically charges customers 22 percent of the purchase price each year for continued software support and maintenance — as its birthright. But customers hate those fees. In a research note Sunday night, Nomura Securities analyst Rick Sherlund raised a red flag when he wrote:

“Oracle is reportedly now the second most active software vendor (next to IBM) in conducting customer usage audits intended to bring in revenues from customers that are not in compliance with their software agreements.”

If a customer is paying maintenance because there’s a gun to his head and not because he’s deriving real value, he’s not a happy customer.

It’s fine for Oracle to buy its way into newer-era computing — with acquisitions of SaaS companies like Rightnow for CRM with Taleo for talent management etc.– but it needs to tend to its legacy database and applications customers as well because right now, they’re the ones paying the bills. And, with the shift to big data and new app delivery models, they’re more open to switching vendors.

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Coopetition run amuck?

Oracle CEO Larry Ellison

This is all interesting because not all that long ago, HP was Oracle’s bestie in x86 servers . Of course that was before HP fired Mark Hurd for cheating on expense accounts and inappropriate interaction with a female contractor and before Larry Ellison blasted HP very publicly for doing so, and HP sued Mark Hurd and … well you get the picture.

Now, before it got into the server — er engineered systems —  business by virtue of buying Sun Microsystems for $7.5 billion in 2010, Oracle courted most of the major hardware guys with the exception of archrival IBM. HP CEOs Carlie Fiorina then Mark Hurd and Michael Dell, typically keynoted at Oracle OpenWorld, for example, touting their respective servers as the best possible hardware to run Oracle databases and applications.

As an enterprise software company, Oracle needed good relationships with server companies at least in part to compete better with IBM which offered servers and databases. In fact, the very first Oracle Exadata engineered system, which came out before the Sun deal, was an HP box. But  with its ownership of Sun and its server lineup, relationships with other hardware vendors got more complicated.

As one Dell partner at last week’s confab told CRN’s Joe Kovar: ”The last thing I ever expected at this event was to see Mark Hurd’s face.” I mean, come on:  A customer buying a Dell box running a raft of Oracle software isn’t likely to buy an Oracle engineered system. And, as I’ve reported for a while, Oracle hasn’t exactly hit the cover off the ball selling hardware – hardware revenues have headed south since the Sun acquisition — although Oracle would argue that the hardware it does sell is highly profitable.

Anecdotal evidence is that most people who buy Exa-boxes are doing so at discount and are not necessarily loading up those boxes with new Oracle software but consolidating what the software they already own on new hardware. Anyway, my thesis is that if Oracle truly were happy with its hardware sales and profitability it wouldn’t be snuggling up to Dell.

NSA spying, fallout for cloud computing adoption?

For folks worried about putting private information on consumer oriented services  like Facebook  clearly had more reason to worry this week as news broke about the U.S. National Security Agency’s monitoring of internet and cell phone data. GigaOM’s Mathew Ingram did a great job updating this story all week  and David Meyer outlined the huge ramifications this could have in Europe where data privacy is a key concern.

You’ve got to wonder if this will have a chilling effect on  various “cloud first” initiatives. Earlier this week, I wrote that Amazon Web Services might deploy ”mini me” GovClouds outside the U.S. for workloads that government agencies — or even businesses  –  would prefer to keep in-country.  Since posting that I’ve had several emails from people who would know that AWS is, in fact, doing this.

Given that AWS,  one of the few internet powers not named in the NSA story — is U.S.-based, could there be pushback from other countries that otherwise would consider an Amazon GovCloud implementation?

Meanwhile, Amazon finally acknowledged the existence of a “secret” contract to build a private cloud for the CIA but it took IBM to get it out of them. IBM contested the contract award to the General Accountability Office which ruled in IBM’s favor and recommended a “re-do” of the process. Kudos to Federal Computer Week reporter Frank Konkel for keeping ahead of this story.

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From the movie’s web site:

“Awe-inspiring boats that reflect the unlimited reach of human ingenuity, breathtaking views, action, tension, excitement, consummate skill, the pursuit of lifelong dreams and the tempestuous romance between sailors and the sea, set against a soaring musical score: this is The Wind God’s, the story of the 33rd America’s Cup race.”

Thank God, MarketWatch‘s Therese Poletti has the scoop on the red carpet event. The movie, she reports, will be “great PR for Ellison and the sailing team that would ultimately prevail in what became a major grudge-match involving the America’s Cup, where billionaire faced off billionaire in Valencia, Spain.” San Francisco Business Times has another account.

Forbes Magazine estimates Ellison is worth $43 billion and he’s not averse to spending it. The America’s Cup chase reportedly cost him $100 million.

And, he is not new to show biz. He appeared in Iron Man 2 (seen in screen grab above.) And two of his children have gone Hollywood.  Son David Ellison is an actor, writer and producer (he produced The Wind Gods) and daughter  Megan Ellison is a producer with more than a dozen titles to her credit including Jack Reacher and Mission Impossible: Ghost Protocol. Ellison has also bought up a sizeable chunk of pricey real estate in the star-studded Malibu beach enclave.

It’s unclear if any mention was made about the death Thursday afternoon of another America’s Cup competitor, Andrew Simpson. A member of the Artemis Racing team, Simpson apparently drowned, after his catamaran capsized in the bay.

Oracle Team Racing’s defense of the America’s Cup will begin July 4 in San Francisco Bay.

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Reports surfaced last week that Hurd, who is co-president of Oracle, was on the short list of prospective Dell CEOs from Blackstone Partners, a private equity firm interested in buying Dell. Blackstone, presumably, would need to install its own guy if its bid against the current Dell guy, Michael Dell, wins the day.

Asked about the issue in Japan at a press event, Hurd said: “I’m very happy at Oracle. No interest.”

Mark Hurd in Japan goes on the record on #Dell: “I’m very happy at Oracle. No interest." #oracle http://t.co/pYsKAM9fDK—
deborah hellinger (@dhellinger) March 25, 2013

Of course, that doesn’t mean Blackstone didn’t ask.

The timing must have been awkward for Hurd. Later today, his boss, Oracle CEO Larry Ellison, and systems guy John Fowler will unveil the latest-and-greatest Oracle server. If you want to sit in, you can register here. 

It doesn’t help when a humongous software company is trying to build hardware credibility for there to be rumors about one of your top guys — a hardware guy — jumping ship to another hardware company. Hurd is the former chairman and CEO of Hewlett-Packard who exited under a cloud in August, 2010.  A month later he was  snapped up by Ellison as Oracle co-president (with Safra Catz)

First line of Blackstone/Michael Dell meeting: "So, yeah… sorry for calling Mark Hurd before we called you."—
  (@danprimack) March 26, 2013

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For the period ending February 28, Oracle reported earnings of 65 cents per share on revenue of $9 billion, just short of the 66 cents on $9.4 billion in revenue that analysts had expected. Oracle co-president Safra Catz said sales were likely hurt by the prospect of government spending cuts.

“It didn’t help that our quarter ended on the same day as the sequester deadline,” she noted on the company’s earnings call Wednesday night. But, overall, Oracle’s sales people took the fall. “What we really saw is the lack of urgency we sometimes see in the salesforce as Q3 deals fall into Q4,” Catz said.

Oracle, HP, Microsoft tread treacherous path

Skeptics maintain that Oracle faces something much more critical than an unmotivated sales force. Rather, they say it, and other legacy IT players must confront a fundamental shift in how companies buy enterprise IT and a shift in the database mix to more NoSQL products and a similar transition to distributed data stores.

Oracle’s bread-and-butter product remains its market-leading relational database which is entrenched in financial services, healthcare and many government and academic accounts. But that dominance is under fire as more companies see the need to add non-relational database capabilities to the mix.

Many of these same enterprise and government accounts are also sick of paying huge fees for yearly software and hardware upgrades in an era where they can easily move at least non-mission critical workloads to Amazon Web Services or some other cloud provider.

Oracle isn’t the only company affected —  Microsoft, Cisco, EMC, HP, and other legacy IT vendors — will continue to face tough times as these transitions play out.

Sunil Dhaliwal, founder of VC firm Amplify Partners, concur that this is a massive “multiyear” transformation that will shake legacy IT providers to their core as more workloads go to Software as a Service offerings which negate the need for massive in-house server upgrades.

Can the giants shrink-down and speed up?

That, and the solid acceptance of open source software is still something the legacy players have yet to deal with, although most of them have made huge acquisitions to bolster their SaaS and open source stories. (Oracle bought RightNow and others as a response to Salesforce.com and Workday, and its acquisition of Sun Microsystems put it into the MySQL and Java business.)

The thinking is that more enterprise players are buying compute, storage, networking and software like they “buy” electricity. While the traditional players see this change coming, it’s unclear if they will be able to adapt fast enough beat lower-cost, younger and more nimble players that were built for this new market.

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Revenue for Oracle’s “exa boxes” fell again, 23 percent year over year to $671 million from $869 million. Revenue on hardware systems support was  also down — 6 percent — from the year ago quarter.

As GigaOM has reported, Oracle has yet to hit on a winning formula for its highly engineered boxes although the company and its proponents maintain that the company makes good profit on each box it sells. It’s just that the revenue it makes on these high end boxes does not make up for revenue it had made on lower end “commodity” servers in the past.

On the earnings call Wednesday night, Oracle chairman Larry Ellison said the company plans to launch its next SPARC-based servers next week.

Said Ellison:

“Our new T5 servers have up to eight processors, and are more than twice as fast as the T4 systems that they replace. Even more important is our new M5 server, which has up to 32 processors and runs its Oracle Database over 10 times faster than the similarly priced old M9000 server it replaces. With the delivery of the M5 server next week, Oracle will finish upgrading every server in the SPARC product line dating from the time we acquired Sun.

He also said that Oracle’s delivery of lower-end boxes last year dinged average selling price.

“… we announced some lower-end Exadata systems, in our engineered space, and new customers have been beginning with the smaller systems, now that they’re available, eighth rack rather than quarter racks. And that’s somewhat lowered our ASP…” Ellison said.

Seeking Alpha has the full earnings call transcript.

Oracle’s server revenue was off 18 percent year over year in the previous quarter.

Overall, Oracle results came in below consensus expectations on license revenue and earnings per share, according to Nomura Securities analyst Rick Sherlund. “After robust 17% reported license and subscription revenues growth in Q2, this was down 2% y/y in Q3 (or down about 6% organic, constant currency), below the Street’s growth estimate of 8% y/y,” Sherlund wrote in a research note, adding: “The long anticipated hardware turnaround remains elusive.”

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On the company’s second quarter earnings call in December, Oracle CEO Larry Ellison said Oracle’s $7.4 billion acquisition of Sun Microsystems made it “a leader in the highly profitable Engineered Systems segment of the hardware business.”  In his view, that’s a better, more lucrative place to be than in “low-margin undifferentiated products like commodity X86 servers.” Leave that race to the bottom to the Dells of the world, he seems to say. (In fact at one point during Oracle’s Sun acquisition, he actually did say that.)

Here’s the problem, since it entered the hardware business, Oracle hasn’t sold enough engineered systems to make up for lost sales of lower-end machines, according to third-party researchers. Its hardware revenue and unit share is headed south.

For the fourth calendar quarter of 2012,  Oracle server revenue  was down 18 percent year over year according to both Gartner and IDC. Meanwhile, as GigaOM’s Jordan Novet reported last week, the “other” server vendors — companies like Quanta and Wistron – saw their aggregate revenue rise nearly 22 percent in the fourth quarter compared to the year-ago period.

In units, the “other” category saw 35 percent growth. These are the types of servers that sell into huge web-scale data centers run by Facebook and Amazon. This is not a new thing: In the third quarter of 2012, Gartner numbers showed Oracle’s server revenue off 22.5 percent while “other” servers revenue was up 27 percent. Oracle’s own figures reinforce this narrative. In its third quarter, ending in November 30,  2012, Oracle hardware systems revenue fell 23 percent to $734 million from $953 million for the year-ago period.

The IDC findings are below. Obviously, Oracle sees huge potential in these high-end boxes — Nomura Securities’ analyst Rick Sherlund said “the Exaseries of servers are growing about 100 percent, but that has not been enough to offset the loss of the other business yet.” The question is how patient Oracle is prepared to be.

I’ve reached out for comment and will update this if one is forthcoming.  Update:  An Oracle spokeswoman declined to comment, citing the company’s quiet period before its next earnings report. Here’s the thing, while Oracle regroups and repositions its server business, the trajectory for “other” servers is way up and Oracle keeps heading in the other direction. It’ll be interesting to see if there’s any indication of a change on Oracle’s third quarter earnings call March 20.

This story was updated at 9:40 a.m. PDT with a statement from Oracle.

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It looks like Amazon is taking steps to fortify its stressed US-East data center facilities in Ashburn, Virg. The company has signed on as the anchor tenant for a new multi-million-dollar data center facility being built by Corporate Office Properties Trust,  according to  The Washington Business Journal

US-East, Amazon Web Services’ biggest and oldest data center farm is where many of its shiny new services debut before rolling out to US-West and beyond.

Amazon had no comment in the Journal’s report.

OpenStack Foundation elects 2013 board

The OpenStack Foundation wrapped up its board elections last week (preliminary results  posted here.)  with elected and appointed directors to be seated at the January 31 board meeting. And with that the OpenStack crowd is off and running into another year in which news will likely include more details of IBM’s OpenStack plans. IBM is a Platinum member of the foundation but has not yet discussed plans for its own OpenStack cloud. Stay tuned for the next OpenStack Summit in Portland, Ore. in April.

In an interview on Friday, OpenStack director Jonathan Bryce said he is thrilled with momentum on the project –which claims 750 individual code contributors. Over the past year HP made its public cloud available and he expects more news in 2013 in the networking front. Nicira, now owned by VMware,  Midokura, Juniper Networks, Brocade Communications and Big Switch are all doing interesting work in OpenStack, he said.

I also expect new names to surface in the OpenStack context. Netflix cloud architect Adrian Cockcroft recently told me that Netflix has been talking to several OpenStack players about possible uses of its open source tools in OpenStack and Bryce said he expected OpenStack players will attend Netflix Open Source Open House next month.

As for the new OpenStack board — the tally includes many holdover board members — CERN’s Tim Bell; HP’s Monty Taylor and some new names including Lauren Sell, formerly of Rackspace but now director of marketing for the OpenStack Foundation.

When is a cloud not a cloud?

Oracle CEO Larry Ellison

Oracle has had a complicated relationship with cloud computing dating back at least to CEO Larry Ellison’s well-documented disdain for the overuse of the term itself. (Face it, he did have a point there. Best quote:  ”What do you think Google runs on? Water vapor?) In the past year, Ellison has fully embraced the C-word but in a way that critics say doesn’t truly adopt cloud principals. Pricing and licensing from Oracle, they say, remains old school.

So when Oracle unveiled new on-premises Infrastructure-as-a-Service capabilities, analyst David Linthicum took a look and declared this to be a “faux cloud.”.

In Infoworld, Linthicum, CTO of Blue Mountain Labs and a GigaOM Pro analyst, wrote:

“Unlike with a true cloud on-demand service, your monthly fee — which requires a three-year contract — covers just the hardware, its maintenance, and some degree of usage. You pay extra for the Oracle software licenses and for ‘peak’ usage (no definition or price given). It’s not the standard cloud model, in which the entire service is included with the fee.”

Oracle, like other legacy IT players — HP, IBM, Microsoft, name-your-favorite-here, have mixed agendas when it comes to cloud. They need to embrace it or risk losing business to rivals who truly “get” the model, but they also don’t like the idea that cloud efficiencies mean that customers  buy less — or less expensive — hardware gear and software licenses.  As Linthicum wrote, Oracle will come under increasing pressure from Amazon, the OpenStack crowd and others but is trying to drag its old model out as long as it can.

Feature photo courtesy of  Flickr akakumo

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But given that hardware revenue fell 23 percent to $734 million from $954 million for the year-ago quarter, that optimism seems a tad forced. Oracle’s hardware business revolves around its high-end Exadata, Exalogic and Exalytics “engineered systems” and Sun T-4 systems. The decline in that business, as Nomura Securities Analyst Rick Sherlund  pointed out, was “worse than the low end of guidance.” Last quarter, Oracle saw a similar sickly performance, with hardware revenue off 24 percent year over year.

On the earnings call, Ellison said engineered systems saw a 70 percent sequential growth in bookings. “We are just about finished with the downsizing phase and the transformation of that business [and are] about to start growing our hardware business,” he told analysts on the earnings call Tuesday night. “In Q3 we’ll be turning the corner and in Q4, we expect the top line growth to go along with continually improving margins.”

In the past Oracle has been able to manage big acquisitions with nary a hiccup. But those were software acquisitions and hardware is a new beast for the company. Plus it’s a beast without the rich margins of databases and middleware. To be fair, there is a natural constituency for these big Oracle data center appliances — big Oracle database and financial applications shops in financial services, retail and other verticals. And there are lots of those companies.

The CIO of a large bank told me that his company has bought several Exadata machines in the past year. The initial, admittedly high, upfront cost of those systems, was offset by a few things. First, the bank is able to consolidate more of its existing Oracle workloads on fewer machines. And it no longer needs an army of database admins, storage experts and networking people to man them. Plus, it already owned all the Oracle software it needs to run — so there was little in the way of additional software license fees.

But his situation just proves that Oracle sales are still led by software. Good thing software was a prettier picture this quarter. Revenue from new software license and “cloud subscriptions” grew 18 percent to $2.4 billion from $2 billion for the year-ago quarter.

Since Oracle bought Sun, co-presidents Safra Catz and  Mark Hurd have repeatedly said that these engineered systems are highly profitable — that may be true. But it’s also true that hardware, is very different from software, and it’s not clear that Oracle gets that yet.

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The purchase augments a push into portfolio management that Oracle started with its 2008 acquisition of Primavera. Per usual, the move seems to take on ERP giant SAP, which fields its own project portfolio management. These two enterprise software giants have been one-upping each other for the past three or four years, after Oracle started competing more with SAP in business applications and SAP launched a full-on onslaught against Oracle in databases with Hana, its in-memory database appliance.

Instantis’ Enterprise Track SaaS product gives work groups the ability to build and share dashboards of their individual projects or a portfolio of related projects that lets them track the life cycle from inception to proposal to execution and results.

Once again, the database market leader shows a willingness to buy customer lists and revenue streams. Instantis claims customers including Dupont, Grace, Cardinal Healthcare and NCR.

In early October, Oracle CEO Larry Ellison said the company was not planning any “big” acquisitions but did not rule out smaller, tactical buys.

Over the past 14 months, Oracle has bought RightNow to boost its cred in CRM Software-as-a-Service, Vitrue for social marketing, Taleo and SelectMinds for talent acquisition; Xsigo for networking expertise, and Endeca for big data wherewithal.

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