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Oracle server revenue slides (again)

Those who hoped that Oracle(s orcl) would break its streak by posting server revenue gains last quarter, have to keep on hoping.

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.”

3 Responses to “Oracle server revenue slides (again)”

  1. Mark Sarbiewski

    Despite a few small acquisitions, Oracle is still fundamentally an on-premise, scale-up technology company in a world that is rapidly moving to a scale-out, cloud / as-a-service model.

    There are precious few examples of large companies that transformed themselves when the world changed on them. IBM managed it, but Microsoft, HP, Dell, etc. have not.

    The vast majority of Oracle’s revenue is tied to products that fit the old model. I saw first hand at HP how difficult it is to move a legacy business in a fundamentally new direction, even when you know exactly what is happening to you. Everything is tied to the old model – the organizational power, budgets, marketing, technology, compensation incentives, etc. Acquisitions get starved, and the people and intellectual capital melt away after a year or two, because it’s obvious to them that it’s still a legacy-driven business.

    Don’t get me wrong, Oracle will be around and powerful for a long time, given their enormous installed base. But that same enormous installed base, and the annuity that gets squeezed from it, will probably be too big to risk on a dramatic shift. Zombies may be powerful, but they’re still zombies.

    • Mark, you are wrong about HP. Meg Whitman is doing a fantastic job. I think she is the best leader HP has had since its founders.

      HP is not falling behind, they are in fact leading. Look at Project Moonshot. Look at HP’s networking group and what they have been doing with SDN. Look at what HP is doing in the printer division with Indigo and “ink in the office”.

      Look at what HP has been able to accomplish with their public cloud. They have almost feature parity with Rackspace, and HP was able to do that in an incredibly short period of time.

      You worked for HP, did you leave on good terms?