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Oracle's Server Woes Hit the Bottom Line
Oracle's server hardware business isn't doing quite as well as it should, but management has a plan in place to turn it around.
Oracle reported third quarter fiscal 2013 earnings late Wednesday, with revenues coming in at $9.0 billion for a 1 percent year-over-year decline. Net income was reported at $2.5 billion, which is unchanged from 2012.
A particular area of weakness for Oracle during the quarter was its hardware business with revenue reported at $671 million, down from $869 million a year ago.
Oracle President Mark Hurd noted during his company's earnings call that despite the downturn in hardware revenue, exa-class engineered systems are in fact doing well. He said exa-class systems had its best quarter ever with over 800 units sold during the third quarter. One of the big winners was the Exadata X3, which had over 400 systems sales. The Exadata X3 was first announced in October of 2012.
Oracle's other exa-class systems include Exalogic, Big Data Appliance and the Oracle Database Appliance, all of which also grew in sales during the quarter.
Looking forward, Oracle CEO Larry Ellison said during the call that next week his company will announce a new generation of servers powered by the new SPARC T5 processor. Ellison claims that the new T5 will be the fastest microprocessor in the world.
The SPARC T5 will replace the T4 that Ellison announced back in September of 2011.
"Our new T5 servers have up to eight processors, and are more than twice as fast as the T4 systems that they replace," Ellison said. "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."
Ellison added that the M5 server will mark a key milestone in Oracle's server business history. With the M5 launch, Oracle will have completely refreshed all the server technology acquired from Sun in 2010.
Though Ellison has big expectations for the T5 architecture, he does not expect that the release will have an immediate impact on his company's financial results.
"We’re announcing the new M5, the new T5, and we think people might take a couple of months to evaluate these systems before they verify that our claims are correct," Ellison said. "The T5 is more than twice as fast as the T4 it replaces, [and offers] much better price performance, and amazingly, the M5 is more than 10 times faster than the M9000 it replaces."
Ellison expects his company's fourth quarter to be better for hardware, though the bigger gains are expected in the first quarter of fiscal 2014 and beyond.
"Next year will be a big growth year for our entire hardware business," Ellison said.
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