Sun Pays Off for Oracle as Q2 Earnings Grow

by Sean Michael Kerner

With solid returns in for the second quarter, Larry Ellison is ready to call the purchase of Sun the best acquisition his company has ever made.

When Oracle launched its blockbuster bid for Sun Microsystems back in 2009, there were a lot of questions about how successful the deal would prove to be. Ever since the deal closed in 2010 Oracle has been building on the Sun business and is now ready to declare the acquisition a success.

"Our $7.5 billion purchase of Sun has already proven to be the most strategic and profitable acquisition Oracle has ever made," Larry Ellison, CEO of Oracle, said on Tuesday during his company's second quarter fiscal 2013 earnings call.

It was another solid quarter for Oracle overall, and Ellison is clearly seeing solid returns from Sun technologies. For the quarter, Oracle reported revenue of $9.1 billion, which is a 3 percent year-over-year increase.

Hardware system revenues made up $734 million of the total, and software license and support revenues came in at $4.3 billion. Net income came in at $2.6 billion, for an 18 percent year-over-year gain.

With the acquisition of Sun, Oracle gained a host of both hardware and software technologies.

"Java, the world's most popular programming language, was the key software asset we acquired when we bought Sun," Ellison said. "Today our Java business is booming, growing over 34 percent this past quarter."

Oracle Exalogic - Rounded On the server side, Oracle has not been as enthusiastic about Sun's legacy x86 business. During Oracle's fourth quarter fiscal 2012, the company experienced a 16 percent downward slump for hardware, due in no small part to Sun x86 server business.

Oracle's focus on hardware has been to leverage Sun's technology to build engineered systems like the Exadata, Exalogic and Exalytics servers. Those servers combine compute, networking, storage and applications in an integrated and optimized solution.

Ellison commented that Sun's hardware technology has enabled his company to become a leader in the highly profitable Engineered Systems segment of the hardware business.

"The rapid growth of highly differentiated products like Exadata and the SPARC T4 have consistently quarter-after-quarter improved the profitability of our overall hardware business," Ellison said.

"Selling systems loaded with Oracle intellectual property," Ellison continued, "along with de-emphasizing the selling of low-margin undifferentiated products like commodity x86 servers and LSI disk storage systems, products that contain no intellectual property — those 2 things have reshaped and downsized our hardware business, while making that business much more profitable."

Oracle President Mark Hurd said that over 700 Engineered Systems were sold during the quarter to big companies like China Mobile, Facebook, Samsung, Time Warner Cable, Vodafone and Wal-Mart.

"We continue to see strong growth as the SPARC T-Series accelerates," Hurd said. "I mentioned, in the last quarter, it was the hottest selling UNIX box in the industry, and it grew faster than it did in the previous quarter."

Sean Michael Kerner is a senior editor at InternetNews.com, the news service of the IT Business Edge Network, the network for technology professionals Follow him on Twitter @TechJournalist.

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This article was originally published on Wednesday Dec 19th 2012
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