Oracle, Sun and Exadata …

For anyone hoping to hear more details about Oracle’s plans for assimilating Sun Microsystems into its business, yesterday’s quarterly conference call with top Oracle executives may have disappointed.

Oracle CEO Larry Ellison and his lieutenants said little about the impending $7.4 billion acquisition of Sun. But analyst Tim Beyers of the Motley Fool thinks Ellison offered a strong hint that may have been aimed at reassuring those who wonder if a company known for selling software is serious about taking over Sun’s hardware business:  Ellison spent a fair amount of time boasting about the success of Exadata, the souped-up new data storage appliance that combines software and hardware from Oracle and Hewlett-Packard.

Exadata has outperformed competing products from Teradata and other companies, in trials by customers who chose to buy from Oracle, Ellison maintained. Oracle co-president Charles Phillips followed up moments later by telling analysts that Sun and Oracle customers are excited about the acquisition: “They know … that if Exadata is any indication of what happens when you optimize hardware and software together, they’re pretty excited.”

Co-president Safra Catz injected a bit of caution later in the call, after she explained that Oracle’s huge customer base helps boost company profits through recurring payments for software maintenance and upgrades. Selling hardware doesn’t usually bring the same kind of margins, she appeared to acknowledge, noting: “Obviously the Sun acquisition will change the margin story for a while, but it will improve over time.”

Analyst Peter Goldmacher of Cowen and Company sounded a similar tone in a note to investors this morning: While Oracle’s latest earnings were “impressive,” he said, “We continue to believe that Oracle’s standalone margin profile is unsustainable, and the pending acquisition/integration of Sun is going to be more challenging than the current valuation implies.”

 

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  • Alan Hargreaves

    I don’t understand why it is that journalists have such a hard time understanding that the SEC *requires* Sun and Oracle to work independently and to not discuss things that could happen after the purchase until it takes place.

    For goodness sake, it’s a legal requirement! You are not going to hear anything from the participants until it happens. Live with it.

 
 
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