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Oracle’s acquisition of computer server maker Sun Microsystems has been an albatross around the company’s neck practically since Day One.But Oracle CEO Larry Ellison says those days will soon be gone. He promises the hardware unit will show revenue growth this fiscal year.
Ellison discussed it yesterday during an interview with Maria Bartiromo on CNBC (see video below):
We have two hardware businesses. We have a hardware business that we care about—this is Exadata, Exalogic, Exalytics—kind of our new generation of hardware and software engineered to work together. So that’s growing at more than 100%. But then we have another hardware business, kind of the old commodity x86 business which is similar. It is basically taking Intel microprocessors, adding memory and selling these commodity boxes and that business is shrinking. So we’ve got two things going on. We’ve got this old Sun business of selling commodity hardware which is disappearing, which we don’t care about at all, and our new business of selling engineered systems which is more than doubling. And the old business is shrinking slightly faster than the new business is growing. But those two lines will cross at the end of this fiscal year and we’ll get very rapid growth because the bulk of our business will be engineered systems and this new, very hot Unix box [with] SPARC T4 [processors] which is also growing very, very rapidly.”
It’s not just Ellison saying that. Oracle could be showing growth in its hardware business by May, Nomura Securities analyst Rick Sherlund told Business Insider.
“The commodity x86 server and storage are declining at 40% a year,” Sherlund said. “The SPARC T4 server is doing well, but it’s likely cannibalising Oracle’s commodity hardware business.”
Sherlund expects Oracle’s hardware business to be flat by the February quarter and show positive growth by around May 2013.
But, he points out, this is not a turnaround for the traditional Sun business.
All the real growth coming from its “Exa” line of hardware, which were Oracle’s own designs, created before it acquired Sun. The Exa systems were originally designed with its partner, HP.
When Oracle bought Sun, the partnership with HP devolved to the point where the two were suing each other. So Oracle may have gotten some talent from Sun to bring the Exa line in-house, but it also had to have that talent, since buying Sun hurt its relationship with HP.
In other words, it’s still not clear exactly what big benefit Oracle gained from buying Sun.
Oracle employees have told Business Insider that after the Sun acquisition Oracle’s sales team had been dysfunctional, ill-equipped to sell hardware and fighting over deals. Many blamed head of North American sales, Keith Block. Over the summer, Oracle parted ways with Block, who had also made some controversial comments about Sun hardware that ended up appearing in Oracle’s lawsuit with Hewlett-Packard.