Oracle CEO Larry Ellison repeated his promise that the company’s hardware business will stop shrinking and start growing within six months.The company reported results for the second quarter of its 2013 fiscal year Tuesday. Revenues for the hardware business were down 23% to $734 million, compared to $953 million for the year-ago period.
That’s all part of the plan.
“Sun has proven to be one of the most strategic and profitable acquisitions we have ever made,” Ellison said. “Sun technology enabled Oracle to become a leader in the highly profitable engineered system segment of the hardware business. I believe that products like Exadata and the SPARC SuperCluster will not only continue to drive improved profitability in our hardware business, by the end of this fiscal year, they will also drive growth in our hardware business.”
He’s been making this same promise for months.
Until earlier this year, Sun was considered to be a failed acquisition. But Ellison says shrinking revenues are because he’s getting rid of Sun’s low-margin, commodity x86 server and storage products.
Employees inside the company tell Business Insider that those selling commodity systems have been targeted for layoffs—which makes business sense if Oracle doesn’t want to be in that business anymore.
Instead, Ellison is looking to sell high-margin “engineered systems” designed to run specific Oracle software products. These are known as the Exa line of hardware products and include Exadata, Exalogic, and Exalytics servers. It also includes the Sparc SuperCluster, a high-end, general-purpose system for running databases and apps.
Prior to Oracle’s purchase of Sun, the “Exa” line were built using Oracle’s designs, with help from HP, then a partner, analysts say. By acquiring Sun and bringing the Exa line in house, Oracle alienated HP.
Given the state of HP these days, maybe it was sheer brilliance on Ellison’s part to go it alone with engineered systems.
But first, he’s got to make the hardware business grow as promised.