Sales of Oracle/Sun Servers Continue to Drop amid New Product Launches

Oracle Blames Customer Evaluation of T4 Servers for Dropping Sales

by Anton Shilov
12/21/2011 | 10:46 PM

Oracle Corp. on Tuesday again said that its hardware business shrank during the most recent quarter. The company explained that in addition to stagnating sales of "commodity" x86 servers, sales of its high-end SPARC T3-based machines also dropped since its customers decided to evaluate next-generation SPARC T4 servers and not get the T3 machines.

 

"Hardware systems revenue was $953 million for the quarter due in part to a product transition to T4 processor-based products, as some customers moved to qualify the new servers and significantly slowed buying the older systems. We saw good early demand for the new SPARC Supercluster, but only released the product for general availability at the very end of the quarter, allowing us to ship only a couple," said Safra Catz, chief financial officer of Oracle, during quarterly conference call with financial analysts.

Oracle said that its total revenues for Q2 of FY2012 were up 2% to $8.8 billion. New software license revenues were up 2% to $2.0 billion; software license updates and product support revenues were up 9% to $4.0 billion; hardware systems products revenues were down 14% to $953 million. Operating income was up 12% to $3.1 billion, operating margin was 35%, while net income was up 6% to $2.8 billion.

Although sales of hardware were down both sequentially and year-over-year, Oracle said that it managed to sell over 200 high-end Exadata and Exalogic engineered systems. The firm did not indicate whether shipments of x86-based servers that the company calls "commodity" were up, down or flat. During last quarter's conference call, chief executive Larry Ellison said that the company was not truly interested in selling Intel Xeon-powered systems as they did not carry the company's intellectual property or software and also did not need special support from Oracle.

Oracle noted that servers based on the latest SPARC T4 processors are compatible with the next-generation SPARC T5 chips due in late 2012 or early 2013. As a result, customers will not have to evaluate new chips and platforms, which means that sales of SPARC servers will not stall in the coming quarters because of new microprocessors.

"Next year, when T5 comes out, you will be able to upgrade from the T4 to T5, and that will sort of eliminate some of this [transactional pause] because now if I bought a T3, I have to do a complete replacement to get to a T4," said Mark Hurd, the president of Oracle.