The first quarter of the year is often not as active as the rest of the year. Many organizations are planning for the upcoming year and digesting what happened in the previous year. But the first quarter of 2010 had quite a bit of activity – at least in regard to data and information management. The economy is still troublesome, but the acquisitions continue unabated. So let’s move forward, follow up on some stories we covered in past editions of The Database Report, and examine the database related news of the quarter.
Closure for Oracle as it Gets the Nod to Acquire Sun Late in 2009, word leaked that Oracle had won approval from the European commission to proceed with its acquisition of Sun Microsystems. Key to winning that approval was Oracle’s agreement to continue funding for MySQL over the course of the next three years at a price of more than $24 million per year. Oracle also agreed to form an advisory group of MySQL customers.
In January 2010, it became official: the European Commission had approved the deal. This, for all intents and purposes, clears the way for the acquisition, announced on April 20, 2009, to move forward. Regulatory hurdles in Russia and China could still cause problems.
Indeed, MySQL founder Michael “Monty” Widenius is stoking those fires with his helpmysql.org campaign. More than 14,000 MySQL users signed a petition protesting the Oracle’s proposed acquisition of Sun. And Widenius’ helpmysql.org has over 600 supporters in China and more than 800 in Russia, and the organization seems poised to turn its attention to China and Russia.
Widenius blogged about alternative suitors for MySQL should regulators turn away Oracle. The list included IBM, Fujitsu, Linux distribution vendors, and others. But how would IBM be any more agreeable than Oracle? True, Oracle is the market leader for database systems, but IBM is a formidable player in the field, too. Monty’s claims seem to me to be a bit of a case of sour grapes.
Even though MySQL is probably the most well known of the open source DBMS players, it is far from a market leader in database software. MySQL had an estimated market share of 0.2% and $40 million in revenue in 2008, according to market research firm IDC.
Widenius lost all claims to MySQL when he (and others) sold the company to Sun. It is somewhat disingenuous of him to claim “noble” aspirations in trying to stop Oracle from gaining control of MySQL.
At any rate, the peaceful “settlement” between Oracle and the European Commission was somewhat surprising because Oracle CEO Larry Ellison had previously claimed that Oracle would oppose any demands from the European Commission. But calmer heads have prevailed. The European Commission can claim that it “won” support for MySQL from Oracle, and Oracle can claim that it had intended to support MySQL all along, so nothing was really “won.” Just take a look at the headline of Oracle’s January 21 press release claiming “European Commission Unconditionally Approves Oracle’s Acquisition of Sun.”
And on February 5, Jonathan Schwartz resigned as CEO of Sun Microsystems in a novel and interesting way: on Twitter with a haiku. Here is the full text of his tweet: “Today’s my last day at Sun. I’ll miss it. Seems only fitting to end on a #haiku. Financial crisis/Stalled too many customers/CEO no more.”
Now Just What Is Oracle Planning to Do With Sun?The next question to be answered is this: Now that Oracle will be acquiring Sun Microsystems, just what will they do with them? According to Oracle CEO Larry Ellison, Oracle plans to stay out of the low margin, high volume server market that is led by Dell and Hewlett Packard. Instead, Oracle plans to service the high end of the market with Sun’s Intel and SPARC Solaris systems.
It would appear that Oracle has IBM squarely within its target sights. Sun’s SPARC Enterprise Server M9000 is a mainframe class SMP system that can scale up to 64 processors and 256 cores. In past statements, Ellison has claimed admiration of IBM’s mainframe business. Putting two and two together, after the acquisition it wouldn’t be surprising to see Oracle try to battle IBM in its own turf for high-end, mainframe type business.
Ellison is also high on Oracle’s Exadata database machine. He has claimed that Oracle’s future strategy will be to group the company’s various technologies together into products like Exadata.
According to Ellison Oracle will be hiring folks post-acquisition. Evidently the company intends to hire about 2,000 new employees at Sun Microsystems. This amount is claimed by Oracle to be twice as many as they dismissed after the takeover.
And what about Java? In a briefing in late January, Ellison dismissed concerns that Oracle would not invest in Java. He said “Sun didn’t make a lot of money from Java, but we sure did,” he said. “BEA sure did.” Oracle’s acquisition in 2008 of BEA Systems brought the profitable WebLogic J2EE application server into the fold.
Ellison claims that “Our vision for 2010 is the same as IBM’s in the 1960s.” He talked about how IBM integrated software with its hardware offerings and sold the combination to customers. So picture the new data center mainframe as a Sun M9000 running the Oracle 11g database, Oracle’s business applications and Fusion middleware, and more. And Oracle will certify that everything will work together and be optimized for performance.
Gee, that really does sound like an IBM mainframe environment, doesn’t it?
Larry Sure Knows How to Get Press But perhaps Ellison is taking the strategy of targeting IBM a bit too far. In early February, perhaps going under the assumption that no press is bad press, Ellison attacked IBM’s DB2 during an Oracle webcast… but he made several factual errors in what can only be termed a “rant.”
What did he say? Well, let’s just look at a few of his statements. Regarding TPC-C benchmarks, Ellison claims to have “(blown) the doors off of IBM. “We crushed them.” He went on to elaborate saying, “In a machine that took up less than 10% the floor space, of IBM’s record setting computer. We ran faster, we ran a lot faster: using a tiny fraction of the floor space, a tiny fraction of the power, cost less.”
Is this news? Technicians working in trenches know that benchmarks are not indicative of real life performance. That aside, it is true that Oracle currently has the leading TPC-C benchmark result. Until late in 2009, DB2 enjoyed a massive 49% lead over Oracle. Oracle’s most recent results give them a 25% lead (using more than six times as many CPU cores to do it).
Regarding the claim of using less space and power, this is due to Oracle using flash memory and comparing it with an IBM benchmark using conventional disk technology. If Oracle compared its benchmark to an IBM system using flash memory, these claims would not stand.
Later, Ellison claimed that “SAP chooses the Oracle Database to run under SAP in almost all their large accounts.” As anyone who follows the computer industry knows, this claim is rather absurd. SAP’s customers choose which DBMS they will use, not SAP. And if SAP had anything to say about it, they would not recommend Oracle, their biggest competitor in the commercial business applications space. Furthermore, SAP favors DB2 for its own systems. They operate more than a thousand SAP systems, and all of those systems run on DB2.
Perhaps the silliest of Ellison’s comments is this: “The Oracle Database scales out, IBM DB2 for Unix does not. Let me see, how many servers can IBM put together for an OLTP application? Let’s see, how many can they group together? Um, one. They can have up to one server attacking really big jobs. When they need more capacity, they make that server bigger. And then they take the old server out, put a bigger one in. And when you’ve got the biggest server, that’s it. That’s all they can do for OLTP.” Ellison also claimed that IBM “can’t scale out, they can’t do cloud, they can’t do clusters, they can’t do any of this.”
I bet this surprised a lot of DB2 users doing these things with DB2! DB2 Parallel Edition was released in 1995, along with the capability to scale to a system of over one hundred Unix servers. DB2 LUW scalability is proven in many of the world’s largest OLTP environments. Consider this press release talking about how DB2 LUW powers one of the largest OLTP systems in the world.
And what about that clustering claim? Evidently Mr. Ellison slept through 2009. IBM DB2 pureScale, released last year, offers powerful, efficient database clustering. For a cluster of 64 nodes, DB2 pureScale maintains 95% efficiency. At 128 nodes, DB2 pureScale maintains 84% efficiency. This is important because if you are growing a cluster to handle bigger workloads, you want your hardware to be doing productive work, not handling system overhead. On the other hand, Oracle RAC has a 100 server limit…
Ellison also made other far-out claims about IBM like “They’re so far behind, I don’t think they have any chance at all. I’m serious.” Ellison also said “They are not competitive in the database business, except on the mainframe.”
If this were true, why would Ellison spend any time thinking or talking about IBM? It sure seems like Ellison is be worried about IBM (and if he isn’t, he should be). Anyone with even a cursory knowledge of the computer industry has to admire IBM. They have led the industry in developing patents for the last 17 years. In 2009, IBM produced 4914 patents while Oracle did not even place in the top 50 patent leaders. A search of the US Patent office database reveals 1588 patents with “database” in the patent description while Oracle produced only 184 patents.
Hyperbole is one thing, but gross inaccuracy is another. In his latest tirade, Ellison is guilty of both. Oracle makes a good DBMS… pity its CEO doesn’t think it can sell it on its own merits without making things up about the competition.
Acquisitions in the First QuarterThere were several data related acquisitions made by the major DBMS companies in the first quarter of 2010. Not unexpectedly, first to the plate in the New Year was Oracle. I guess swallowing Sun Microsystems did not sate Oracle’s appetite because on January 5, Oracle announced it had acquired data quality vendor Silver Creek Systems. No terms were disclosed.
Silver Creek Systems, based in Westminster, CO, produces software that helps companies simplify and standardize product descriptions across the various information stores in their business. The data quality technology from Silver Creek should help to boost Oracle’s various application suites, such as its CRM (Customer Relationship Management) and SCM (Supply Chain Management) offerings.
Oracle did not provide any details on how it planned to utilize Silver Creek’s technologies other than to indicate that it expected to increase spending on research and development for data quality software.
In early February, Oracle struck again, this time acquiring AmberPoint, a provider of SOA management capabilities. Oracle intends to incorporate AmberPoint’s technology to extend Oracle’s Fusion Middleware SOA Management Solutions. Again, financial details of the transaction were not disclosed.
“AmberPoint and Oracle share a vision of providing customers with comprehensive SOA management capabilities that support modern IT environments and are also complete, open, and integrated,” said Thomas Kurian, Oracle Executive Vice President, Product Development. “We expect the addition of AmberPoint’s products to Oracle Fusion Middleware SOA Suite will provide stronger end-to-end governance that allows customers to manage the entire lifecycle of SOA-based solutions, providing visibility and management across heterogeneous environments.”
Oracle’s final acquisition of the quarter was announced a couple of days later when the company announced plans to acquire Israeli-based Convergin, a provider of software for the telco industry.
Adding Convergin products to Oracle Communications portfolio is expected to enable customers with next-generation solutions to address network migration to an all IP core, significantly reducing integration and hardware costs.
Coupled with Oracle acquisition of Sun and the Java Platform Micro Edition, the acquisition of Convergin should serve to further bolster Oracle’s capabilities and positioning in the mobile applications space.
IBM was not silent in making data and database related acquisition during the first quarter of 2010, either. In late January, IBM announced its intention to acquire National Interest Security Company, LLC (NISC). The acquisition of NISC will further strengthen IBM’s already formidable advanced analytics capabilities. Financial terms were not disclosed.
IBM will integrate the NISC business into its Global Business Services group where it will operate, at least initially, as a wholly owned subsidiary. The combined offerings will enable IBM to expand its capabilities with federal, state and local government entities, particularly in the fast-growing areas of defense, healthcare, energy, logistics and security. NISC’s deep federal expertise will complement IBM’s existing public sector offerings and the recently launched Business Analytics and Optimization (BAO) Services for Public Sector.
“With IBM’s analytic and innovation prowess, and NISC’s industry knowledge and experience in defense, healthcare, energy and infrastructure management services, we’ll bring an unprecedented level of service and support to our government clients,” said Chuck Prow, managing partner, public sector, IBM Global Business Services. The acquisition was successfully completed early in March.
IBM also announced in early March that it had completed its acquisition of Initiate Systems, which it embarked upon acquiring in early February. Initiate Systems was a privately held provider of data integrity software based in Chicago, IL. Before being acquired by IBM, Initiate had been one of the largest stand-alone MDM vendors. The company had filed to go public in November 2007, but withdrew the IPO a few months later.
Ititiate’s software enables information sharing among healthcare and government organizations, helping healthcare clients work more intelligently and efficiently with timely access to patient and clinical data.
“With the addition of Initiate’s software and its industry expertise, IBM will offer clients a comprehensive solution for delivering the information they need to improve the well-being of patients at a lower cost,” said Arvind Krishna, general manager, Information Management, IBM. “Similarly, our government clients will now have even more capabilities for gathering and making use of information to serve citizens in a timely and efficient manner.”
MDM seems to be getting “hot” as Initiate was not the only MDM vendor scooped up in the first quarter. In late January, Informatica announced it had completed the acquisition of Siperian, a leading MDM vendor for approximately $130 million in cash.
And finally, in early February Sybase agreed to acquire Aleri, Inc., a provider of complex event processing software. The move should strengthen Sybase’s position in the financial services sector, where it is already strong with its DBMS offering.
“With this transaction Sybase positions itself as a clear market leader in CEP. We have strengthened our real-time analytics platform, by adding Liquidity Risk Management and the industry leading Liquidity Management Suite,” said Dr. Raj Nathan, Senior Vice President and CMO of Sybase. “Our customers increasingly expect Sybase to provide a broad analytics portfolio to meet their growing needs and we are committed to continue to deliver on this vision.”
All in all, a very active quarter for data related technology acquisitions.
First Quarter Product AnnouncementsIn early February, IBM announced new data protection software, a line of consulting services and resources, and previewed information monitoring software to help organizations expand their use of trusted information to improve decision making. These moves further bolster IBM’s already formidable arsenal of data lifecycle management solutions.
The data protection announcement was for Optim Data Redaction. This solution, engineered for unstructured data like Word documents and PDF files, automatically recognizes and removes sensitive content from documents and forms. For example, a customer’s credit scores in a loan document could be hidden from an office clerk, while still being visible to a loan officer. In today’s atmosphere of more and more stringent regulations, a data redaction solution is becoming a requirement. For example, PCI DSS industry standards dictate specific rules regarding the display of debit and credit card information on receipts and reports.
Optim Data Redaction is planned for general availability in March 2010.
The information monitoring announcement was for InfoSphere Business Monitor. This technology is based on a combination of work from IBM’s research group and technology gained when IBM acquired Guardium. Guardium is a database activity monitoring (or auditing) solution. InfoSphere Business Monitor tracks the quality and flow of an organization’s information and provides real-time alerts of potential flaws. For example, if a health insurance company was analyzing profit margins across different product lines (individual, group, HMO, Medicare, etc.), decision makers would immediately be alerted when a data feed from a specific geography was not successfully integrated.
InfoSphere Business Monitor is available as a technology preview; it is not generally available and no GA date was announced.
These announcements, coupled with IBM’s acquisitions this quarter, serve to clarify IBM’s continuing interest in and intended domination of the realm of information and data lifecycle management.
The only other product “announcement” of any note was IBM’s announcement of the beta program for the next version of DB2, now “officially” known as DB2 10 (no more DB2 X). It is a closed beta program, and it began on March 12, 2010.
The announcement, made in early February, highlighted some of the areas of improvement to be delivered by DB2 10 for z/OS, and at the top of that list, to no one’s surprise, is performance. DB2 10 promises to deliver out-of-the-box savings by improving operational efficiencies ranging from 5% to 10% out-of-the-box CPU savings for traditional workloads and up to 20% out-of-the-box CPU savings for nontraditional workloads. Of course, we’ll have to wait and see if these claims hold water once DB2 10 is made generally available (probably some time late this year or early next year).
For anyone interested in the beta program for DB2 10 more information is available on IBM’s website.
Another Lawsuit from OracleOracle continued to make legal news, this time suing Rimini Street, a Las Vegas-based computer support company. Rimini is a third-party support and maintenance provider for Siebel, PeopleSoft, JD Edwards, and SAP software. Oracle claims that Rimini Street engaged in “a massive theft” of Oracle’s software. According to Oracle, Rimini uses automated bots to scour its website and download the materials after obtaining passwords from Oracle customers.
Lawyers representing Oracle filed a federal lawsuit in late January against both Rimini Street and its president and CEO Seth Ravin, alleging copyright infringement, unjust enrichment and breach of contract. The 13 charges made by Oracle in the complaint also allege violations of the federal Computer Fraud and Abuse Act and California’s Computer Data Access and Fraud Act, and unfair competition.
In a prepared statement, Ravin claimed Oracle’s motivation was to stifle competition.
Does this lawsuit remind you of anything? It is strikingly similar to the ongoing lawsuit that Oracle is fighting against the TomorrowNow unit of SAP, which also provided third-party support for Oracle’s business application software. SAP eventually closed the TomorrowNow business unit in 2008, but the lawsuit continues to wind its way through the court system.
But guess what? It seems that Seth Ravin, Rimini’s CEO, previously worked at TomorrowNow.
The First Quarter: By the NumbersAs per our regular custom, let’s examine the earnings of the Big Three DBMS vendors during the past quarter.
Oracle reported healthy fiscal second quarter earnings, up 15% over the same period last year at 29 cents per share. Total revenues were up 4% to $5.9 billion; new license revenues were up 2% to $1.7 billion; and operating income was up 10% billion.
Database and middleware software revenue grew at 10% over the same quarter last year to $3.306 billion from $2.992 billion, while application software revenue grew at 7% over the same quarter last year to $1.594 billion from $1.484 billion.
“We delivered results which were substantially better than we expected on both the top and bottom line, growing non-GAAP operating margins by 280 basis points to 49%, the highest Q2 non-GAAP operating margin in our history,” said Oracle CFO Jeff Epstein. “Our solid top line growth, coupled with disciplined expense management, was key in generating $8.4 billion of free cash flow over the last twelve months.”
Oracle also paid a dividend this quarter. Its Board of Directors approved a cash dividend of $0.05 per share of outstanding common stock to be paid to stockholders of record as of the close of business on January 19, 2010, with a payment date of February 9, 2010.
In early January IBM reported 2009 fourth quarter and full year results for its 2009 fiscal year.
Fourth-quarter net income was $4.8 billion compared with $4.4 billion in the fourth quarter of 2008, an increase of 9%. Total revenues for the fourth quarter of 2009 of $27.2 billion increased 1% (down 5%, adjusting for currency) from the fourth quarter of 2008.
Net income for the year ended December 31, 2009, was $13.4 billion compared with $12.3 billion in the year-ago period, an increase of 9%. Diluted earnings were $10.01 per share compared with $8.89 per diluted share in 2008, an increase of 13%. Revenues for 2009 totaled $95.8 billion, a decrease of 8% (5%, adjusting for currency), compared with $103.6 billion in 2008.
Revenues from the Software segment were $6.6 billion, an increase of 2% (down 4%, adjusting for currency) compared with the fourth quarter of 2008. Revenues from IBM’s key middleware products (WebSphere, Information Management, Tivoli, Lotus and Rational) were $4.1 billion, an increase of 6%. Narrowing things down just a bit further, revenues from just Information Management software, which includes DB2 and IBM’s other database and information on demand solutions, increased 7%.
The net of it all, is that IBM’s fourth quarter was solid but overall annual sales dipped below the $100 billion mark. IBM put a positive spin on things, though. Samuel J. Palmisano, IBM chairman, president and chief executive officer said, “We concluded a strong year with a solid performance in the fourth quarter in which we again delivered growth in margins, profit and earnings. IBM continued to benefit from our strategic transformation, offerings that our clients value in this economy, and our commitment to developing countries around the world.”
For my mainframe readers, revenues from System z mainframe server products decreased 27% compared with the year-ago period. Total System z computing power measured in MIPS (millions of instructions per second) decreased by 19%. This is the fifth straight quarter of mainframe revenue decline, and the third straight quarter of double-digit decline of both MIPS and mainframe revenue. IBM is planning to unveil a new mainframe later this year though (likely to be named the z11), which should stanch the mainframe decline.
In late January, Microsoft announced record revenue of $19.02 billion for the second quarter ended December 31, 2009. This marked a 14% increase from the same period of the prior year. Operating income, net income and diluted earnings per share for the quarter were $8.51 billion, $6.66 billion and $0.74 per share, which represented increases of 43%, 60% and 57%, respectively, when compared with the prior year period.
“Exceptional demand for Windows 7 led to the positive top-line growth for the company,” said Peter Klein, chief financial officer at Microsoft. “Our continuing commitment to managing costs allowed us to drive earnings performance ahead of the revenue growth.”
Revenue for the Server and Tools division, which includes Microsoft SQL Server, was up by about 2.4% –Server and Tools revenue was $3.844 billion for the quarter versus $3.755 billion for the same quarter last year.
Obviously, Microsoft’s huge quarter was not about its database software.
…And in Other Database Related NewsWhat else happened in the world of database management during the first quarter of 2010? Well, IBM can be proud of its number one ranking in the server market. IDC reported in late February that IBM held a 35.4% revenue share, comfortably ahead of the number two player in the market, Hewlett Packard, at 30.5%.
In money related news, Larry Ellison ranked number one of the 2009 stock option list, according to an analysis from executive-compensation research firm Equilar Inc. The value of the options granted to Ellison was $57.4 million in 2009, a significant portion of the total grants to top Oracle executives, which was $174.3 million.
SummaryAnd so ends another edition of The Database Report. Even with a sagging economy, there was quite a bit of activity during the first quarter. So it sure promises to be an exciting year in the DBMS market. And that means you better make sure that you check in with us again next quarter to review what happens with your favorite database software and companies.