Another quarter has come and gone marking the time for us to examine what happened in the world of data and database management during the past three months.
The first quarter of 2012 was highlighted by the usual antics including acquisitions, lawsuits, product announcements, and employee news… and as usual, we’ll take a look at the financial performance of the Big Three DBMS vendors. So without any further ado, let’s commence the quarter’s edition of The Database Report, and review all of the news that’s fit to review within the realm of data and database systems.
Quarterly Earnings AnnouncementsLet’s being our coverage of this quarter by taking a look at the earnings of the Big Three DBMS vendors, as well as earnings at SAP.
Oracle’s Fiscal Second Quarter
Oracle announced disappointing fiscal 2012 second quarter results. Total revenue was up 2% to $8.8 billion and new software licenses were also up 2% to $2.0 billion. According to Oracle, these results were helped by an increase in last-minute additional approvals required for previously-scheduled and expected deals in some regions.
Hardware revenue was $953 million for the quarter, a 14% decline over the same quarter last year. Oracle attributed the hardware result in part to a product transition to T4 processor-based products, which caused some customers to significantly slow buying the older systems. The company asserted that it saw good early demand for the new SPARC Super Cluster but since it was only released for general availability at the very end of the quarter, only a couple were shipped. A potential bright spot: hardware gross margins were 51% for the quarter on lower volumes
Software license and product support revenues were up 9% coming in at $4 billion. The database and middleware product line performed well, with new software licenses of $1.48 billion (up 4% over the same quarter last year). Database software updates and support came in at $2.7 billion (up 11%) for a combined total of $4.186 billion (up 8%).
The news was not as rosy on the applications front, where new license revenue was down 2% at $569 million. However, overall applications revenue rose by 4% to a total of $1.848 billion.
Oracle highlighted the growth of the Exadata and Exalogic products with triple-digit growth rates as compared to the second quarter of last year. “Sales of our engineered systems accelerated in Q2,” said Oracle CEO, Larry Ellison. “Exadata growth was well over 100% compared to last year, and Exalogic grew more than 100% on a sequential basis.”
Additionally, Oracle announced that its Board of Directors authorized the repurchase of up to an additional $5 billion of common stock under its existing share repurchase program in future quarters. The Board of Directors also declared a quarterly cash dividend of $0.06 per share of outstanding common stock. This dividend was paid to stockholders of record as of the close of business on January 11, 2012, with a payment date of February 1, 2012.
Microsoft’s Fiscal Second Quarter
In mid-to-late January Microsoft announced quarterly revenue of $20.89 billion for its fiscal second quarter, representing a 5% increase from the prior year period. Operating income, net income, and diluted earnings per share for the quarter were $7.99 billion, $6.62 billion, and $0.78 per share, compared with $8.17 billion, $6.63 billion and $0.77 per share, respectively, in the prior year period.
The Server & Tools business posted $4.77 billion in second quarter revenue, an 11% increase from the prior year period, reflecting double-digit revenue growth in Windows Server and SQL Server premium editions and more than 20% growth in System Center revenue.
“We saw strong demand for our business products and services, despite the soft PC market and continuing economic uncertainty in key parts of the world,” said Peter Klein, chief financial officer at Microsoft. “We delivered record earnings per share by continuing to manage our costs while investing for future growth.”
IBM’s Fiscal Fourth Quarter
And the third member of the big three, IBM, announced its fiscal fourth quarter 2011 earnings this quarter. Total revenues for the quarter were $29.5 billion an increase of 2% over the same quarter last year. Fourth quarter net income was $5.5 billion compared with $5.3 billion in the fourth quarter of 2010, an increase of 4%. Operating net income was $5.6 billion compared with $5.4 billion in the fourth quarter of 2010, an increase of 5%.
“We had a strong fourth quarter performance, capping a year of record earnings per share, revenue, profit and free cash flow,” said Ginni Rometty, IBM president and chief executive officer. “We delivered outstanding results in all four of our strategic initiatives for the quarter and the year, as we continued to realize the benefit of our long-term investments in growth markets, business analytics, Smarter Planet solutions and cloud. We are well on track toward our long-term roadmap for operating earnings per share of at least $20 in 2015.”
Revenues from the Software segment were $7.6 billion, an increase of 9%. Software pre-tax income of $3.7 billion increased 12% year over year. Revenues from IBM’s key middleware products (which includes WebSphere, Information Management, Tivoli, Lotus and Rational) were $5.2 billion, an increase of 11% versus the fourth quarter of last year. Operating systems revenues of $710 million increased 3% compared with the prior-year quarter. Focusing on just the Information Management product line (which includes DB2), software revenues increased 9%. IBM highlighted the fact that distributed database products grew by double digits led by a strong performance from Netezza, which was up nearly 70%. Since acquiring Netezza, IBM has expanded its customer base by over 40%.
Turning our attention to hardware, revenues from the Systems and Technology segment totaled $5.8 billion for the quarter, down 8% from the fourth quarter of the previous year. Systems and Technology pre-tax income was $790 million, a decrease of 33%. So it was not just Oracle that experienced difficulties on the hardware front; it is just that Oracle gets more focus on that segment since they are so new to the hardware business. IBM clarified the hardware earnings by explaining that last year the company had a great fourth quarter with over 20% growth driven by a new mainframe (the z196) that had almost 70% revenue growth. Given that, mainframe revenue declined 31%. So the decline in this quarter was not unexpected.
The company went on to explain that when you look at the full year, Systems and Technology delivered solid performance with revenue up 6%, gross margin up 1.6 points, and $1.6 billion in pre-tax income, up 12% year to year.
And being that it was the end of a fiscal year, IBM wrapped up the year with some figures and provided high level guidance for the upcoming year. At the beginning of the year IBM said it expected growth in the first half of the year to be higher than the second half, and that was true. For the year, IBM delivered operating pre-tax and net income growth of 9%, and operating earnings per share growth of 15%, with double-digit growth in each of the four quarters. For the upcoming year, the company said that it expects to deliver full year 2012 earnings per share of at least $14.16 along with operating earnings per share of at least $14.85.
SAP’s Fiscal Fourth Quarter
Finally, let’s take a look at SAP’s fiscal fourth quarter earnings, which came in above estimates. In mid January the company announced revenue of 4.5 billion Euros (approximately $5.75 billion). Analyst estimates were at 4.36 billion Euros. Overall software revenue was up 16% and total revenue was up 10%.
Entire year results were impressive, too. For the full year, operating profit came in at 4.71 billion Euros, ahead of SAP’s forecast of 4.45 billion to 4.65 billion Euros.
“SAP performed exceptionally well in 2011 clearly exceeding its guidance for revenue and profit. This record performance was driven by strong top line results with double-digit software revenue growth in all regions, resulting in year over year total revenue growth of 1.7 billion Euros and a record cash flow,” said Werner Brandt, CFO of SAP. “We are well positioned to exceed our 20 billion Euro revenue target and reach a 35% operating margin in 2015.”
At this point, one could compare SAP’s results to Oracle’s and come away with the conclusion that Oracle was unwise to make all of the applications acquisitions it made over the past years in its bid to compete head to head with SAP. But I think that might be a bit rash. Oracle is also trying to become a hardware vendor and perhaps it is the combination of both that is causing some heartburn. But I would not underestimate Oracle. With some more time under their belt, things will likely improve… and we will be here each quarter to watch, analyze, and comment on their efforts.
On the Acquisition FrontIBM buys Emptoris and Green Hat
IBM made two strategic acquisitions during the first quarter of 2012. Let’s first take a look at the acquisition of Emptoris. The acquisition of Emptoris expands IBM’s cloud-based analytics offerings that provide supply chain intelligence for the purpose of improving inventory management and cost efficiencies.
Emptoris offers a suite of sourcing, contract management, spend analysis, supplier lifecycle management, services procurement and telecom expense management solutions with the goal of providing “Smarter Commerce.”
“Developing the right procurement strategy and an adaptive supply chain are keys to achieving the business objectives of Smarter Commerce,” said Craig Hayman, general manager, IBM Industry Solutions. “Together, Emptoris and IBM’s integrated solutions will transform how clients manage compliance and mitigate supply risk.”
With the closing of this acquisition, approximately 725 Emptoris employees joined IBM’s software group.
Also in the first quarter of 2012, IBM announced it was acquiring Green Hat, a provider of software quality and testing solutions for the cloud and other environments. Financial terms of the deal were not disclosed. Green Hat customers include British Airways, H&M;, T-Mobile, JP Morgan, Goldman Sachs and Virgin Mobile.
Green Hat helps customers improve the quality of software applications by enabling developers to leverage cloud computing technologies to conduct testing on a software application prior to its delivery. Using Green Hat’s solutions, a virtual test environment can be set up in a matter of minutes versus weeks, and at a lower cost than traditional testing solutions.
“This acquisition extends IBM’s leadership in driving business agility and software quality by changing the way enterprises can manage software development cost, test cycle time and risk,” said Kristof Kloeckner, General Manager, IBM Rational. “Together, we offer the most complete solution available today for agile software development and testing, with flexible options such as the cloud. Green Hat’s application virtualization capabilities will help our customers accelerate their delivery of business critical software.”
Oracle Snaps Up Taleo
Of course, Oracle participated in the acquisition activities of the first quarter of 2012, too. In early February the company announced that it was buying Taleo for $1.9 billion. Coming hot on the heels of SAP’s acquisition of SuccessFactors (see coverage later in this column) the move was widely viewed as a reaction to SAP’s action. Taleo’s Talent Management Cloud helps organizations attract, develop, motivate and retain human capital to improve performance and drive growth.
Taleo’s software is used by 5,000 enterprises and Taleo estimates that about half of the world’s top career websites run Taleo software. After the acquisition closes, Oracle and Taleo expect to create a comprehensive cloud offering for organizations to manage their Human Resource operations and employee careers. Taleo’s Board of Directors has unanimously approved the deal and the transaction is expected to close in the middle of 2012.
“Human capital management has become a strategic initiative for organizations,” said Thomas Kurian, Executive Vice President, Oracle Development. “Taleo’s industry leading talent management cloud is an important addition to the Oracle Public Cloud.”
What About SAP’s Acquisitions?
SAP was busy this quarter, too. The company closed on the acquisition of SuccessFactors, Inc., begun in December 2011. SAP paid $40.00 per share in cash for the company, representing a valuation of approximately $3.4 billion.
SuccessFactors billed itself as a provider of cloud-based human capital management solutions. The announcement of this acquisition sparked waves of rumors about Oracle’s reaction, which we just read about as Oracle bought Taleo.
“The cloud is a core of SAP’s future growth, and the combination of SuccessFactors’ leadership team and technology with SAP will create a cloud powerhouse. The acquisition will help us address the top priority for CEOs globally – managing people and talent,” said Bill McDermott, Co-CEO, SAP. “Together, SAP and SuccessFactors will create tremendous business value for customers, with potent synergies to accelerate our growth in the cloud.”
According to SAP’s press release on the acquisition, SuccessFactors is believed to operate the largest scale of paying cloud users with 15 million subscription seats. With more than 3,500 customers in 168 countries, SuccessFactors is growing rapidly, recording 77% revenue growth year-over-year in the third quarter 2011 and 59% revenue growth year-over-year in the first nine months of 2011.
So it would seem that both Oracle and SAP gobbled up the two leaders in this space. It will be interesting to see how the companies integrate their acquisitions and compete with one another.
Additionally, in mid January SAP also announced the acquisition of software and relevant assets from datango AG, a leading provider of workforce performance support software. The datango solution provides content development, translation and deployment capabilities for electronic training, documentation, and user support.
“The workforce performance tools market has become increasingly strategic and critical to our customers’ success, and datango is a proven leader in this space,” said Markus Schwarz, senior vice president and global head of SAP Education. “By having its own product in this market, SAP can now deliver and accelerate innovations and produce robust content for our customers in the future.”
So, all in all, it was yet another busy quarter in terms of acquisitions.
Microsoft SQL Server 2012 Release for General AvailabilityIn the works for some time now, SQL Server 2012 saw the light of day as a GA product in March. Microsoft launched the product on the web at a Virtual Launch Event on March 7th. The event consisted of more than thirty sessions that highlighted the features and functionality of the latest and greatest version of SQL Server. The sessions were broken down into three separate tracks:
- Mission Critical Confidence highlighting the technical aspects of the release that would be of interest to DBAs.
- Breakthrough Insights focusing on the business intelligence (BI) and analytics features added to SQL Server 2012.
- Cloud On Your Terms covering SQL Server’s cloud features such as integration with Apache Hadoop and SQL Azure.
Although we have covered some of the highlights of this release in past editions of The Database Report, it is important to note that Microsoft changed its pricing as it announced the GA version of SQL Server 2012. The new approach prices SQL Server per core, which allows for a more granular metric for its customers.
Microsoft also announced a revamped set of editions that it will market and sell. At the entry level, Microsoft continues to offer the Standard Edition designed for departmental use. Next is a new Business Intelligence Edition for customers looking to access Microsoft’s BI capabilities as well as all of the Standard Edition features. Developer, Express, and Compact Editions will continue to be available as well, And at the top end is SQL Server 2012 Enterprise Edition which is designed for customers seeking a mission-critical database implementation.
Microsoft also offers a Web Edition of SQL Server 2012, but only to organizations that sign a Service Provider License Agreement.
Amazon Launches DynamoDBAnother interesting product launch this quarter came from a non-traditional player in the database market, amazon.com. In January, Amazon made a splash by announcing DynamoDB, a cloud service offering to bring a big-data, NoSQL system to its customers.
The announcement actually came from Amazon Web Services, a division of amazon.com. Amazon Web Services offers IT infrastructure services to businesses in the form of web services, a.k.a. cloud computing.
Amazon DynamoDB is a fully managed NoSQL database service that provides fast and predictable performance with seamless scalability. Using a web console DynamoDB customers can easily create and manage tables, or scale a table’s request capacity to the needed level without incurring any downtime. Amazon touts that customers can achieve average latencies in the single digit milliseconds for database operations.
High availability can be achieved because DynamoDB stores data on Solid State Drives and replicates it synchronously across multiple Availability Zones. And you can grow your DynamoDB table from a thousand writes per second to 100,000 writes per second using the AWS Management Console.
Amazon additionally touts the ease of administration using DynamoDB, as it is a fully managed service. Customers need not worry about hardware or software provisioning, setup and configuration, software patching, and so on.
You can learn more about Amazon DynamoDB on the web at http://aws.amazon.com/dynamodb/.
Additional First Quarter Product AnnouncementsSeveral additional product announcements were made this quarter, including several from Oracle.
First up in January was the general availability release of the Oracle Big Data Appliance. The company originally announced the Big Data Appliance at last year’s Oracle Open World conference, but without an official release date. As such, some industry analysts were skeptical of Oracle’s desire or ability to move quickly enough to matter. Well, Oracle eliminated that skepticism by releasing the Big Data Appliance in January.
The Oracle Big Data Appliance bundles Cloudera’s distribution of Apache Hadoop and Cloudera Manager (an administration and management console for Hadoop). The appliance also comes with the open-source distribution of R software called Oracle R Enterprise, as well as the Oracle NoSQL database.
Oracle also released another new product in February, the Oracle Advanced Analytics Package. The “new product” is basically an integrated offering combining two existing Oracle products with additional statistical analysis features. The Advanced Analytics package unites the Oracle Data Mining product with Oracle R Enterprise, an Oracle branded version of the open source R analytics environment that was released into the world in January 2012 as part of the Oracle Big Data appliance. So Oracle was busy this quarter trumping up its ability to support advanced analytics, which is important for them in order to compete with the current leaders in analytics which includes IBM, Teradata, SAS, and EMC Greenplum.
But IBM was not standing still. In March, IBM unveiled new consulting services and software in the predictive analytics space. The new analytic offerings address the emerging opportunities of big data to manage financial operations, decrease fraud and nurture next-generation customer relationships. The software is based on experiences drawn from more than 20,000 analytics engagements, combining innovations developed by IBM Research with new predictive technologies from dozens of companies IBM has acquired.
“These new capabilities target the agendas of global business leaders operating in a world of accelerating complexity, unpredictability and massively available information,” said Bridget van Kralingen, senior vice president, IBM Global Business Services. “By integrating analytics into business processes and converting new insights into action, IBM is helping organizations transform big data from a threat into an opportunity, one that will be their most valuable natural resource.”
IBM Cuts StaffAt the end of February, IBM laid off more than 1,000 employees, according to Alliance@IBM, an IBM employee organization. The alliance keeps a running tally of cuts by IBM business units and provides a bulletin board for affected employees to post comments.
IBM never comments on the specifics of any workforce reduction, but “word on the street” is that the cuts were made to better optimize the workforce. And seeing as how IBM employs more than 425,000 people, the loss of a thousand jobs is not a significant portion of the company’s workforce.
Legally SpeakingNow let’s turn our attention to the court house and take a quick look at the outstanding legal issues in the database market. First up, remember the ongoing Oracle v. SAP trial? This is the case that Oracle won against SAP because an SAP subsidiary named TomorrowNow accessed Oracle proprietary data. But late last year a judge threw out the $1.3 billion jury verdict against SAP, claiming the penalty was “grossly excessive.”
At this point, the two parties are wrangling with each other regarding a retrial date. The retrial is for damages only, the entire case will not be retried. SAP has admitted wrongdoing but will not have to pay the $1.3 billion. The new case will determine how much has to be paid. Although Oracle is balking at retrying the case so early, the court is moving forward with a pretrial conference on May 24, 2012 with the intent of starting the trial on June 18, 2012. Why would Oracle be against that? Well, they claim that they will not have sufficient time to prepare because of so many other legal disputes. The court is unlikely to care about that, though… I mean, after all, the right to a speedy trial is a Constitutional right, isn’t it?
And what about Oracle’s ongoing legal battles with Google? Remember that Oracle is asserting that Google has violated Oracle’s patents on Java and was demanding as much as $6 billion from Google. Well, the claims are not substantially reduced, coming in at $230 million now. Who knows, if the claims keep going down I wouldn’t be surprised to see this one settled out of court eventually.
Synopsis…which brings us to the conclusion of yet another edition of The Database Report. Be sure to log on to TDAN.com to keep up to date on the activity in the data and database system market.