The most interesting acquisition of this quarter was not conducted by our usual suspects (meaning IBM, Microsoft, Oracle and SAP), but was a technology acquisition by a small, private software vendor from one the largest. Yes, I am talking about Embarcadero Technologies acquiring the data modeling software ERwin from CA Technologies.ERwin has had a storied life and is a leading data modeling product used by data architects and data analysts for designing logical and physical designs for database implementations. The product was originally developed by LogicWorks, which was acquired by Platinum technology, inc. in 1998. Platinum was then swallowed up by CA the next year.
The product had an odd life at CA, at least in my opinion. CA provides has a large direct sales force that sells infrastructure software (system management, application management, database administration) and products to large organizations. The company never really focused on the data modeling market. Indeed, most sales of ERwin were handled by resellers instead of CA’s internal sales force.
Announced in mid-March, Embarcadero Technologies, agreed to acquire CA’s ERwin Data Modeling solution. No financial terms were announced. Early indications are that Embarcadero will be retaining the staff and keeping the ERwin product line – at least initially. Over time, it would only make sense for the company to pick and choose the best features from the newly acquired ERwin and Embarcadero’s data modeling tool, ER/Studio. But time will tell.
“Data architecture is now the biggest part of Embarcadero’s business and represents our significant commitment to the category,” said Wayne Williams, CEO at Embarcadero Technologies. “Every aspect of IT – from application development and business intelligence to security and user experience – is defined and driven by data architecture.”
Of course, this was not the only acquisition during the quarter. Oracle and IBM were busy, too.
Late in 2013, Oracle announced that it has entered into an agreement to acquire Responsys, Inc., a provider of enterprise-scale cloud-based B2C marketing software. Oracle will pay $27.00 per share in cash or approximately $1.5 billion for the company.
The addition of Responsys extends Oracle’s Customer Experience Cloud, which includes Commerce, Sales, Service, Social and the Oracle Marketing Cloud. Responsys together with Eloqua (acquired by Oracle late in 2012), the company can boast of a Marketing Cloud that support industries with B2C or B2B business models.
“Oracle customers will benefit from continued R&D; investment across the Responsys and Eloqua platforms, ensuring that CMOs in all industries are armed with a best-in-class solution,” said Thomas Kurian, Executive Vice President, Oracle Development.
The Board of Directors of Responsys has unanimously approved the transaction, which is expected to close in the first half of 2014, subject to Responsys stockholders tendering a majority of outstanding shares.
In late February 2014, Oracle pounced again, this time agreeing to acquire BlueKai, a cloud-based big data platform that aggregates consumer data to better target online advertising and marketing efforts. Although financial terms of the deal were not officially disclosed, Fortune magazine reported that the cost of the deal was “a little above” $400 million, mostly in cash.
“Modern marketers require new ways of acquiring, centralizing, interpreting, and activating customer data across marketing channels so that they can enhance the customer experience and maximize the return on their marketing spend,” said Steve Miranda, Executive Vice President, Applications Development, Oracle. “The addition of BlueKai to the Oracle Marketing Cloud enables marketers to act on data across both known customers and new audiences and precisely target customers with a personalized message across all channels.”
Oracle also announced that it acquired Corente, a leading provider of software-defined networking (SDN) technology for wide area networks (WAN). The combination of Oracle and Corente is expected to deliver software-defined networking offerings that create cost-effective, secure networks, spanning global deployments, delivering a complete technology portfolio for cloud deployments with SDN offerings that virtualize both the enterprise data center LAN and the WAN.
What about IBM? Well, they had news coming and going. In the “going” part of the news, in late January IBM agreed to sell its low-end server business to Lenovo. The server lines being sold to Lenovo include System x, BladeCenter and Flex System blade servers and switches, x86-based Flex integrated systems, NeXtScale and iDataPlex servers and associated software, blade networking and maintenance operations. The purchase price is about $2.3 billion, approximately two billion of which will be paid in cash and the balance in Lenovo stock. The agreement builds upon a longstanding collaboration that began in 2005 when Lenovo acquired IBM’s PC business, which included the ThinkPad line of PCs.
IBM will retain its System z mainframes, Power Systems, Storage Systems, Power-based Flex servers, and PureApplication and PureData appliances. Also, IBM will continue to develop and evolve its Windows and Linux software portfolio for the x86 platform.
Following the closing of the transaction, Lenovo will assume related customer service and maintenance operations. IBM will continue to provide maintenance delivery on Lenovo’s behalf for an extended period of time, so customers should see little change in their maintenance support.
“This divestiture allows IBM to focus on system and software innovations that bring new kinds of value to strategic areas of our business, such as cognitive computing, Big Data and cloud,” said Steven A. Mills, senior vice president at IBM Software and Systems.
Approximately 7,500 IBM employees around the world are expected to be offered employment by Lenovo, but no word from Lenovo on exactly how many employees it will agree to pick up.
Moving to the “coming” part of IBM’s news, in late February IBM agreed to acquire Boston, MA-based Cloudant, Inc., a privately held database-as-a-service (DBaaS) provider. Financial terms of the deal were not disclosed.
Cloudant complements IBM’s Big Data and Analytics portfolio beyond traditional data management by providing DBaaS capabilities that enables clients to simplify and accelerate the development of engaging and scalable mobile and web apps. Cloudant also is integral to IBM’s MobileFirstsolutions. It enables developers who use Worklight, IBM’s mobile app development software, to quickly create flexible, reliable and scalable apps that include a variety of structured and unstructured data.
“IBM is leading the charge in helping its clients take advantage of big data, cloud and mobile,” said Sean Poulley, vice president, Databases & Data Warehousing, IBM. “Cloudant sits squarely at the nexus of these three key transformational areas and enables clients to rapidly deliver an entirely new level of innovative, engaging and data-rich apps to the marketplace.”
Cloudant has been an active participant and contributor to the open source Apache CouchDB database community. Cloudant’s JSON cloud-based data service enables mobile and web developers to quickly and easily store and access the explosion of mobile data using an API that is significantly easier to use than alternatives.
“IBM has a rich history in the field of data management, and one that will truly differentiate Cloudant’s technology in the marketplace,” said Cloudant CTO and Co-Founder Adam Kocoloski. “Joining IBM allows Cloudant to innovate faster than ever before, and IBM’s track record in open source software gives us complete confidence in our ongoing collaboration with the Apache CouchDB project. Cloudant could not have found a better home than IBM.”
The acquisition of Cloudant is expected to close in in the first quarter of 2014. Following the close, Cloudant will join IBM’s newly formed Information and Analytics Group led by Senior Vice President Bob Picciano, a business unit within the IBM Software & Systems Group.
Finally, Microsoft played the acquisition game this quarter, too. In early January Microsoft announced that agreed to acquire Parature, a provider of cloud-based customer engagement solutions. The acquisition enables Microsoft to add customer self-service capabilities to the Microsoft Dynamics family.
“Parature is a perfect fit for every business and will enable us to offer customers one of the best cloud-based solutions for customer self-service,” said Bob Stutz, corporate vice president, Microsoft Dynamics CRM. “This is a compelling combination for organizations committed to delivering the best service experience that consistently exceeds their customers’ expectations.” Financial terms of the deal were not disclosed.
Let’s turn our attention to the most recent financial news from the four major DBMS vendors that we track: IBM, Microsoft, Oracle, and SAP.
IBM’s third-quarter revenues were $23.72 billion compared to $24.74 billion for the same quarter last year. But what’s a billion dollars or so among friends?
For the most part, the lower revenues were attributed to IBM’s underperforming hardware division. Of course, these results were announced before the company’s sell-off of its lower-end server business, so IBM is taking steps to remedy the situation, believed to be caused by the growing popularity of cloud computing services.Revenues in the hardware group were down almost entirely across the board. Revenues from its Systems and Technology segment totaled $3.2 billion for the quarter, down 17 percent from the third-quarter of 2012. Pre-tax income decreased $291 million to a loss of $167 million.
Total systems revenues decreased 19 percent, and revenues from Power Systems were down 38 percent compared with the 2012 period. Revenues from System x were down 18 percent. Revenues from System Storage decreased 11 percent. The mainframe was the lone bright spot, with revenues from System z products increasing by 6 percent as compared with same period last year. Total delivery of System z computing power, as measured in MIPS (millions of instructions per second), increased 56 percent.
What about on the software side of the business? Things were looking much better there. Revenues from the Software segment came in at $5.8 billion, up 1 percent compared with the same quarter a year ago. Revenues from IBM’s key middleware products, which include WebSphere, Information Management, Tivoli, Social Workforce Solutions and Rational products, were $3.7 billion, up 3 percent versus the same quarter last year. Focusing just on Information Management, the line that includes DB2, software revenues increased 2 percent year over year.
Oracle announced its fiscal second quarter results touting that total revenues were up 2 percent to $9.3 billion.
New software licenses and cloud software subscriptions revenues were flat at $2.4 billion, while software license updates and product support revenues were up 6 percent to $4.5 billion. Hardware Systems revenues, including hardware systems products and hardware systems support, were unchanged at $1.3 billion, which is a positive for Oracle because hardware had been on a steady decline for several quarters. But hardware systems products revenues were down 3 percent to $714 million, so the gap was covered by support revenue.
“We’re very pleased with our results as new software license and cloud software subscription revenue grew 1 percent in constant currency over the 18 percent growth reported last year,” said Oracle President and CFO, Safra Catz. “Software revenue grew 5 percent helping drive our tremendous cash flow and for the first time ever, we generated more than $15 billion in operating cash flow over four quarters.”
Up in Redmond the financial juggernaut keeps investors happy with new record earnings. In late January, Microsoft Corp. announced revenue of $24.52 billion for its fiscal second quarter. Gross margin, operating income, net income, and diluted earnings per share for the quarter were $16.24 billion, $7.97 billion, $6.56 billion, and $0.78 per share, respectively.
“We delivered record revenue as demand for our business offerings remains high and we made strong progress in our Devices and Consumer segment,” said Amy Hood, chief financial officer at Microsoft. “These results reflect our focus on execution, cost discipline, and long-term shareholder value as we continue to drive the strategic transformation of the company.”
Devices and Consumer revenue grew 13 percent to $11.91 billion, while Commercial revenue grew 10 percent to $12.67 billion. And SQL Server continued to gain market share with “revenue growing double-digits.”
“We significantly outpaced enterprise IT spend as we continue to take share from our competitors by delivering the devices and services our customers need as they transition to the cloud,” said Kevin Turner, chief operating officer at Microsoft.
SAP announced its fourth quarter results as well as full fiscal year 2013 results in late January. Reading through the press release you would think that the results were outstanding, but digging deeper into the numbers reveals a decline in software license sales and slower growth for HANA. And the strengthening Euro did the company no favors, either. The euro gained 7.9 percent in the past year or so, making SAP software relatively more expensive in North America and Asia (where the company tallies more than half of its business).
Sales of software licenses, a source of future service revenue, fell 2 percent to 1.9 billion euros ($2.6 billion). Sales of HANA totaled 296 million euros in the fourth quarter, which was impacted by a 31 million-euro effect from currency swings. That caused it to fall short of an average analyst estimate of 331 million euros. Nevertheless, SAP boasts more than 3,000 HANA customers and full year 2013 HANA software revenue of 633 million euros at actual currencies (an increase of 61 percent over the last fiscal year).
Not surprisingly, the company line remained positive. “We are proud of having delivered another year of double digit growth, outperforming the market and expanding our margin, while at the same time investing in innovation and the cloud,” said Co-CEOs Bill McDermott and Jim Hagemann Snabe. “Based on our strong global momentum from 2013 we will accelerate the transition to the cloud by offering customers choice. With all solutions moving to the Cloud powered by our real time platform HANA, we will simplify for our customers, extend our lead and drive growth that is more predictable and profitable for the long term.”
As I read that prepared quote I try to imagine them both saying it at the exact same time and grin a little bit.
Microsoft’s New CEO
Regular readers of this column know that Microsoft has been in search mode for a new CEO since Steve Ballmer announced in Q3 last year that he would be stepping down. Well, on February 4, 2014 Microsoft announced that it had appointed Satya Nadella as Chief Executive Officer and member of the Board of Directors effective immediately. Nadella previously held the position of Executive Vice President of Microsoft’s Cloud and Enterprise group.
“During this time of transformation, there is no better person to lead Microsoft than Satya Nadella,” said Bill Gates, Microsoft’s Founder and Member of the Board of Directors. “Satya is a proven leader with hard-core engineering skills, business vision and the ability to bring people together.”
Microsoft also announced that Bill Gates, previously Chairman of the Board of Directors, will assume a new role on the Board as Founder and Technology Advisor, and will devote more time to the company, supporting Nadella in shaping technology and product direction. John Thompson, lead independent director for the Board of Directors, will assume the role of Chairman of the Board of Directors and remain an independent director on the Board.
In his email to Microsoft employees on his first day as CEO, Nadella claimed that “This is a software-powered world.” He further said “I believe over the next decade computing will become even more ubiquitous and intelligence will become ambient. The coevolution of software and new hardware form factors will intermediate and digitize — many of the things we do and experience in business, life and our world. This will be made possible by an ever-growing network of connected devices, incredible computing capacity from the cloud, insights from big data, and intelligence from machine learning.”
In the wake of Nadella’s ascent, there were several departures in the executive ranks. Tami Reller, executive vice president of marketing, and Tony Bates, executive vice president of the company’s Business Development and Evangelism group both departed. The exit of Bates makes sense as he was the former CEO of Skype and a candidate for the CEO job that was taken by Nadella. Reller’s departure may be for similar reasons… she was not a CEO candidate but with her finance background, she lost out to Amy Hood when the company’s CFO job opened up last May.
At any rate, it will be interesting to watch Microsoft transform itself under with Nadella at the helm.
Here Comes Microsoft SQL Server 2014
On the database technology side of all things Microsoft, in mid-March the company announced that SQL Server 2014 had been released to manufacturing and would become generally available on April 1, 2014. The new version of SQL Server boasts many improvements such as in-memory and cloud capabilities, improved AlwaysOn Availability, updateable column store indexes, and backup enhancements among others.
A nice overview of the new features can be found on the SQL Server Pro blog by Michael Otey at Important New Features in SQL Server 2014.
Layoffs at IBM
In early March details about layoffs occurring at IBM began hitting the IT news. IBM termed the layoffs as workload rebalancing needed because of 2013’s financial results. In January, IBM announced that it would take a restructuring charge of $1 billion in the first quarter of 2014.
And in March news of job cuts in Poughkeepsie NY, Rochester MN, and Burlington VT (among others) began to trickle out. The cuts were not just in the US, as additional sources reported large cuts in India, Brazil, and Argentina, as well as in some European locations.
However, even as some employees were let go, IBM continued to hire in high growth areas. At any given time, IBM has thousands of job openings in high growth areas.
“As reported in our recent earnings briefing, IBM continues to rebalance its workforce to meet the changing requirements of its clients, and to pioneer new, high-value segments of the IT industry,” said IBM spokesman Doug Shelton in a statement. “To that end, IBM is positioning itself to lead in areas such as cloud, analytics and cognitive computing, and investing in these priority areas.”
News from the Court Room for Oracle
And finally, following up on some earlier stories covered here, we have updates on some outstanding cases involving Oracle.
First, a federal judge dismissed part of Oracle’s suit against Solaris third-party support providers Terix and Maintech. Oracle had claimed that the two companies “either obtained access credentials to Oracle’s secure support website under false pretenses or directed others with access credentials to download Oracle’s intellectual property unlawfully.” The judge saw it otherwise.
But the case is not over. The judge did not dismiss Oracle’s other claims against the companies, including for breach of contract, copyright infringement, unfair competition and false advertising.
Secondly, a ruling was handed down in Oracle’s case against Rimini Street. The case has been going on for four years, in which Oracle claimed that Rimini Street engaged in “a massive theft” of Oracle’s software. According to Oracle, Rimini used automated bots to scour its website and download the materials after obtaining passwords from Oracle customers.
The ruling found that Rimini Street, had indeed violated some copyrights when the company installed copies of PeopleSoft on its computer systems so it could create software updates for customers. But the U.S. District Court judge also found that Rimini Street did not infringe on Siebel or J.D. Edwards copyrights, as alleged by Oracle.
So in this case, both sides could claim some level of victory.
Until Next Quarter…
And that brings us to the end of another edition of The Database Report on TDAN.com. The data and database world continues to amuse and entertain as we examine the quarterly goings-on. Stay tuned next quarter for more information on acquisitions, lawsuits, financials new and new technology.