The third quarter of 2011 has come to a close, and it is time to investigate what happened in the database market over the past three months. We’ll track the usual suspects and their activities including acquisitions, product news and earnings announcements. So let’s spread some light on the activities that transpired during July, August and September of 2011.
We’ll start this quarter off by examining the acquisitions made by the big players in the data management marketplace. Once again, it was an active market with consolidation continuing unabated. Oracle, as usual, was the most active player.
First up, Oracle acquired Pillar Data Systems, a San Jose, Calif.-based provider of highly scalable SAN Block I/O storage systems that provide performance scaling. Oracle expects the acquisition to help the company deliver a complete line of storage products that runs Oracle software faster and more efficiently. Pillar claims to have approximately 600 customers spread across 24 countries.
“The acquisition of Pillar Data Systems provides Oracle with a compelling SAN storage architecture that complements our core strengths,” said John Fowler, Executive Vice President of Systems at Oracle. “Customers can optimize the value of their Oracle applications, database, middleware and operating system software by running on Oracle’s storage solutions.”
Perhaps the most interesting aspect of this acquisition is that Oracle CEO Larry Ellison owned Pillar Data through his equity firm, Tako Ventures. So Ellison kind of bought the company from himself.
Then, early in the quarter, Oracle agreed to acquire FatWire, a privately held company that specializes in business website management software. FatWire’s solutions are designed for business users with easy-to-use tools, enabling marketers to optimize the online experience for customers. FatWire boasted more than 300 customers including Best Buy, Cisco, Ford and Pfizer.
Oracle grabbed FatWire to support its ongoing Web experience management strategy. FatWire’s solutions complement and extend Oracle’s solutions including BI, CRM, Enterprise Content Management, WebCenter and ATG Web Commerce. By adding FatWire’s capabilities to its portfolio, Oracle can help companies to optimize multi-channel online customer experience through an integrated and scalable platform. The FatWire acquisition should complement Oracle’s acquisition of e-commerce vendor Art Technology Group (earlier in 2011).
In late July, Oracle acquired Ksplice, a privately held company based in Cambridge, Mass. The Ksplice software enables Linux administrators to perform system updates, bug fixes and patches without requiring systems to be taken offline. The company boasts around 700 customers.
This acquisition should help bolster Oracle’s customized Linux kernel that the company uses in its middleware. “System administrators are forced to choose between known best practices and added operational costs when administering Linux updates,” said Jeff Arnold, CEO of Ksplice Inc. “Ksplice’s technology will be able to take Oracle’s kernel updates and transform them into zero downtime updates that provide always-accessible systems with no reboot necessary. This results in improved system availability and security as well as reduced operational costs for the customer.”
Oracle claims to be the only enterprise Linux provider that will be able to offer zero downtime updates when the Ksplice technology becomes a standard feature of Oracle Linux Premier Support.
And then hot on the heels of that acquisition, Oracle acquired InQuira, a provider of knowledge management software that supports Web self-service and agent-assisted service. InQuira is a privately held company with headquarters in the San Francisco Bay Area, and claims to have more than 85 customers. The InQuira technology will be deployed by Oracle to bolster its CRM offerings.
“The acquisition of InQuira provides Oracle with a complete knowledge management suite integrated with self-service support, online customer forums and agent-assisted CRM,” said Anthony Lye, SVP of Oracle CRM. “We expect InQuira to be the centerpiece for Oracle Fusion CRM Service. With InQuira, Oracle will provide an integrated suite of proven solutions that deliver a comprehensive and highly personalized experience for every customer, across all channels.”
Oracle was not alone in making acquisition-related news this quarter. IBM also weighed in with its acquisition of Algorithmics, a provider of risk analytics software. The deal, announced in early September, cost IBM $387 million.
By adding Algorithmics to its product line IBM expands its already impressive business and analytics capabilities. The Algorithmics software is used by banks, investment and insurance companies to assess risk and address regulatory requirements. More than 350 clients, including 25 of the top 30 banks, use Algorithmics analytics software and advisory services. Clients include The Allianz Group, BlueCrest, HSBC, and Scotia Capital.
“Today’s economic environment demands that financial institutions have more cash on hand, a better understanding of their financial standing and the ability to deliver more transparency to stakeholders,” said Rob Ashe, IBM General Manager, Business Analytics.
“Combining Algorithmics expertise with IBM’s deep analytics portfolio will allow clients to take a more holistic approach to managing risk and responding to economic change across their enterprises.”
The acquisition is subject to applicable regulatory clearances and other customary closing conditions. With the closing of this acquisition, approximately 900 Algorithmics employees will join IBM’s Software Group.
In late August, IBM also announced its intent to acquire i2, a provider of intelligence analytics for crime and fraud prevention based in Cambridge, UK with U.S. headquarters in McLean, Va.. With more than 4,500 customers in 150 countries, i2’s solutions are used by 12 of the top 20 retail banks globally and eight of the top 10 largest companies in the world.
IBM asserts that the acquisition of i2 will extend their leadership in helping clients harness “big data” through i2’s intelligence analysis and tactical lead generation capabilities. “IBM’s goal is to better equip public safety officials and businesses with the information and tools they need to ensure safer cities,” said Craig Hayman, General Manager of Industry Solutions at IBM. “The combined capabilities of IBM and i2 will help customers uncover patterns and trends that will allow them to more effectively protect the privacy and safety of citizens, businesses and governments.”
After ingesting Skype last quarter, Microsoft did not acquire any companies during the third quarter of 2011… but there were unsubstantiated rumors that the company had its eye on Nokia as an entry into the mobile phone market.
Finally, in early September, SAP announced it would acquire Right Hemisphere, a leading provider of visual enterprise solutions based in San Ramon, Calif., and Auckland, New Zealand. The 3-D model-based visualization and communications technologies from Right Hemisphere will be used to enhance SAP software, adding visual navigation and interrogation of an entire product or asset and all its associated data in a unified environment. The capabilities should help SAP customers to unify, synchronize and deliver visual product and business information to improve global product development, launch and support processes.
“Right Hemisphere technology empowers customers to visualize business processes from design to manufacturing through sales, operations and service, helping people to easily cooperate and communicate using the most powerful human sense — vision,” said Peter Maier, general manager and head of Line of Business Solutions, SAP AG. “By bringing 3-D to the enterprise and enriching it with business data, we’re setting a new standard in helping companies achieve more efficiency, accuracy and flexibility across the value chain.”
“Order in the Court”
Now we turn our attention to the bevy of ongoing legal battles that abound in the data management market.
Part 1 – Oracle, Itanium, Hewlett-Packard and Mark Hurd
First, let’s look in on the ongoing Oracle and Hewlett-Packard (HP) feud over the Itanium chip. Recall that earlier this year Oracle announced its intentions to stop developing applications for Intel Itanium microprocessors. That did not make HP happy, and the company sued Oracle, demanding that it reverse its decision because it is in violation of “legally binding commitments” Oracle made to Hewlett-Packard.
After HP filed their lawsuit trying to force Oracle to continue supporting Itanium across its product lines, Oracle shot back in a press release saying, “It just takes a few minutes to read the early drafts of the agreement to prove that HP’s claim is not true. What is true is that HP explicitly asked Oracle to guarantee continued support for Itanium, but Oracle refused, and HP’s Itanium support guarantee wording was deleted from the final signed agreement.”
And in a later press release, Oracle had more harsh words for HP. “Oracle has long viewed HP as an important partner,” said Oracle CEO Larry Ellison. “By filing this vindictive lawsuit against Oracle and Mark Hurd, the HP board is acting with utter disregard for that partnership, our joint customers, and their own shareholders and employees. The HP Board is making it virtually impossible for Oracle and HP to continue to cooperate and work together in the IT marketplace.”
So HP wants Oracle to continue to support Itanium and Oracle does not want to support a platform it claim is “dying.” If there really are legally binding terms requiring Oracle to support Itanium, HP can continue along its current path and force Oracle to comply. But what will be gained? As soon as the agreement ends Oracle will drop Itanium again. If you are an Itanium customer relying on Oracle software, the game is already over and it is time to move on.
So what is really to gain here?
In other legal action between Oracle and Hewlett-Packard, Oracle filed a cross-complaint seeking to have a California state court dismiss the Mark Hurd settlement. The motion also asks for “general and special damages” and attorneys’ fees, as well as an order prohibiting HP from making “false and misleading statements.” So the whole Mark Hurd business is now being brought into the Itanium lawsuit and it is difficult to try to figure out what makes sense where.
Evidently HP alleges that the agreement to support Itanium was part of the settlement over Mark Hurd’s hiring by Oracle in 2010. Oracle claims that the settlement does not contain any such agreement. Furthermore, Oracle wants the Hurd settlement to be annulled because HP did not disclose it was about to hire Leo Apotheker (formerly of SAP) as its new chief executive and Ray Lane (formerly of Oracle) as its new chairman when the two companies signed the agreement last year. Oracle claims that it was a “deliberate and active concealment” of material facts by HP and the agreement should be rescinded.
This one is messy and likely to get messier before it is over.
Part 2 – Oracle versus Google
The ongoing litigation between Oracle and Google regarding alleged Java patent violations in the Android mobile operating system continues, too. Sparring between Google and Oracle this quarter centered on a potentially damaging e-mail.
The email written by Google engineer Tim Lindholm in August 2010 to Android chief Andy Rubin stated, “What we’ve actually been asked to do is to investigate what technical alternatives exist to Java for Android and Chrome. We’ve been over a bunch of these, and think they all suck. We conclude that we need to negotiate a license for Java under the terms we need.”
Google was trying to suppress the email or have it redacted citing attorney-client privilege and that it was a violation of a protective order for Oracle to reveal the email. But the judge ruled that the email would be allowable.
But the fight continues. Evidently the argument now focuses on the autosave feature wherein multiple versions of the email were autosaved during its creation. Google claims that Lindholm was “drafting a clearly privileged email to Google in-house counsel Ben Lee.” But the drafts did not list Lee as a recipient because, according to Google, the list of recipients was not filled in until right before the email was sent. Google is claiming that all versions of that email should be privileged.
There were actually quite a few filings and orders issued in this case during August, mostly relating to discovery requests, but none of them were overly exciting. And you thought your job was tedious?
The trial is scheduled for October 31, 2011, but the judge has declared that he would prefer that the companies settle the matter before then. We’ll see…
Part 3 – Oracle versus SAP
Perhaps the biggest legal news of the quarter comes in the ongoing battle between Oracle and SAP (TomorrowNow). When last we looked in on this one, SAP’s request for a stay was granted so it could put off having to pay the $1.3 billion award Oracle won in last year’s jury trial. SAP claimed that the payment amount was excessive and a judge agreed. On September 1, a federal judge threw out the $1.3 billion jury verdict against SAP AG, claiming the penalty was “grossly excessive.”
The earlier trial did not dispute that the SAP subsidiary gathered the information in question. Oracle’s claim was that the stolen information helped SAP steal customers from the company by offering similar services at cheaper prices. SAP argued that any customer migration was minimal and that SAP should have to pay only $40 million for the accounts that were lured away from Oracle. But the jury sided with Oracle, awarding the company more than 30 times that amount. These events all occurred in November 2010. It was one of the largest verdicts ever in a case involving software-related theft.
So where does that leave things? Well, calling the size of the penalty “contrary to the weight of the evidence,” the judge’s decision is a significant victory for SAP. At this point, Oracle can accept the “maximum amount sustainable by the proof” according to the court, which is $272 million – or the court will order a new trial as to the amount of actual damages in the form of lost profits or infringer’s profits.
After the judgment was issued, Oracle sent out a press release that read: “There was voluminous evidence regarding the massive scope of the theft, clear involvement of SAP management in the misconduct and the tremendous value of the IP stolen. We believe the jury got it right and we intend to pursue the full measure of damages that we believe are owed to Oracle.”
However, at the time of this writing, Oracle had yet to make a decision regarding its next step. The company had until the end of September to accept or reject the remittitur (or submit a stipulated request for additional time).
So we will have to check in again next quarter to find out whether this long-standing dispute is over or whether there will be another trial. Stay tuned.
The Third Quarter of 2011: By The Numbers
IBM’s Second Quarter
In July, IBM reported better-than-expected results for its fiscal second quarter of 2011. Net income rose 8% to $3.7 billion and operating profits per share rose 18%, to $3.09 a share. Total revenues for the second quarter of 2011 of $26.7 billion increased 12% (5%, adjusting for currency) from the second quarter of 2010.
“In the second quarter our long-term strategic investments in the company’s growth initiatives again helped drive strong revenue performance,” said Samuel J. Palmisano, IBM chairman, president and chief executive officer. “Hardware, software and services revenue grew at double digits, and we achieved strong profit and free cash flow growth.”
Palmisano continued, “As IBM begins its second century, we continue a process of transformation, positioning the company to lead in the future and deliver higher value to our clients and our shareholders. Given our strong start to 2011, we are raising our full-year operating earnings per share expectations to at least $13.25.” The increase to $13.25 per share represents a 10 cents per share increase over the prior guidance offered by the company.
Revenues from the Systems and Technology segment, which is IBM’s hardware group, totaled $4.7 billion for the quarter, up 17% from the second quarter of 2010. Systems and Technology pre-tax income was $393 million, an increase of 112 % year over year. Most of this phenomenal growth can be attributed to mainframe sales; revenues from System z mainframe server products increased 61% compared with the year-ago period. Total delivery mainframe MIPS (millions of instructions per second) increased 86%.
Global Technology Services segment revenues increased 11% to $10.2 billion.
From a software perspective, IBM produced nice results, too. Revenues from the Software segment were $6.2 billion, an increase of 17%. Software pre-tax income of $2.3 billion was up 12% year over year. Information Management software revenues (which contains DB2, IMS, and Informix, among other products) increased by 18%. Operating systems revenues increased 16% to $630 million, WebSphere revenues increased 5% year over year (spurred by a new release), and revenues from Tivoli increased 9%.
Net income for the six months ended June 30, 2011 was $6.5 billion compared with $6.0 billion in the year-ago period, an increase of 9%. Diluted earnings per share were $5.30 compared with $4.57 per diluted share for the 2010 period, an increase of 16%. Revenues for the six-month period totaled $51.3 billion, an increase of 10% compared with $46.6 billion for the six months of 2010.
So IBM continues to perform rather well.
Oracle’s Fourth Quarter
Oracle announced its fiscal 2011 Q4 results and total revenues were up 13% to $10.8 billion. Operating income was up 32% to $4.4 billion, and operating margin was 40%. Additionally, Oracle also announced that its Board of Directors declared a quarterly cash dividend of 6 cents per share of outstanding common stock.
“In Q4, we achieved a 19% new software license growth rate with almost no help from acquisitions,” said Oracle President and CFO, Safra Catz. “This strong organic growth combined with continuously improving operational efficiencies enabled us to deliver a 48% operating margin in the quarter.”
“In addition to record setting software sales, our Exadata and Exalogic systems also made a strong contribution to our growth in Q4,” said Oracle President, Mark Hurd. “Today there are more than 1,000 Exadata machines installed worldwide. Our goal is to triple that number in FY12.”
Software license revenues were up 19% to $3.7 billion and software license updates and product support revenues were up 15% to $4.0 billion. Breaking down the software numbers, applications revenues for the quarter were up 22% to $2.34 billion and quarterly database revenues were up 18% coming in at $5.36 billion. But Oracle’s fortunes were not quite as rosy in the hardware segment. Systems products revenues were down 6% to $1.16 billion.
“In FY11 Oracle’s database business experienced its fastest growth in a decade,” said Oracle CEO, Larry Ellison. “Over the past few years we added features to the Oracle database for both cloud computing and in-memory databases that led to increased database sales this past year. Lately we’ve been focused on the big business opportunity presented by Big Data.”
So was the quarter good or bad? The good news for Oracle is that the company beats analysts’ expectations for the fiscal fourth quarter. A strong showing in the services and software business can be credited for that win. Overall, the performance of the company was solid, but the hardware segment is potentially troubling. And the company’s outlook for the first quarter disappointed the market’s expectations and the stock declined in after-hours trading after the announcement.
So, Oracle rings in a pretty good quarter, but the market seems to be concerned about what comes next.
Microsoft’s Fourth Quarter
In late July, Microsoft Corp. announced record fourth-quarter revenue of $17.37 billion for the quarter ended June 30, 2011, an 8% increase from the same period of the prior year. Operating income, net income, and diluted earnings per share for the quarter were $6.17 billion, $5.87 billion, and 69 cents per share, which represented increases of 4%, 30%, and 35%, respectively, when compared with the prior year period.
For the fiscal year ended June 30, 2011, Microsoft reported record revenue of $69.94 billion, a 12% increase from the prior year. Operating income, net income, and diluted earnings per share for the year were $27.16 billion, $23.15 billion, and $2.69, which represented increases of 13%, 23%, and 28%, respectively, when compared with the prior year.
“Throughout fiscal 2011, we delivered to market a strong lineup of products and services which translated into double-digit revenue growth, and operating margin expansion,” said Peter Klein, chief financial officer at Microsoft. “Our platform and cloud investments position us for long-term growth.”
Revenue for the Server & Tools segment (where SQL Server is reported) grew 12% for the fourth quarter, the fifth consecutive quarter of double-digit growth. For the year, Server & Tools grew 11%.
“A strong year of double-digit increases in revenue and earnings is a real credit to all of our Microsoft employees and partners around the world. We continue to see strong business demand across all of our products, from small businesses all the way up to the largest global enterprises,” said Kevin Turner, chief operating officer at Microsoft.
The company reaffirmed its fiscal 2012 operating expense guidance of 3% to 5% growth from 2011, or $28.0 billion to $28.6 billion.
SAP’s Second Quarter
In late July SAP announced its sixth consecutive quarter of double digit growth in software and software related service revenue. SAP’s software revenue rose 35%, and total revenue 27%, from the year-ago quarter. Operating profit declined 47% year-over-year, supposedly impacted by the company’s TomorrowNow lawsuit with Oracle. The operating profit for its fiscal second quarter increased by 26%.
“We are pleased to report another strong quarter,” said Werner Brandt, CFO of SAP AG. “The strong customer demand for our industry-leading innovations positions us well to achieve our goal of at least 20 billion euros in total annual revenue and a 35% operating margin by the middle of the decade, as well as for the long term.”
“We are witnessing a structural change in the IT market – customers are shifting more of their investments toward software as it continues to become a larger and more important component of the overall technology stack. As a result, we are seeing strong demand from customers,” said Jim Hagemann Snabe, Co-CEO of SAP. “We focused our strategy on innovation at the right time and are now reshaping the industry with our mobility, in-memory and cloud solutions. Innovation is driving growth again at SAP.”
So Oracle’s biggest application competitor also posted a strong quarter. It seems like the enterprise software market is healthy and growing.
Let’s turn our attention now to the actual technology and product announcements made during the third quarter of 2011. Although there were no significant new DBMS releases, there were some interesting technology advances made during the quarter.
The closest thing to a significant DBMS announcement probably came from Microsoft. At the Microsoft Worldwide Partner Conference 2011, Microsoft announced a community technology preview (CTP) of the new Microsoft SQL Server, code-named “Denali.”
Microsoft touts SQL Server “Denali” as a cloud-ready information platform that will help organizations unlock breakthrough insights across the organization as well as quickly build solutions and extend data across on-premises and public cloud backed by capabilities for mission critical confidence.
“Cloud computing is as big a transformation as we have ever seen and, together with our partners, Microsoft will help customers through the shift,” said Satya Nadella, president of the Server and Tools Business at Microsoft.
Highlighted aspects of the SQL Server “Denali” CTP include:
Deliver required uptime and data protection with AlwaysOn
Gain breakthrough and predictable performance with Project “Apollo”
Help enable security and compliance with new User-defined Roles and Default Schema for Groups
Enable visual data exploration for rapid data discovery of deeper insights across the organization with Project “Crescent”
Ensure more credible, consistent data with SSIS improvements, a Master Data Services add-in for Excel, and new Data Quality Services
Optimize IT and developer productivity across server and cloud with Data-tier Application Component (DAC) parity with SQL Azure and SQL Server Developer Tools code name “Juneau” for a unified experience across database, BI, and cloud functions
Of course, a CTP is still a preview and “Denali” is not yet generally available.
In addition to the CTP3 for SQL Server Code Name “Denali,” Microsoft also released SQL Server 2008 R2 SP1 to customers. SQL Server 2008 R2 SP1 is basically a collection of updates and fixes for SQL Server 2008 R2.
In July, Oracle announced the Oracle Exadata Storage Expansion Rack, a cost-effective way to add extreme performance storage servers to an Oracle Exadata Database Machine.
The Oracle Exadata Storage Expansion Rack is ideal for storing massive amounts of structured and unstructured data including historical relational data,backups of Oracle Exadata Database Machine, blogs, documents, images, LOBs and XML files.
“Organizations today are continually challenged with managing and storing the explosive growth in both structured and unstructured data,” said Andrew Mendelsohn, senior vice president, Database Server Technologies, Oracle. “By combining leading, industry-standard servers and storage hardware from Sun with the intelligence built into Oracle software, the Oracle Exadata Database Machine and Oracle Exadata Storage Expansion Rack allow customers to achieve unmatched data scalability, capacity and reliability.”
August saw the announcement of Oracle Solaris 11 Express for Oracle Exadata Database Machines X2-2 and X2-8. “Over the past year we’ve worked very closely with the Oracle Database and Oracle Exadata teams to enhance Oracle Solaris to deliver unmatched performance and availability for Oracle customers’ database workloads,” emphasized Markus Flierl, vice president Oracle Solaris Core Engineering. “Coupled with intensive system and patch testing, we offer an Oracle Solaris on Oracle Exadata Database Machine that’s highly robust and ready to deploy out of the box.”
The move makes sense for Oracle. By offering its own Solaris operating system on its Exadata hardware, the company further exerts control over its database machine technology.
In September, Oracle announced the general availability of MySQL Install for Windows, which helps simplify and streamline the installation process for MySQL users running on Windows platforms. The company claims to deliver up to 90% cost savings over Microsoft SQL Server with the delivery of the new install and additional MySQL Enterprise Edition tooling for modeling, development, monitoring, administration and backup of Windows-based MySQL applications.
Additionally, to further support Windows users, Oracle completed certification of MySQL Enterprise Edition for Windows Server 2008 R2 Failover Clustering, enabling Windows users to deploy business-critical applications that demand high levels of availability.
In late August, IBM announced a new hybrid cloud solution building on its acquisition of Cast Iron (acquired in May 2010). The solution is geared to reduce the time it takes to connect, manage and secure public and private clouds.
“As a user of IBM WebSphere Cast Iron, we have been able to not only easily integrate our on-premise and cloud-based applications, but also provide live feeds of order data changes to our sales reps on any device, including mobile phones, tablets and laptops,” said Randy Berger, IT manager, Process & Application Development, Siemens.
Clearly, the big database providers are targeting the cloud with their new technology releases.
And so we end another edition of The Database Report. There continues to be a lot of activity to keep track of in the data and database system market. And the big DBMS vendors continue to do well financially as they release new software versions and acquire the smaller players.
What can we expect to see during the last quarter of 2011? I’m not a psychic, so if you want to keep on top of what is happening, be sure to check in with The Database Report on a quarterly basis… see you in Q4!