The Database Report October 2012

As the year 2012 enters the home stretch and we leave the third quarter in the rearview mirror it is time, once again, to review what happened in the database systems market during the past quarter. As usual, we will take a look at the acquisitions, lawsuits, quarterly financial results, and announcements that highlighted the third quarter of 2012. So without any further ado, let’s dive into this quarter’s edition of The Database Report.More Legal Wrangling

And what better place to begin this quarterly overview than in the courtroom? As regular readers of The Database Report know, the database market has been littered with lawsuits of late. And some of these legal actions seem to drag on forever and ever. Case in point? Let’s look in on the Oracle lawsuit against SAP regarding TomorrowNow.

This lawsuit was filed by Oracle way back in the second quarter of 2007 (more details at The case was “settled” (or so we thought) a while ago but with number in the billions these things are rarely “settled” quickly or easily.

Oracle won the case against SAP because SAP’s TomorrowNow subsidiary illegally accessed Oracle proprietary data. But late in 2011 the judge threw out the $1.3 billion jury verdict against SAP, claiming the penalty was “grossly excessive.” Even so, Oracle had been seeking $2 billion!

At any rate, in early August 2012, Oracle and SAP “agreed” to SAP paying Oracle a damage award of $306 million to “settle” the case. But notice my use of “quotes” here… nothing is really settled. “SAP, which admitted infringement before the 2010 trial and pled guilty to a number of criminal charges brought by the U.S. Department of Justice after trial, must pay us a minimum of $426 million, including attorneys’ fees,” said Oracle General Counsel Dorian Daley.

Those do not sound like the words of someone ready to settle a case. And they were not… on August 31, 2012 Oracle filed an appeal “from the final judgment entered in this action on August 3, 2012, and each and every part thereof.”

In other legal news this quarter, in mid August Oracle agreed to pay a $2 million penalty to settle charges that it did not have the proper controls in place to prevent employees at its Indian subsidiary from surreptitiously setting aside funds from the company’s financial books. According to the U.S. Securities and Exchange Commission the funds that were squirreled away were used to make unauthorized payments to spurious vendors – a violation of the Foreign Corrupt Practices Act (FCPA). A full copy of the complaint and charges can be found at

Oracle agreed to settle the charges without admitting or denying the allegations. The terms of the settlement take into account Oracle’s voluntary disclosure and cooperation with the investigation, as well as steps taken by Oracle to correct the problem including firing employees involved in the scandal and improving its FCPA compliance program.

Finally, and also involving Oracle, in early September the judge handed down a ruling in the Google versus Oracle intellectual property case. Google had requested $4.03 million in reimbursements for court costs; the judge, however, denied $2.9 million of the requested reimbursements but granted the rest of it… which comes to a tidy sum of $1.13 million.

This case has been wending its way through the courts for two years now. It began when Oracle sued Google for allegedly stealing code from Java to use in the development of Google’s Android mobile operating system. The judge had ruled earlier this year that the Java APIs used by Google in Android are open source and not protected by copyright.

Oracle had been seeking $6 billion in damages, but instead, Google was awarded a little over $1 million. Of course, Oracle will appeal the decision.

Third Quarter Acquisitions

Consolidation in the database and data management market continued during the third quarter of 2012 with acquisitions by all of the Big Three (IBM, Oracle, and Microsoft) as well as the acquisition of a major database tools vendor. The social media aspect of data management seemed to dominate the acquisitions this quarter, starting off with Microsoft.In late June, Microsoft announced its intent to acquire Yammer for $1.2 billion in cash. Yammer is an emerging enterprise social network provider and Microsoft is looking to incorporate it into its Office, Skype and cloud offerings.

Launched in 2008, Yammer has more than 5 million corporate users, including employees at 85 percent of the Fortune 500. The service allows employees to join a secure, private social network for free and then makes it easy for companies to convert a grassroots movement into company-wide strategic initiative.

The Yammer team will join the Microsoft Office Division, led by President Kurt DelBene, and will continue to report to current Yammer CEO David Sacks.

“The acquisition of Yammer underscores our commitment to deliver technology that businesses need and people love,” said Steve Ballmer, CEO, Microsoft. “Yammer adds a best-in-class enterprise social networking service to Microsoft’s growing portfolio of complementary cloud services.”

Then in early July, Oracle joined the social media buying frenzy by snapping up Involver, a San Francisco-based startup that has created a development platform for social media marketing campaigns. Involver is leading provider of SML (Social Markup Language), a social media development platform that enables developers to create customized marketing applications for social media sites and web campaigns.

Involver was founded in 2007 with backing from Bessemer Ventures and other investors. CEO Don Beck is a veteran of IBM, J.D. Edwards, and Adobe. The terms of the deal were not announced.

The Involver acquisition is just the latest social media acquisition for Oracle. In June 2012 the company acquired Collective Intellect, which helps companies monitor, understand and respond to what’s being said about them on social media. In May, Oracle acquired Virtue, which helps companies manage multiple social networks.

Oracle’s Social Platform currently includes applications for social listening and analytics, marketing, sales and support that deliver brand consistency and an enhanced customer experience. Involver further extends these applications by delivering a technology platform for developers to deliver unique and compelling customer experiences that are built-for-purpose and ready-made for Facebook, social sites, and mobile phones and tablets.

Using Involver’s SML along with Oracle’s other social media assets and the Oracle Cloud Java and Database services, Oracle plans to deliver a complete social development platform.

But IBM was not resting while Microsoft and Oracle acquired. In late August, IBM announced it had signed a definitive agreement to acquire Kenexa, a publicly held company headquartered in Wayne, Pennsylvania, that provides recruiting and talent management solutions, using a combination of Cloud-based technology and consulting services.

IBM agreed to purchase Kenexa in a cash transaction at a price of $46 per share, or roughly $1.3 billion. The acquisition bolsters IBM’s leadership in helping clients embrace social business capabilities while gaining actionable insights from the enormous streams of information generated from social networks every day.

“Every company, across every business operation, is looking to tap into the power of social networking to transform the way they work, collaborate and out innovate their competitors,” said Alistair Rennie, general manager, social business, IBM. “IBM is uniquely positioned to help clients generate real returns from their social business investments, while helping them gain intelligence into the data being generated in these networks to be more competitive in their markets.”

The addition of Kenexa to the IBM portfolio complements IBM’s strategy of bringing relevant data and expertise into the hands of business leaders within every functional department, from sales and marketing to product development and human resources. also got into the social media acquisition game, completing its acquisition of Buddy Media this past August. Founded in 2007, Buddy Media started as an idea to empower chief marketing officers (CMOs) and agencies to organize their teams and optimize their social media marketing programs. The Buddy Media platform allows customers to publish content, place and optimize social advertising and measure the effectiveness of social media marketing programs.

Earlier in the year, Google bought Meebo, which is used to share ads and content on social media. So the social media software consolidation seems to be running at a fever pitch right now.

What about the other acquisitions this quarter? Well, Oracle made a couple of other acquisitions and so did Dell… but let’s start with Oracle. The company made two acquisitions in July.

In the latter part of July 2012 Oracle announced that had agreed to acquire the assets of Skire, a provider of capital program management and facilities management applications available on the cloud and on-premise. The transaction is subject to customary closing conditions and approvals and is expected to close in the second half of 2012. Terms of the agreement were not disclosed.

“Adding Skire to the Oracle Primavera Suite will help our customers gain complete visibility, automation and financial control across their entire project and program portfolio to help them manage for long-term growth,” said Mike Sicilia, senior vice president and general manager, Oracle Primavera.

By combining Skire with Oracle’s Primavera products, the company plans to create a full lifecycle Enterprise Project Portfolio Management (EPPM) platform spanning capabilities from capital planning and construction to operations and maintenance for owners and operators, contractors and sub-contractors.

Then on July 30, 2012, Oracle announced that it has entered into an agreement to acquire Xsigo Systems, a provider of network virtualization technology. Xsigo’s software-defined networking technology simplifies cloud infrastructure and operations by allowing customers to dynamically and flexibly connect any server to any network and storage, resulting in increased asset utilization and application performance while reducing cost. Again, terms of the agreement were not disclosed.

“The proliferation of virtualized servers in the last few years has made the virtualization of the supporting network connections essential,” said John Fowler, Oracle Executive Vice President of Systems. “With Xsigo, customers can reduce the complexity and simplify management of their clouds by delivering compute, storage and network resources that can be dynamically reallocated on-demand.”

The combination of Xsigo for network virtualization and Oracle VM for server virtualization expands Oracle’s capabilities to deliver a comprehensive set of virtualization capabilities for cloud environments.

The biggest acquisition of the quarter however, was made by Dell when it bought Quest Software. The acquisition, announced in early July, calls for Dell to pay $28 a share for Quest, valuing the deal at $2.36 billion. It also brought a bidding war for Quest to an end – private equity firm Insight Venture Partners had earlier bid $23.00 per share for Quest… and later increased its offering to $25.75. The private equity firm was thought to have the inside track to acquire Quest because of its longstanding relationship with Quest chairman and CEO, Vinny Smith.

The acquisition is expected to close in Dell’s third fiscal quarter.

Quest was established in 1987 and is based in Aliso Viejo, CA. The company boasts of more than 100,000 customers worldwide, including 87 percent of the Fortune  500. Quest offers a broad selection of software solutions that solve many of the most common and challenging IT problems. Included in that portfolio are tools for Windows server management, identity and access management, and database administration and management. Many DBAs use Quest’s TOAD to provide a simple, consistent way to build, manage, and maintain databases.

The acquisition is key for Dell as it positions itself to expand its offerings from lower cost commodity hardware to higher margin software solutions. Dell recently announced the formation of its Software Group and the Quest offerings will bolster Dell’s ability to compete for enterprise software contracts.

“The addition of Quest will enable Dell to deliver more competitive server, storage, networking and end user computing solutions and services to customers,” said John Swainson, president, Dell Software Group.  “Quest’s suite of industry-leading software products, highly-talented team members and unique intellectual property will position us well in the largest and fastest growing areas of the software industry.  We intend to build upon the strong momentum Quest brings to Dell.”

Quest’s software product set generated $857 million in global revenue based on fiscal year 2011 results at gross margins of 86 percent and operating margins of 11 percent. Additionally, Quest employs more than 3,500 individuals in 23 countries including a sales force of 1,500 as well as 1,300 software developers.

“Clearly, Dell’s distribution, reach and brand are well recognized in the industry. Combine that with Quest’s software expertise and award-winning systems management products and you have a very powerful combination for our customers and partners,” said Vinny Smith, chairman and chief executive officer of Quest Software. “With this transaction, Quest’s products and employees become the foundation for Dell’s critical software business.”

So, all in all, it was a very busy quarter in terms of acquisitions and consolidation in the database industry.

By the Numbers – Financial Results for the Quarter

And now let’s turn our attention to the financial side of the business. As we do each quarter, we will examine the financial results as reported by the major players in the database market: IBM, Oracle, Microsoft, and SAP. We will start with IBM


IBM released the financial results for the first quarter of its fiscal year (2012). Diluted earnings came in at $2.61 per share, compared with $2.31 per share in the first quarter of 2011, an increase of 13 percent. First-quarter net income was $3.1 billion compared with $2.9 billion in the first quarter of 2011, an increase of 7 percent. Total revenues for the first quarter of 2012 of $24.7 billion were flat (up 1 percent, adjusting for currency) from the first quarter of 2011.

“In the first quarter, we drove strong profit and earnings per share growth. We delivered another excellent software performance, expanded services margins, and continued the momentum in our growth initiatives,” said Ginni Rometty, IBM president and chief executive officer. “Our investments in growth market countries continued to generate strong revenue growth across software, hardware and services while contributing to the company’s ongoing margin expansion.”

The company raised its 2012 full-year operating earnings per share expectations to “at least $15.00.” IBM’s earlier guidance was at least $14.85 per share.

Revenues from the Software segment were $5.6 billion, an increase of 5 percent (up 7 percent, adjusting for currency) compared with the first quarter of 2011. Software pre-tax income increased 12 percent and pre-tax margin increased to 30.2 percent.

Revenues from IBM’s key middleware products, which include WebSphere, Information Management, Tivoli, Lotus and Rational products, were $3.5 billion, an increase of 7 percent (up 8 percent, adjusting for currency) versus the first quarter of 2011. The Information Management brand, which contains IBM’s database systems offerings, grew 5 percent year over year.

Mark Loughridge, Senior Vice President and Chief Financial Officer, Finance and Enterprise Transformation, said “Business analytics had a very strong quarter with double-digit growth in Cognos.  Our acceleration in Cognos is driven by the successful integration of our predictive capabilities into recent product launches spanning both Business Intelligence and Financial Performance Management.”

IBM also touted the growth of Netezza, which had a win-rate of nearly 80 percent in head to head proof of concept engagements.

The hardware business declined, though this was not unexpected given the strong growth (19 percent) it experienced during the same quarter of last year. But IBM is not standing still having announced the PureSystems initiative in the second quarter of this year and a new mainframe (discussed later in this article) this quarter.

Turning our attention to Oracle, the company announced its fiscal fourth quarter financial results and total revenues were up 1 percent to $10.9 billion, with new software license revenues up 7 percent to $4.0 billion. Hardware revenue continued to disappoint with systems products revenues down 16 percent to $977 million.

In the all important Database and Middleware category, new software licenses were up, albeit by a miniscule amount – $2.706 billion in this year’s fourth quarter versus $2.694 billion in the same quarter of 2011. But software license updates and product support grew by 6 percent to $2.828 billion versus $2.663 billion in the same quarter of 2011.

Applications revenue grew, too, with new software license revenue coming in at $1.279 billion (up 23 percent over the same quarter last year) and software license updates and product support revenue registering $1.324 billion (up 2 percent over the same quarter last year).

Oracle executives highlighted the positives. “Our record-breaking fourth quarter featured several all-time highs for Oracle: new software license sales of $4 billion, total software revenue of $8 billion, total revenue of $11 billion, and EPS of 82 cents,” said Oracle President and CFO, Safra Catz. “For the fiscal year, we also set all-time highs for operating margins of 46%, and operating cash flow of $13.7 billion.”

Mark Hurd, Oracle president chose to focus on Oracle’s engineered systems stating “For the year, the Exadata, Exalogic, Exalytics, SPARC SuperCluster and the Oracle Big Data Appliance product group grew over 100% year-over-year.”

And Oracle Chief Executive Officer, Larry Ellison touted the cloud: “The development of Oracle Cloud is strategic to increasing the size and profitability of Oracle’s software business. Our Oracle Cloud SaaS business is nearly at a billion dollar revenue run rate, the same size as our engineered systems hardware business. The combination of engineered systems and the Oracle Cloud will drive Oracle’s growth in FY 2013.”

Oracle’s Board of Directors also declared a quarterly cash dividend of $0.06 per share of outstanding common stock, as well as announcing that Oracle was planning to repurchase as much as $10 billion of common stock in upcoming quarters.

Moving North up the West coast of the United States we visit Microsoft in Redmond, Washington. The company announced fiscal fourth quarter revenues of $18.06 billion. Nevertheless, Microsoft posted a net loss of $492 million ($0.06 per share), compared with net income of $5.87 billion, or $0.69 earnings per share, in 2011’s fourth quarter.

The results were impacted by two one-time items that Microsoft had previously disclosed: a $540 million revenue deferral related to an upcoming upgrade program for its new Windows 8 operating system, and a charge of $6.19 billion for the impairment of goodwill on its online services division. The goodwill impairment acknowledges that Microsoft’s online services division will not grow as quickly as previously expected, mostly with regard to the 2007 acquisition of aQuantive for $6.3 billion.

Excluding the impact of those two items, revenue would have been $18.59 billion and earnings per share would have been $0.73.

“We delivered record fourth quarter and annual revenue, and we’re fast approaching the most exciting launch season in Microsoft history,” said Steve Ballmer, chief executive officer of Microsoft. “Over the coming year, we’ll release the next versions of Windows, Office, Windows Server, Windows Phone, and many other products and services that will drive our business forward and provide unprecedented opportunity to our customers and partners.”

Server & Tools, the business unit that includes Microsoft SQL Server, saw revenue growth of 13 percent for the fourth quarter and 12 percent for the full year. And Microsoft’s Business Division grew revenue at a 7 percent clip for both the fourth quarter and the full year.

Microsoft reaffirmed its fiscal year 2013 operating expense guidance of $30.3 billion to $30.9 billion.

Finally, let’s turn our attention to Europe to take a look at the revenue of SAP AG. For the fiscal first quarter SAP reported the ninth consecutive quarter of double-digit growth in software and software-related service revenues.

Software and software-related service revenue grew 13 percent to 2.619 billion Euros. Software revenues for the quarter were 637 million Euros (4 percent growth), software support revenues were 1.953 billion Euros (14 percent growth), and cloud subscription increased by 625 percent from 4 million Euros to 29 million Euros.

“We are seeing strong growth in our In-Memory SAP HANA platform, with cloud and mobile solutions, including core applications and analytics,” said Bill McDermott and Jim Hagemann Snabe, CEO of SAP. “Customers appreciate our speed of innovation and our ability to orchestrate solutions across our entire portfolio. With our extensive industry expertise, we help customers to optimize their business processes better than ever. We are confident to achieve our targets for the second quarter and for the full year 2012.”

So it would seem that, generally speaking, the financial health of the DBMS market is looking good.

Speaking of SAP…
Perhaps driven by Oracle’s full frontal assault in the applications space, SAP is working hard to increase its DBMS market share. Most SAP customers rely on database software from Oracle or IBM to run SAP’s ERP applications. But SAP is hoping eventually to change that with its HANA in-memory database platform. The company is hard at work improving the capabilities of HANA using its vast arsenal of database technology it acquired when it bought Sybase in 2010.

Of course, SAP has already ported its Business Suite to run on Sybase ASE (Adaptive Server Enterprise). HANA, on the other hand, is being touted as the analytics data store of the moment. And SAP has already announced the availability of its Business Warehouse platform running on HANA.

Additionally, SAP is working to tie Sybase IQ, a columnar-store database, together with HANA to act as a store for analytical data; and SAP also intends to use the Sybase SQL Anywhere mobile database system as a front-end data store for the HANA platform.

To bolster support for HANA, SAP has contributed $155 million to a venture capital fund for startups that build applications on the HANA platform. It has also spent $337 million on an incentive program intending to entice customers to use HANA. SAP will use the funds to provide consulting services for new customers who want to move to HANA.

The company is also boosting its training materials for developers and database administrators to ensure that there is sufficient information available for HANA as it gains in popularity.

Of course, the company is fighting an uphill battle to displace the firmly entrenched relational database systems from Oracle and IBM. The strategy to compete with the Big Three makes sense, but success will not come easy, if it comes at all.

But SAP can be cautiously optimistic about its approach. Computerworld reported in early September 2012 that “SAP is close to having 600 customers for its HANA in-memory database platform.” (

A New Mainframe is Unveiled
In late August, IBM unveiled the latest and greatest model of mainframe computer, the zEnterprise EC12. The IBM zEC12 enterprise system is the result of an investment by IBM Systems and Technology Group of more than $1 billion in IBM research and development primarily in Poughkeepsie, New York, as well as 17 other IBM labs around the world and in collaboration with some of IBM’s top clients.

The new zEC12 offers industry-leading security and robust support for operational analytics that can help clients efficiently sift through large volumes of raw data and transform it to gain knowledge that can be used for competitive advantage. For example, a retailer managing online transactions on zEC12 can gain insights from client information that will enable it to provide clients with a more customized shopping experience.

The new IBM mainframe offers built-in security features designed to meet the security and compliance requirements of different industries. With operational analytics and near real-time workload monitoring and analysis, clients can use the new zEC12 for a variety of workloads, including hybrid clouds that can take advantage of the System’s 25 percent more performance per core and 50 percent greater total system capacity than its predecessor as well as the world’s fastest chip running at 5.5 GHz. This new chip was produced at a smaller size than earlier systems, allowing more cache on the chip. And the system can support as many as 120 cores.

“We continue to drive innovation on System z, allowing a broader set of clients to apply its leadership capabilities in security and resiliency to the current demands of their business, be they from analytics, cloud or mobile computing,” said Doug Balog, general manager IBM System z.  “Our end-to-end design approach for smarter computing – from processors to systems to software optimization – is targeted to handle complicated business challenges associated with managing, protecting and analyzing a client’s most critical information. It’s what makes the mainframe the ultimate enterprise system.”

From a database perspective, the zEC12 advances performance for analytics, increasing performance of analytic workloads by 30 percent compared to its IBM predecessor. In addition, support for the IBM DB2 Analytics Accelerator that incorporates the Netezza data warehouse appliance into zEC12 enables clients to run complex business analytics and operational analytics on the same platform.

So keep an eye on the hardware revenue at IBM in the next couple of quarters. As IBM mainframe customers migrate to the new zEC12 I would guess that IBM’s hardware numbers will improve.


And so end the third quarter of 2012. Consolidation, lawsuits, healthy financials, and continuing innovation continue to mark the DBMS market. But what will unfold during the final quarter of the year? Be sure to check in at next quarter (and every quarter) to read The Database Report and keep up with what is going on in the world of data management and database systems.


Share this post

Craig Mullins

Craig Mullins

Craig S. Mullins is a data management strategist and principal consultant for Mullins Consulting, Inc. He has three decades of experience in the field of database management, including working with DB2 for z/OS since Version 1. Craig is also an IBM Information Champion and is the author of two books: DB2 Developer’s Guide and Database Administration:The Complete Guide to Practices and Procedures. You can contact Craig via his website.

scroll to top
We use technologies such as cookies to understand how you use our site and to provide a better user experience. This includes personalizing content, using analytics and improving site operations. We may share your information about your use of our site with third parties in accordance with our Privacy Policy. You can change your cookie settings as described here at any time, but parts of our site may not function correctly without them. By continuing to use our site, you agree that we can save cookies on your device, unless you have disabled cookies.
I Accept