Good day, everyone, and welcome to today's Oracle Corporation Quarterly Conference Call. Today's conference is being recorded. At this time, I'd like to introduce Ken Baughn, Vice President of Investor Relations for Oracle. Please go ahead, sir.
Thank you, Ruthie. Good afternoon, everyone, and welcome to Oracle's Q1 fiscal year 2011 earnings conference call. With us on the call today are Chief Executive Officer, Larry Ellison Ellison President, Safra Katz President, Mark Hurd and Chief Financial Officer, Jeff Epstein. As a reminder, today's discussion will include forward looking statements, including predictions, expectations, estimates or other information that might be considered forward looking. While these forward looking statements represent our current judgment on what the future holds, these statements are also subject to the risks and uncertainties that may cause actual results to differ materially from statements being made today.
Throughout today's discussion, we will attempt to present some important factors relating to our business, which may potentially affect these forward looking statements. We encourage you to review our most recent reports on Form 10 ks and 10 Q and any applicable amendments for a discussion of these factors and other risks that may affect our future results or the market price of our stock. As a result, we caution you against placing undue reliance on these forward looking statements, which reflect our opinion only as of today. And as a reminder, we are not obligating ourselves to revise or publicly release any revisions to these forward looking statements in light of new information or future events. A copy of the press release and financial tables, which includes a GAAP to non GAAP reconciliation and other supplemental financial information can be viewed and downloaded from our Investor Relations website.
We'll begin the call with a few prepared remarks before taking questions from the audience. With that, I'd like to turn the call
over to Jeff for his opening remarks.
Thank you, Ken, and welcome, Mark. Good afternoon, everyone, and thank you for joining us. I will review our non GAAP financial results focusing on U. S. Dollar growth rates unless otherwise stated.
This quarter, foreign exchange rates weren't much of a factor in our overall results compared to our guidance of a negative 2% currency effect to new license revenue and a negative 3 percent currency effect to total revenue. We beat the high end of our guidance range for new license revenue, total revenue and earnings per share with a record earnings per share for the Q1. On a constant dollar basis, we also our guidance ranges for new license revenue, total revenue and earnings per share. In short, Q1 was an excellent quarter. For Oracle.
In the Q1, new license revenues were $1,300,000,000 up 25%. The Americas grew 33%, EMEA was up 12% and Asia was up 26%. With each region up double digits on a constant dollar basis as well, our results continue to underscore the strength and diversity of our business and the quarter was not dependent on any unusually large deals. Technology and license revenues were $937,000,000 up 32%. As the Americas grew 44%, EMEA was up 25% and Asia was up The Americas grew 14%, EMEA was down 19% and Asia was up 54%.
Our software license updates and product support revenues were $3,500,000,000 up 11% from last year. Customer support attach and renewal rates continue at the usual high levels. Revenues from our hardware systems products were $1,100,000,000 while from hardware systems support were $680,000,000 Our services revenues were $1,100,000,000 up 18% as we continue to manage this business to profitable margins. Our total revenues were $7,600,000,000 up 50 up 50% from last year. Non GAAP operating income was $2,900,000,000 up 27%.
The non GAAP operating margin was 39% for the quarter. Our tax rate for the Q1 was 24.7% as we saw some one time benefits to our tax rate. Our Q1 non GAAP earnings per share were 0 point 42 dollars
0 point 5 dollars above the high end of
our EPS EPS guidance range of $0.35 to $0.37 Earnings per share were up 38% from last year. In Q1, we repurchased 10,800,000 shares at an average price of $23.13 per share for total of $250,000,000 As we have previously discussed, the rate of our stock buyback will fluctuate each quarter, taking into account alternative uses for our cash and our stock price. Turning to the balance sheet, we have $23,600,000,000 in cash and investments. Our days sales outstanding improved again to 45 days compared to 46 days last year and is a is a testament to the quality of our receivables, the quality of our customers and the effectiveness of our collection efforts. Finally, we generated 8 point $5,000,000,000 in free cash flow during the last four quarters.
Now, I'll turn the call over to Saffron.
Thanks, Jeff. I'm going to just make a few brief comments on Q1 and then I'll review the guidance for Q2 and turn the call over to Larry and Mark. Obviously, we're extremely pleased with our Q1 results, which follows a really great FY 2010. Our software license growth was frankly outstanding. It was more than double the high end of our guidance actually.
And as I've said in the past, what's really going on is we have a lot of company specific momentum in each line of business, both software and hardware systems. Our customers are realizing that it's far better to buy open and integrated solutions from us rather than discrete components from half a dozen separate vendors. Clearly, the benefits of engineered systems are obvious to them. We are just seeing more opportunities involving more of our products and deals seem to be getting a little bigger. Customers are buying our applications, including industry specific applications.
And of course, they're deploying those applications on our middleware suite, database and operating systems, both Solaris and Linux. And now they are seeing real benefit to deploying those applications and technologies and technologies on our optimized hardware systems. So discrete product competitors are just becoming less and less relevant. Our hardware system revenue also came in as you can see better than we'd expected, particularly since this is the first time the Sun guys have had an August close. Because I actually do read what you guys write, I want to repeat something I've said on previous calls regarding Sun's hardware business and how we've changed it.
First, we've ended numerous reselling agreements accounting for 100 of 1,000,000 of dollars of hardware revenue that usually came to Sun at little or no profit at all. Secondly, Sun lost a lot of money chasing commodity server share, but never really had the volume to actually compete effectively on price. We are not going to chase highly unprofitable revenue. And thirdly, we have redirected hardware business to the part of the market where we have a competitive advantage. Think Exadata.
There's a reason we talk about all the time. We're focused on the sweet spot of the market for us where we can deliver unique value for our customers. So comparing hardware revenue to SUNS historical revenue is just not terribly meaningful. Now you can see all this show up in our gross margin for systems, which was over 48%, higher than last quarter, which was 46% when even though our volumes are much lower in Q1. So in addition to our strong top line performance in both hardware and software, we delivered very strong operating margins as usual.
With Sun included for the full quarter, our operating margin was 39%, substantially higher than our peers, including IBM and SAP. Actually, our 39% operating margin is 10% higher than SAP, even we're also selling hardware. So let me get to the guidance. And we do believe that the guidance I'm giving is realistic, though conservative.
I want to emphasize that our pipelines
are very strong in the coming quarter, assuming exchange rates remain at current levels, which right now is a negative 3% currency effect on license growth and a negative 4% on total revenue growth. With that, our guidance for Q2 is as follows. New software license revenue growth is expected to range from 9% to 19% in constant currency and 6% to 16% at current exchange rates. Hardware product revenues are expected to be between $1,000,000,000 and $1,100,000,000 in constant currency or $1,100,000,000 to $1,200,000,000 at current exchange rates, and that does not include the hardware support revenue. Total revenue growth on a non GAAP basis is expected to range from 43% to 47% in constant currency and 39% to 43% at current exchange rates.
On a GAAP basis, we expect total revenue at somewhere between 42% to 47% growth in constant currency and 38% to dollars to dollars to 0 point 4 $7 in constant currency and $0.44 to 0 point 46 dollars up from $0.39 last year, assuming current exchange rates. GAAP EPS for the Q2 is expected to be $0.28 to $0.30 assuming constant currency, dollars 0.27 to $0.29 at current exchange rate. Now my guidance assumes a GAAP tax rate of 30.5 and a non GAAP tax rate of 28.5. Now of course, it may end up being different. And of course, our Board again declared a dividend of $0.05 With that, I turn it over to Larry for his comments.
Thank you, Safra. I know there's been a lot of concern about Oracle going into the hardware business and so I'm going to focus my comments about the Sun hardware Hardware business, how we found it and what we've done to try to make it better. Let's see. We have 2 fundamental goals in the Sun Hardware business. 1st, to Hardware business.
1st, to make it profitable and quoting one of our great presidents, Mission accomplished. We have now have a very, very hardware business and made a substantial contribution to our overall profitability in Q1. We have a profitable business and we think it's been going to become more profitable throughout the fiscal year. But again, I want to emphasize the hard not the Sun software business is clearly profitable. I'm going to focus on the Sun hardware business.
And I'm saying it's already making a substantial contribution to our to our profitability. Since we took over Sun, we've improved the gross margins to 48 point 4%. That's up from a nadir of around 38% when Sun was running things. And we think there's more to go. I mean, I don't know if we can get to 60, but 60 is kind of a target.
It depends on our product mix and it's not going to happen overnight. But again, I think we can very substantially improve those gross margins. So again, we're profitable, we want to make it more profitable, going to get better throughout the year. Once profitable and we are profitable, we've got to grow the size of that business. And we think we can double it.
I mean, I guess, it can take some time, but again, we think we can double the size of that hardware business and we think we have to. We have to aggressively take share from IBM and our other hardware competitors. All right. To make the Sun business more profitable, what have we done and what are we going to do? The first thing and the easiest thing to do was to stop pursuing business that was not profitable.
As Safra pointed out, let's stop chasing revenue and start chasing profits. So we're not selling Hitachi disks anymore. It's a terrific product, but we don't make any money reselling. We're not selling Veritas Net backup anymore. We're not selling we're not pursuing these high performance computing deals, which are big deals and very prestigious.
But again, I don't want anyone to make any money on these things. So, we're out of those businesses. And that I think a lot of people will be looking at our top line and saying that we're not growing. Our top line is growing, but that growth has been offset by kind of dumping these unprofitable lines of We've filled in with other businesses, which are more profitable. The other thing we are so that's done.
We don't resell things that are unprofitable. We don't pursue business that's unprofitable. The other thing we're doing is trying to optimize operations over there. We will be through a single integrated computer system for order management, for support, for dispatching for field service, we'll have all of that done around January. So that's a pretty good record level.
Oracle and Sun will be on a single unified global system in January, everything HR, payroll, accounting, service, order management, inventory, everything is going to be in place in January. And that's going to be a big help. That will make our operations more efficient and profitable. And we're reducing the number of contract manufacturers and reducing the number of contract manufacturer locations. So we're simplifying that.
And by directly shipping from those manufacturers We had, I think, 7 or a We had, I think, 7 or 11, I can't remember which parts depot locations in the Bay Area alone and reducing that to a couple. So we're simplifying and optimizing the operations. Again, we think that this is going to have impact throughout this fiscal year. But we'll be in pretty good shape by the end of this fiscal year and that's going to help the profitability of our business and the responsiveness of our business to our customers. All right.
The other thing in terms of growing the top line of the Sun business is we've got to innovate in the area of interesting new products. And we inherited some
new products from Sun, which
are terrific, like the ZFS storage appliance. And again, the unique thing about the ZFS storage appliance, it's a Solaris disk system that integrates hardware and software where the hardware and software is engineered to fit together. So we love that product that was done at Sun. We are working of course, we have been working with Sun to do other engineered hardware software combinations, Exadata being the best known. My quote in the release was the Exadata pipeline for the full fiscal year is now up to $1,500,000,000 and growing rapidly.
We think this is going to be a huge business for us. And we're going to be introducing more hardware software combinations at OpenWorld next week. That's a big focus for us, which is to leverage our advantage, which is being both a software company and a hardware company, engineering all the pieces, so they fit together and work together well. And we think that's going to make customers' lives a lot easier, look at systems that are easier to operate, more reliable and faster. That's certainly true of Exadata and it will be true of the other products we announced in this area.
We're upgrading our Spark processors. We think we can build processors as fast as anybody else. I mean, we think IBM has got a terrific processor, Intel has got a terrific processor. And we think we will have a terrific processor. We got a way to go yet, but I think we're making really good progress building the team and building the next generation of Spark processors.
Okay. That's kind of on the technology side of the Sun hardware business where I think we're making good progress and we will continue to invest in that area. The other thing is in distribution. Sun had been going from direct sales from the old Ed Zander days, if you remember that name, where Sun had one of the great sales forces in the industry to virtually laying off the bulk of their sales force and going through partners. And that's not the kind of company we're.
I mean, we sell directly to very large customers where we offer them technology and the services to exploit that technology effectively. And we have those we already have those direct relationship with the customers in software, and we need the same those same relationships both on the sales side and on the service side in the hardware part of the business because, again, we see that as a unified business. There's no there really is no such thing as the hardware business or the software business. The business that we're in is the systems business. And we have to provide support in the systems business.
We have to sell systems. It's really one business. And since we're direct in software, we need to be direct in hardware. That's going to improve our margins, that's going to improve our penetration, that's going to increase our top line. We're adding about 2,000 salespeople and but which include not just salesmen, but also include sales engineers and service engineers.
And we're doing that with basically no net increase in our overall Sun technical replacing them with revenue producing people and technical people. So, we expect we can grow that business, we can double that quality of services to our largest customers. We're very excited about this and we fully expect to exceed that target of CAD1.5 billion in operating profit in the full fiscal year and CAD2 1,000,000,000 the following year. With that, I'll turn it over to Mark Gerd. And Mark, welcome aboard.
Thanks, Larry. It's great to be here with Larry and Safra.
Over the last 20 5 years, I've competed against and partnered with Oracle and I can tell you that Oracle has amassed the most enviable portfolio of technology in the industry. What led me to come to join Oracle is not what Oracle has accomplished in the past, but the clear growth opportunities I see going forward. The company is well positioned for where the industry and where customers are headed. I don't believe there is any other company in the industry better positioned than Oracle. Oracle is obviously leading the leading database and middleware company at a time when data and digitization are increasing exponentially.
So we essentially get to monetize the growth in data occurring around the globe. Oracle is way ahead of the competition in engineered systems and Exadata is really just the beginning. And Oracle is defining that market. The growth opportunities with highly optimized engineered systems are just starting and there's really no one else in the market with the software and hardware assets that can match Oracle. In addition, I think there is a large a large longer afford to do their own software development.
Many of these vertical markets individually are larger than ERP in ERP the fact is no other large software company has even started addressing these markets. Last, Oracle is a large global platform and a time when much of the growth is going to occur outside of the United States. We are well positioned to take advantage of
that growth.
What really gives me confidence in Oracle's growth is the sheer size of our R and D investments and our financial capacity to execute. We generated $8,500,000,000 in free cash flow over the past 12 months and we expect that we will spend over $4,000,000,000 this year on R and D. And we are going to spend all next week at Open World explaining just how we are spending that money. Without giving anything away, let me assure you it's well spent. So I'm going to speak quickly.
I'm really excited about the opportunities of which I've just touched a few. Let me turn to our Q1 results. Listen, I've been doing this a long time, 25% license growth and a company this size is a big number, especially for a company that closes in August. And again, I've been doing this a long time. I've been selling for over 30 years, but I personally never had to close the books in August.
So the credit for this really has to go to the sales organization. This is a fantastic performance. This quarter, we had several end to end Oracle wins, which were sold products from applications to technology and systems. An example is Vivo, the largest mobile database operating system at Sun M and M's at 9,000 servers, top to bottom Oracle technology. We had a a particularly strong quarter in technology, both database and middleware with growth of 32% and double digit growth in every single region.
In database, we continue to see a strong migration of customers to 11GR2, which also benefits our database options such as advanced compression and database vault. We had key database went along with active data guard option at the New York Police Department to help with their counter year, continues to do very well with the fastest adoption curve we've year continues to do very well with the fastest adoption curve we've seen over any of our previous releases. This quarter, we released a major new release of Oracle Business Intelligence 11 gs. While the On the application side, we had key wins against SAP at Mayan Resorts in Mexico and Molina Healthcare of California. Shifting to systems.
We saw growth again this quarter for the Sun products. On the high end, we saw great wins with the M9000 at Banco Ital in Brazil against IBM and also at Centerlink in Asia Pac where we beat IBM again with the M9000 systems. In the mid range, we beat IBM and winning a big deal at Telefonica in Spain and both MT We also saw storage wins at Banco DO Brasil, the State of New York and Branch Banking and Trust. Overall, a very strong quarter for Oracle. And with that, I'll turn it back to Ken.
Thank you, Mark. Ruthie, we are now ready for the Q and A portion of the call.
And we'll take our first question today from Adam Holt with Morgan Stanley.
Great. Thank you and congratulations on obviously a very good quarter. I wanted to drill down a little bit on the database technology business up over 30%, one of the best numbers we've seen in a long time. Mark talked a little bit about the impact of Fusion Middleware, but was there anything else that stood out in the quarter that was particularly strong? And what's the outlook in that line item in particular for next quarter?
Yes. Well, I think Exadata, I mean, people think of Exadata as a hardware sale. And of course, it's a combined hardware software sale. And whenever we sell Exadata, we sell database licenses unless the customer has database licenses and we sell storage server licenses. So for example, let me name my favorite Exadata sale, which was
we put 3 Exadata Racks
into SoftBank and replaced 60 Teradata Racks. And about half of that sale was hardware and half of that sale was software. But that was there. Imagine that 50 19 inches rack, kind of a room full of gear. Teradata, data to this machine, out it goes.
It's by the way, SoftBank is Teradata's biggest customer in Japan. And in goes 3 Exadata machines. By the way, the 3 Exadata machines way our hardware line and our software line. And so we're and that really I think Exadata really is helping our technology software growth substantially.
And ladies and gentlemen, we do want to remind everyone we're going to limit everyone to one question and then we'll move on to the next question. So now we'll go on to Heather Bellini of ISI Group.
Hi, thank you. Just looking at how you've retooled the hardware business, I was wondering if you could help us think down the road. Is this something given the margin improvement that you've had that we could see get even better and kind of think about it in the likes of Cisco and EMC who have gross margins in the 55% to 60% range?
Yes. Heather, again, I when we first took over the business, we set an internal target of around 50%. We just want to get to at least get to that point, which is reasonable and we're just about there. And then in Q1, we're at 48.4%. And I think in Q2, we'll the 50% mark.
But I think 60% is absolutely reasonable in gross margin. And can we do better? It depends on the product mix. I mean, how many Exadata and other engineered systems, CFS storage appliances versus some of the other systems that are T Series, which is a little bit lower margin. But I think depending on the mix, we can get to 60 or better.
And I think we can just as importantly double the top line. So we can dramatically improve margins and double the top line.
And our next question is from Sarah Friar with Goldman Sachs.
Great. Thanks so much. A more strategic question, just given those comments on the opportunity in vertical industries and just given some of Mark's actions at HP, is a natural next step to have a bigger IT services component? Or Larry, are you still of the belief that you're cannibalizing services and that that's the
right shift for customers? Well, okay. I think, again,
I don't think we're going
to end up again IBM is a great company and I appreciate the kind words from Sam Palmisano about us as being their number one competitor now. And actually, I mean that sincerely. I think Oracle is splattered. We've worked very hard. We look at IBM as our number one competitor and we're thrilled that they look at us as their number one competitor now.
And we know we have to work very hard to be successful in that competition. But IBM's services business seems to be the dominant part of their business and their product business is important, but secondary to the services business, if you will. We look at it just reverse. We look at our products being the dominant part of our business. And one of the things we're trying to do with our products is obviate the need for services.
So we do a very good job of integrating our applications together and making them easier to install and easier to upgrade, you don't need as much services. So our goal again, if we engineer these hardware software systems database and all this stuff is in one box, you don't need as much integration services. So we're trying to attack the yes, it's reduced the amount of services required to advantage of these systems. Having said that, our customers, especially in the big verticals, which Mark mentioned, in banking, we've got a big banks going through transformations and services. We can't eliminate all the services.
That's just fantasy. We can eliminate some of the stuff. But we're going to I think you'll see us engaging with our customers and providing services because they want us to, but we also have to be prepared to partner with other service oriented companies and point of which is IBM. We've actually got a very good relationship with IBM in services, which we're trying to expand, let's say, in banking. IBM's got a terrific presence in banking.
We've got some great banking products. IBM doesn't sell banking software. And we'd love for IBM to become expert in using our software to transform banks. And so again, Accenture, the IBM, the Indian companies, the Woodford has taught us. I will let Mark does a lot more about this and I'll let him comment.
Well, I think Larry is exactly right. I mean, listen, when you're running a big services company, the biggest issue is labor. And you've got a lot of incidents that occur and you've got a lot of labor trying to deal with those incidents of customers and the secret to services in the future is the way to automate those incidents and you automate them through software. So the future of
the service
level simultaneously. So the R and D that we have in fact isn't really it's a supplement if you will to the services capability and as we get to more of these engineered systems where we can build something once and sell it many, many times and do that work remote and do it in an automated way, it is frankly a replacement for what you today think of as very labor based services. I think as a product company, we want to be supporting those labor based service companies and partner with them when it makes sense. So I think our strategy is to do both, to automate those processes, to be able to sell those automated capabilities and then to partner with the services company as it makes sense.
Great. Thank you. Very thoughtful response. Appreciate it.
And we'll take our next question from Jason Maynard with Wells Fargo.
Hi, good afternoon guys. I've got a question for Larry and then a follow-up for Safra. First Larry, with these expedited results of the pipeline that you're talking about, it's pretty clear that this is becoming a big winning product for you. Can you maybe lay out the vision for how this can expand to other workloads like custom developed and packaged applications? And what does that mean for your opportunity to get more data center share spend?
Please come to Oracle Open World on Sunday. That's a very good idea. Yes, I mean it's something we certainly have thought about and made complete sense and I think we'll be announcing some very interesting things on Sunday in that area. Okay.
So I have to wait, I guess.
Just go to Vegas.
All right. That's fair. I was going to follow-up maybe with SAFR real quick. These results for August were clearly better than we expected, but the environment actually hasn't been that great for IT spending. I mean, when you sort of look at what's going on out there, do you need the IT spending market to pick up much?
Or can you continue to put up these type of results to sort of a status quo environment?
The truth is we've been actually putting up these kind of results through really much of this environment. The reality is that what we've got going is really very company specific. We are taking share from others. As Larry described in the SoftBank case, that type of thing is really happening everywhere. Customers are looking at us as their most important vendor.
And since they're buying so many things from us, they just many of them more and more are just doing what you know is Oracle first. If we have it, they'll buy it from us. They can't from dozens and dozens of vendors. We do it better. We spend more in R and D than anybody else does.
And we make it our business and our job to make sure these things work together so that customers don't have to figure out how to do it themselves. This is both sort of intuitively appealing and obvious to our customers who otherwise have to run very, very complex systems. And in every case. And as they buy from us, we're obviously taking share from everybody else. So in this environment, as you can see, we're doing just magnificently.
And that's because customers are just buying it from us and buying more.
Okay, cool.
See you Sunday.
And our next question comes from John DiFucci with JPMorgan.
Thank you.
Just first of all welcome aboard Mark. Glad to see you here. But I have a question for Safra. Safra, as Jason said, it's a really strong quarter and very clean across all the geographies. But I actually have a question on Europe and not so much regarding Oracle.
Your comments about company specific spending that comes from government spending, whether that's direct or indirect through healthcare or however it's done. And just curious what you're seeing in this region? And I'm not just the apps license number was down year over year, but that's not different from what we're seeing from other companies. So I'm not picking on that at all. But we cover a lot of companies, right?
Jason was trying to get to that. But what are you seeing in that region? And how did that affect your guidance this quarter?
Well, the truth is a number of the governments have been struggling for a number of quarters. And as you know, we sell the government. But for us, Europe is in Europe, Middle East and Africa is a lot of countries. There's a lot of potential there for us. And our overall license in constant currency was 18% growth, which I think most folks would have thought is impossible.
And yet, what's really happening is the same momentum we have in other geographies we have. Is it true that some of these governments are struggling and that if they weren't, we'd sell even more? Absolutely, of course. But as it is, we have so many products and we have so much still opportunity. And I'll tell you in addition, I think our competitors are absolutely falling out of bed.
So as a result, we are both the safe choice and we are the obvious choice. And to the extent that they've got that they have budget, they use it with us. And secondly, I mean, the truth of the matter is these companies cannot just stop and these governments cannot just stop buying our software. They need it. They use it and they ultimately have to go ahead and buy it and they are doing that.
So it's true, 18% growth in this kind of a quarter in the summer in Europe, I say that's pretty darn good. And we expect and actually Europe, even the ask number you mentioned, they actually had a very tough compared to everybody else. And I expect all around, I expect some very reasonable numbers,
European numbers out of Europe.
If I can obviously, in Europe.
If I can comment about the European apps number, we've been tracking we track our apps business, especially in Europe as a percentage of SAP because SAP is stronger in Europe than they are any place else in the world. And clearly certain countries like Germany, Switzerland, Austria, they I mean they have a virtual monopoly, closing in on 100% share in those countries, which makes it very difficult. We're up to about 60% of the size of SAP in Europe now in applications. And that's the toughest market and we are bigger than they are in North America for example, which is kind of our home territory. So, we think things are going pretty well in applications in Europe, albeit it can be a bit lumpy.
Q1 is our smallest license quarter. And you point out that this is the one deal we've kind of missed one deal closed the 1st day of this quarter or Q1 apps would have looked a lot better in Europe. But we think overall over the last four quarters, we've done very well in Europe against SAP taking share from SAP in their home markets. We have a number of deals, especially, say, in the which I think Mark rightly emphasizes. We are a large software company and we have a lot of software that's that's industry specific for retail, for telecommunications.
We're winning all of the retail deals in Germany against SAP, all of them. Let me repeat that, 100% of them. So, we're very happy on how things are going overall looking back over the last four quarters with our most important software competitor in Europe, which is the same thing.
Thank you.
And we'll take
our next question from Kash Rangan with Merrill Lynch.
Yes. Thank you very much. Larry, it was good to see you talk about the goals for doubling the hardware business. I'm wondering if you could just give us a little bit more color, how should we think about this to keep the to double the revenue and then get the margins up to 55%, 60%. So almost seems like you're going to be out of the low end business.
Looks like it's almost as big as the IV Mainframe business that you're looking to create or maybe potentially larger than that. How do you create that position given Versum has been operating? And if we have time for Mark, what would be your key priorities as you
step into Oracle? That's it for me. Thanks.
Okay. I'll make some opening comments and I'll turn it over to Mark. But I think that the big thing is these engineered systems that Exadata being one example, another we'll be announcing some more systems in Oracle Open World, the ZFS storage appliance. We have to have products that offer unique value in the marketplace like IBM mainframes. I mean IBM offers unique value with those products.
I mean, those mainframes run software that doesn't run on other computers. So you kind of a unique value proposition. With Exadata, we got to run the Oracle database 10 times faster than on any other kind of machine and we do that. And with other things, we have to have very substantial performance advantages, reliability differentiated engineered products that can buy hardware and software. We think we can improve our margins and grow our share dramatically rather than mucking around kind of trying to sell a low end server on price against Dell.
We're partnering with Dell. We think Dell is a great company. And we love partnering with them, but we don't want to compete in that space. They're very good at that.
Sure. I'll just add to that some priority perspective. First, this is a very well run company. We want
to go grow and we want to grow profitably. We want to
take share, want to be in a position where we can delight our customers and earn more of their spending. And that's my priority. When you look at the R and D and the things that we'll be announcing next week, we want to have the best sales force on the planet, and customers respect every day and we want to deliver the best service on the planet. And those
are the things I'm working on.
And ladies and gentlemen, we have time for one more question. We'll take that question from Phil Winslow with
rebound and while database is driving the way and overall license growth, when you look at the apps business, what's really driving it there? Are we talking about core ERP seeing a rebound or is it still these edge applications where you're getting traction? And also, Larry, just as a follow-up here on database, obviously doing phenomenally well, but we've seen some competitive announcements in the database market with SAP buying Sybase, talking about m memory, EMC buying Greenplum, just curious your take on those? Thanks.
Well, listen, for us, even ERP, remember, with us, our numbers are so big that we still got to sell ERP every quarter to do well. But the HF patients are doing very, very, very well also. And I mean, it's going very well all around. I mean, as far as big ERP wins,
a lot
of people are not necessarily changing their ERP systems, but they're buying more for their current systems. They're buying additional modules into their systems. And for us, it's really all around going really quite well. Performance Management is doing very well, things like that. And so it's really it's the edge applications and the basic business remain solid.
Okay. In terms of database technology announcements, screen plums, SAP and memory and those things. Now, we're pretty good at this database side. And I was I guess the word might was used was dismissive of SAP's in memory database. And SAP took that and Hasso Plautner did a movie where he interviewed himself.
If you haven't it, it's on SAP's website, it's really worth watching. And he interviews himself. He plays 2 characters and he memory databases. I said I thought it was peculiar that SAP would choose to compete with us in the arena of database technology. I mean, they compete with us in ERP and they've got there first.
They were ahead of us and they've done quite well and they're the leaders there. But to compete with us in data that's just seemed like a peculiar choice especially if all of you can recall NetWeaver with their attempt to compete in middleware. So, they tried to compete with us in middleware and we're not very successful and they hardly ever talk about NetWeaver. So after a failure in middleware for them to immediately move on to, well, let's go tackle them in database with a 2 pronged strategy. Let's buy Sybase, which does not run SAP.
And then let's build our own in memory database technology kind of trumping Oracle in R and D and getting to Oracle market before them. Let me announce today, I'll make the announcement now that Oracle has had under development for some time an in memory database that's a part of the Oracle database and we will deliver that to the market before SAP delivers theirs. So we'll be out in the market with our technology. This is not radically new technology. There are a number of university projects.
There are tons of research papers. We've been following this for a very, very long time.
We don't live under a rock.
Well in advance of their product. Now, we have I believe that Oracle will do a better job of delivering in memory database technology, which is primarily for query optimization. And it's based on a variety of different kinds of compression and it's basically columnar without it's hybrid columnar compression. I only go to all with what the technology is, but we've been working on it for a long time. We'll be in the market before SAP.
And I believe just like we beat them badly in middleware where Fusion Middleware beat NetWeaver, they have even less of a chance to beat us in database technology than they had to beat us in middleware technology. And I just think that was a colossal mistake to take us on in middleware. It's a bigger mistake to take us on in middleware. It's a bigger mistake to take us on in database. And in the meantime, they've got this all new product called Business by Design, which is aimed at, I don't know, companies of 4 people, between 4 and the 100 people or something like that, which is floundering horribly.
And they've done nothing new in their core ERP business for 25 years. They still build an ABAP. So this I guess, which will come as a surprise to nobody. So after 5 years of development, NetSuite and Ouro Open Ouro will be announcing our Fusion application suite, all the ERP products, all the CRM products, all the HRMS products have been redone, the ground up and SAP is going to go and compete with us using their 25 year old technology. And so rather than focusing on their applications and upgrading their applications like we did with Fusion, they said, Oh, no, I have a better idea.
You got to watch the video where Haso interviews it's called Haso acts Haso or something like that. You got to watch it. Instead of competing with us in applications and modernizing their applications, they say, oh, no, let's go kill Oracle and database technology. Good luck. Operator?
And ladies and gentlemen, that does conclude our question and answer session. Turn the conference back to our speakers for any closing remarks they may have.
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