Arik Hesseldahl

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Hurd at Last: Oracle’s Co-President Talks to AllThingsD

It was a year and 20 days ago that the software giant Oracle announced it had hired Mark Hurd, the former CEO of Hewlett-Packard, as a co-president.

It was a pretty fast turnaround for Hurd, who resigned at HP following an unpleasant flap. But at the time, Oracle was in the process of acquiring Sun Microsystems and adding a sizable IT hardware business to its portfolio. Hurd, having earned a reputation for running a tight operational ship during five years at HP, was available and had already built a friendship with CEO Larry Ellison, who had publicly castigated HP’s board for acting rashly in dismissing Hurd.

Hurd has been quietly working away inside Oracle since then, getting to know its business and regularly speaking at small Oracle customer events, like one in New York in March. He’s also been a regular on Oracle’s earnings conference calls.

Now Hurd’s public profile at Oracle is about to rise considerably. With Oracle set to hold its annual Oracle OpenWorld conference in San Francisco next month, Hurd will be delivering a keynote address of his own and will from here on be taking on generally more public roles at Oracle. Make no mistake: He won’t be standing in for CEO Larry Ellison — what mere mortal could? — and Ellison will be doing two keynotes of his own at the Oracle event. But Oracle customers and investors will be seeing more of Hurd than they have before.

Hurd today granted AllThingsD his first on-the-record interview since joining Oracle. (We published a few highlights earlier today.) It comes on the heels of last week’s surprisingly strong earnings report by Oracle, which is what we talked about first. Hurd declined to offer any good-natured advice to Meg Whitman, HP’s newly named CEO, and also declined to answer any questions whatsoever about the circumstances surrounding his departure from that company 13 months ago. (I did ask, I swear!).

He also sort of diplomatically avoided naming competitors, so I’ll do that on his behalf. When he mentions database and middleware competitors, he means IBM. When he refers to “point products” and “boutique companies,” he’s referring to Salesforce.com and Workday, both cloud-based applications that compete with Oracle offerings.

The full transcript of our conversation is below.

AllThingsD: You had a pretty good quarter, in a tough environment. What in your view is going well at Oracle, and what could be better?

Hurd: Well listen, we released a quarter, that I think was a great quarter, that had 17 percent new license growth which is outstanding. In Q1 of 2011 we had 25 percent license growth. The good news is that it was 25 percent, and the bad news was that it was this year’s comparison, so when we grow 17 on top of 25 it’s just outstanding license fee growth. When you remember that last year we had 33 percent revenue growth and 33 percent earnings growth, these numbers we just posted are coming against a really good 2011. So they’re just outstanding. Also, we had Exadata growth that was just outstanding. We talked about that on the conference call. We had a good launch for Exalogic during the quarter. We had a growth in the T-series and M-series, which are the traditional Sun servers, during the quarter. Then I’d add that our industry verticals grew faster than Oracle overall. That’s an important strategy for us. We get deeper into these industry verticals, and they solve our customers’ most difficult problems. They’re very industry- and business-specific, and when you add to them the rest of our portfolio, it made for a strong quarter all the way around.

The other thing about the quarter is that you were strong in Europe at a moment when Europe seems to be melting down. Why is Oracle so strong when others would be seeing weaknesses? What is Oracle doing differently in Europe that others aren’t?

I wouldn’t comment on what others are seeing, because I only know what Oracle is seeing. It may be that it’s just Oracle-specific momentum more than anything else, but when I look at each segment of our business in Europe, if I actually read to you the growth rates of each of our product segments, it would sound very consistent. We didn’t have any one big deal in Europe, no big transaction. We didn’t have any one country that stood out. It was just broad-based, across-segments, across-countries performance. And the performance in Exadata, Exalogic, overall hardware growth, all very strong in the quarter. So forgetting the macro environment, Europe was a bright spot for Oracle last quarter and very strong. Also one quick note: Whenever you have a quarter in Europe where the applications growth in the quarter was 63 percent — when you grow like that it’s just great stuff.

Let’s talk about the hardware business a bit, which is still relatively new. You talked on the conference call last week about how you’re focusing more on hardware with higher content of Oracle intellectual property, and less on commodity stuff, what we often call the x86 servers that use chips from Intel and are less distinguished from what other companies offer. Where are you in that process and how long do you think it will take to get where you want to be?

I think you’ve got it right. We’re very focused on growth in Exadata and growth in Exalogic. You know this but it bears repeating, Exadata is a combination of server and storage and software technology integrated into a single solution that we think gives our customers a better total cost of ownership, or TCO. Some of the performance gains our customers are seeing are 30 or 40 or 50 even 70 times the performance improvement. Not 30 or 70 percent performance gains, but 30 or 70 times better than before. On top of all that we support them remotely, diagnose their problems remotely, sometimes before they even know they have them. And so growing that Exa line is very important to us. Now, next week at Oracle Openworld, we’re going to release more Exa lines and more technology than you’ve ever seen from the company at any one time. Last week we introduced an Oracle database appliance, which is very much an Oracle intellectual property stack focusing on mid-market and departmental solutions. While it’s not as big a system as an Exadata, it’s a manifestion of the same strategic directions we’ve had before. They’re integrated systems where we can bring a stack of value to our customers.

Your CEO Larry Ellison made a comment on the conference call last week that got a lot of attention: Essentially that Oracle would be okay with the x86 business going to zero. Now I know it’s a little more complicated than that. Would you care to revise and extend his remarks on that subject a bit?

What I would say is that we don’t have interest in selling products where there’s no Oracle intellectual property. We’re very focused on adding value to customers. If there’s no Oracle intellectual property in it, then you ought to buy it from someone else. We’re very focused on getting our technology into the market. We think we can do two things. All of our products are designed to be the best-of-breed, the best in the markets they serve, to work in heterogenous environments, to be open. That is clearly our strategy at every layer of our architecture. In addition to that, we vertically integrate some of these systems like we do in Exadata and like we do in Exalogic and like you’ll see in other manifestations over the next week, where we think we can deliver extreme performance, extreme TCO and extreme serviceability. If there’s some product that comes from a third party that just comes through Oracle where we add no value, that’s the stuff we have no interest in. If we add no value to it, you ought to buy it from someone else.

So that doesn’t mean you intend to get out of the x86 business entirely, only that you’ll want to sell hardware that is sold in combination with Oracle IP whether it’s software or something else.

Yes. We still have an x86 line. But Larry was trying to make a point.

Let’s talk about competitors. Who do you see showing up on deals you’re competing on? Who keeps you up at night?

We have competitors in the industry vertical markets that are really point products, and horizontal apps, there are some that are boutique companies that provide certain functional applications whether it’s in HR [Human Resources] or something like that. We certainly have competitors in database and middleware.

So it’s been a year since you joined Oracle. What’s it like working with Larry Ellison?

It’s great. It’s just great.

What defines success for you at Oracle? If we talk at this time next year, where do you want Oracle to be?

We’re releasing a whole new set of technology next week. Our opportunity is to drive that into the market and increase customer awareness of the portfolio. You’ve got all these smartphones running around the market. They’re basically computers in people’s hands, and they’re begging for data from enterprise applications, and those applications need to be modernized to make that happen. We can help our customers on innovation whether it’s e-commerce or any other environment they want to innovate in and at the same time we get the opportunity to make them more efficient. These engineered systems solutions deliver tremendous performance that help our customers server their customers better and help them get better efficiency at the same time. So we’ve just got a tremendous hand to play and that’s what we’re going to do.

You’ll be speaking at Oracle Openworld in San Francisco next week. What’s on your agenda?

I’ll be doing a lot of stuff. Larry has a keynote Sunday, and he’ll do another Wednesday, and I’ll be doing one Monday. But they’ll all be centered on our innovations and systems and software that we’re bringing to market, so that will be the primary agenda for the week.

Will we be seeing you in a much more public role at Oracle generally? Are you going to be more of a public face of Oracle going forward?

I have a job to do, so it won’t be to the exclusion of that. I spend most of my time working on customers and making sure we have the best team in the industry. Last year I’ve spent time on customers, people and products. I don’t see that changing. To the extent that we have things to announce I’m clearly going to be doing all that in addition. I’ve been seeing lots and lots of customers, and will be continuing to work on building our team and making sure I’m participating in the product process in every way possible. That’s what I’ll be focused on.

What are you hearing from those customers? What are they worried about? What are they telling you about their business?

They love our products, they love our people and want to get more deeply engaged with Oracle. It’s a huge opportunity for us, but it’s also a challenge, because frankly there’s a lot to be done. And frankly we can’t do everything, so we have to pick our spots to engage properly. It’s important for us to focus.


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