Oracle reported a 62 cents per share profit, soundly beating the 56 cents that analysts had expected. Sales, at $9.1 billion, were ahead of expectations by $100 million.

President and CFO Safra Catz said the company is on track to deliver what she said will be the highest operating profit margins in the company’s history this year. Software license sales were up 7 percent, while product support revenue was up 8 percent.

The bad news came, as usual, in hardware, where overall sales were down 16 percent, though sales of its engineered systems grew by nearly 140 percent.

It’s a better report than last quarter, when the company missed a few key sales targets. The shares suffered the next day as a result and haven’t recovered since.

The press release is below. I’ll have more later as the conference call with analysts gets underway.

ORACLE REPORTS Q3 GAAP EPS UP 20% TO 49CENTS; Q3 NON-GAAP EPS UP 15% TO 62CENTS

Trailing Twelve Month Operating Cash Flow Up 35% to $13.5 billion

REDWOOD SHORES, Calif., Mar. 20, 2012 — Oracle Corporation (NASDAQ: ORCL) today announced fiscal 2012 Q3 GAAP total revenues were up 3% to $9.0 billion, and non-GAAP total revenues were up 3% to $9.1 billion. Both GAAP and non-GAAP new software license revenues were up 7% to $2.4 billion. Both GAAP and non-GAAP software license updates and product support revenues were up 8% to $4.1 billion. Both GAAP and non-GAAP hardware systems products revenues were down 16% to $869 million. GAAP operating income was up 11% to $3.3 billion, and GAAP operating margin was 37%. Non-GAAP operating income was up 8% to $4.2 billion, and non-GAAP operating margin was 46%. GAAP net income was up 18% to $2.5 billion, while non-GAAP net income was up 13% to $3.1 billion. GAAP earnings per share were $0.49, up 20% compared to last year while non-GAAP earnings per share were up 15% to $0.62. GAAP operating cash flow on a trailing twelve-month basis was $13.5 billion.

“Oracle is on track to deliver the highest operating margins in our history this year,” said Oracle President and CFO, Safra Catz. “Oracle can achieve these record margins as an integrated hardware and software company because we are focusing on high margin systems where hardware and software are engineered to work together.”

“Hardware revenue for our engineered systems grew 139% this quarter and going into Q4, we have a record pipeline,” said Oracle President, Mark Hurd. “In applications, Fusion in the Cloud is winning with great success against niche HCM cloud vendors in the US and worldwide. Our modular, integrated platform of 100 apps available in the cloud or on-premise is a key differentiator.”

“This past quarter Oracle delivered the hardware and software for our new extreme performance Exalytics In-Memory Machine,” said Oracle CEO, Larry Ellison. “At the core of Exalytics is our new in-memory database technology capable of instantaneous big data analysis; questions are answered at the speed of thought. And unlike SAP’s Hana in memory appliance, Exalytics runs your existing applications. Simply plug-in Exalytics and your existing Oracle Business Intelligence applications and Hyperion Enterprise Performance Management applications run much, much faster.”

The Board of Directors also declared a quarterly cash dividend of $0.06 per share of outstanding common stock. This dividend will be paid to stockholders of record as of the close of business on April 11, 2012, with a payment date of May 2, 2012.

The deal can’t help but be seen as a response to SAP’s acquisition last year of SuccessFactors, a Taleo rival. Indeed, Taleo’s shares have appreciated significantly in recent months — from $29 to $42 a share over the course of two weeks in December — on speculation that it would be the next cloud company to fall to the recent burst of acquisitions in the cloud software space. And so it has.

If Taleo is a new name to you, perhaps you should go back and read this interview I did with its CEO Mike Gregoire (pictured), about a week after the SuccessFactors deal. The company had been on track to do $325 million in revenue, and has been growing at a 20 percent annual clip.

What’s strange is that Gregoire seemed uninterested in being acquired by Oracle at the time, mainly because he had lived through Oracle’s hostile takeover of PeopleSoft, and had been with that company “until the bitter end.” Apparently, Gregoire and his board have seen past any reticence about Oracle this time around.

The press release is below:

Oracle Buys Taleo

Adds Leading Talent Management Cloud Offering to the Oracle Public Cloud

DUBLIN, CA–(Marketwire -02/09/12)- Oracle today announced that it has entered into an agreement to acquire Taleo Corporation (NASDAQ: TLEO – News), a leading provider of cloud-based talent management for $46.00 per share or approximately $1.9 billion, net of Taleo’s cash and debt. Taleo’s Talent Management Cloud helps organizations attract, develop, motivate and retain human capital to improve performance and drive growth.

Together, Oracle and Taleo expect to create a comprehensive cloud offering for organizations to manage their Human Resource operations and employee careers. The combination is expected to empower employees and managers to effectively manage careers throughout their entire employment, enable organizations to retain talent and optimize costs, and improve the employee experience through faster on boarding and better collaboration with team members via social media.

The Board of Directors of Taleo has unanimously approved the transaction. The transaction is expected to close mid-year 2012, subject to Taleo stockholder approval, certain regulatory approvals and other customary closing conditions.

“Human capital management has become a strategic initiative for organizations,” said Thomas Kurian, Executive Vice President, Oracle Development. “Taleo’s industry leading talent management cloud is an important addition to the Oracle Public Cloud.”

“Taleo’s integrated cloud-based talent management solutions optimize how organizations hire, manage, develop and reward their employees and gives companies the intelligence needed to capitalize on their most critical asset — their people,” said Michael Gregoire, Chairman and CEO, Taleo. “Joining forces with Oracle gives us the opportunity to better serve our customers.”

Last year, the judge offered Oracle a choice: Accept a judgment of $272 million in damages, reduced from $1.3 billion awarded at trial, or seek a new trial. Oracle says in court filings that it wants a new trial.

The key passage of the two-page court filing reads as follows (the word “remittitur” refers to the judge’s previous order reducing the award):

Oracle has no choice but to elect a new trial, as accepting the remittitur would force Oracle to risk waiving its right to appeal the Court’s decision on the motions for judgment as a matter of law and for a new trial. Oracle’s objective is to obtain clarification of the law and, if it is right about what the law is and what the evidence supports in this case, to vindicate the verdict of the jury and Oracle’s intellectual property rights as a copyright owner. Accepting the remittitur would be contrary to this objective.

And that means that the whole thing starts over again.

Calling the $1.3 billion award “grossly excessive,” U.S. District Court Judge Phyllis Hamilton in February granted an SAP request to throw out the award. Hamilton said that Oracle never proved that it lost enough business to justify so large a judgment.

Oracle had won the award in November, after accusing SAP’s now-shuttered TomorrowNow unit of copying its software without paying appropriate licensing fees. It had been the largest judgment ever in a copyright infringement case.

At trial, Oracle accused SAP’s now-shuttered TomorrowNow business unit of illegally downloading Oracle software and then making several thousand copies of it, in order to avoid paying the relevant license fees that are Oracle’s financial bread and butter. Oracle ultimately won the claim, but then the fight turned to damages.

Lawyers for Oracle had argued that the company’s damages should be tied to the value of a hypothetical license that TomorrowNow would have had to pay for the software, had it been properly licensed. For its part, SAP had argued that, as competitors, damages should have been calculated based on profits lost by Oracle and gained by SAP as a result of the infringement, and as such is in a much lower range than what Oracle argued for.

The case has caused a lot of personal enmity between Oracle and SAP, as well as with Hewlett-Packard, especially during the 11-month period when former SAP co-CEO Léo Apotheker was CEO of HP. Apotheker’s first days on the job at HP were marred by his apparent absence from HP headquarters, in what couldn’t help but look like an attempt to avoid being served with a subpoena. Maybe Oracle will try again.

One thing Judge James Kleinberg did was dismiss a fraud claim by Oracle that said HP had been all sneaky when it concluded a settlement with Oracle that included an agreement to continue building software for systems using the Itanium chip. The settlement was struck only a few weeks before HP hired Léo Apotheker as its CEO and Ray Lane as its chairman.

But that’s not the important part of what Judge Kleinberg did. The most important aspect of yesterday’s action in Hewlett-Packard v. Oracle was the release of the unredacted version of Oracle’s cross-complaint. And it’s a juicy read.

I’ve posted the redacted version before. Now you can read all the bits that were blacked out.

What you’ll find is a lot of information that goes to the core of Oracle’s argument that HP has a lot to lose if the Itanium chip goes end of life, which is exactly what Oracle has said Intel plans to do. As the only major server vendor who sells boxes running Itanium chips, HP makes a lot of money — billions of dollars, according to a newly unredacted statement in the filing — on service-and-support contracts with its Itanium customers. As one HP executive is quoted on page four of the filing, without Itanium, HP would be “strategically screwed.”

Intel, on the other hand, was more or less ready to let the chip die. Having spent billions, dating back to 1989, to develop the Itanium chip, which outside of HP never saw any market success, Intel had to be convinced to keep building them. To do that, HP, the filing reads, paid Intel $440 million to keep Itanium chips in production for a few more generations, through 2014. The deal didn’t even cover the cost of the chips, as HP had to pay for them, as well, the filing reads. Oracle calls the arrangement a “pure pay-off to induce Intel to keep churning out processors that it really wanted to kill.”

And while there’s nothing specifically wrong with the arrangement by itself, Oracle’s point is that HP was misleading the marketplace about the true status of the keystone product in its Business Critical Service business. That unit, in no small part because of the uncertainty wrought by this lawsuit, saw its sales fall by 23 percent in HP’s most recent quarter.

Having won the release of the unredacted complaint, Oracle claimed something of a victory in a statement:

“Oracle is delighted that the Superior Court of the State of California, Santa Clara County, has rejected HP’s attempt to hide the truth about Itanium’s certain end of life from its customers, partners and own employees. We look forward to seeing all of the facts made public that demonstrate how HP has known for years that Itanium is end of life.”

It all sounds very reasonable, until you take into account the fact that Oracle acquired Sun Microsystems in 2010 and is now a big server vendor that competes with HP, and would by no real stretch of argument benefit from an exodus of HP’s Itanium customers toward other vendors. HP called the decision by Oracle to cease support for Itanium part of a “calculated business strategy” to mess up HP’s Itanium business and capture those customers. Yet the evidence so far suggests that the one benefiting from this fight is actually IBM.

HP claimed victory of its own, in a statement:

“HP is pleased that the Superior Court of the State of California, Santa Clara County, has rejected Oracle’s attempt to use a fraud claim to undo its contract with HP. We look forward to seeing the facts made public that demonstrate how Oracle’s March 2011 announcement to no longer develop software for Itanium servers was part of a calculated business strategy to drive hardware sales from Itanium to inferior Sun servers. This further demonstrates the fact that Oracle breached its contractual commitment to HP and ignored its repeated promises of support to our shared customers.”

HP has portrayed itself as the defender of the interests of Itanium customers, under attack by Oracle. As HP puts it in its statement, Oracle tried to induce customers running Oracle software on HP Itanium systems into replacing that hardware by limiting support and withholding software patches and bug fixes. “Customers were left without options to address bugs and other defects in their Oracle software,” HP says.

For HP, this is all a simple argument over whether or not Oracle can be held to the contract they agreed to in 2010.

The agreement stems from the circumstances of former HP CEO Mark Hurd’s resignation, and his subsequent hiring by Oracle as its president. HP sued Hurd and Oracle, and soon they settled. HP says that a clause in that settlement included a provision that Oracle would continue to port its database software to HP servers running the Itanium chip. Oracle has argued that this clause is not part of the final agreement. The settlement document itself remains confidential, but its details will likely emerge in the trial. Expect lots of arguing over different versions of the agreement.

I have embedded two documents below, for your reading pleasure. The first is Oracle’s unredacted cross-complaint, with all the blacked-out bits from the previous version now fully revealed for the world to see. Below that is a Case Management Conference Statement filed by HP lawyers, also unredacted, where it seeks to expose Oracle as making cold-blooded moves that would appear to be attempts to spur Oracle’s own software customers to abandon HP hardware. It’s not quite as juicy as Oracle’s document, but it has its moments, too. Enjoy them both:

HP v Oracle – Amended Cross Complaint

0077a 2011121 Hp Cmc Stmnt Unredacted

“I’m very impressed by the great technology produced by this company,” the superstar singer told 46,000 techies, for whom he performed later that night.

Read the rest of this post on the original site »

It’s been a few days since the world devoured and digested the contents of the June 2010 letter to then-Hewlett-Packard CEO Mark Hurd, alleging a pattern of sexual harassment of a marketing contractor during a period running from 2007 to 2009.

The facts are pretty simple: HP investigated, found that its sexual harassment policies hadn’t been violated, but in the process found irregularities with expense reports that made HP’s board of directors lose their trust in Hurd. He resigned on August 6, 2010, following a settlement with the contractor, Jodie Fisher, who wrote a letter saying there were unspecified “inaccuracies” in the original letter.

So what have we learned from this visit back to the summer of 2010? And, are there any larger implications for Hurd or for his current employer, Oracle? Or, moreover, for the world at large?

The short answer to the second question is, of course, no. Immediately in the wake of Hurd’s departure from HP, Oracle CEO Larry Ellison rushed to Hurd’s defense, then offered him a job. There’s no indication that any of the new revelations have tarnished Hurd’s standing with Ellison or within Oracle.

So long as Ellison is happy with Hurd as Oracle’s co-president, Hurd is secure. The way Ellison appears to see it, HP was dumb to let Hurd go over what was ultimately a problem with expense reports. Hurd is human, but on game day he plays to win, so Ellison made space for him on team Oracle. The day Hurd doesn’t play to win is another matter.

HP investors can now evaluate and debate whether that company’s board of directors overreacted to the matter, although in reality it doesn’t matter. What’s done is done, and HP’s new CEO, Meg Whitman, has plenty on her plate for the year ahead, not the least of which is undoing some of the damage to its share price done under Hurd’s replacement, Léo Apotheker.

What else have we learned? Hurd’s not the first, nor sadly the last, senior executive to be accused of sexual harassment. For every letter like this one that sees the light of day, there are thousands more that the public never reads.

The U.S. Equal Employment Opportunity Commission has tracked the number of sexual harassment claims it investigates each year since 1997, when there were 15,889 cases. It is perhaps encouraging to learn that the number of such cases investigated by the EEOC has dropped by 26 percent to 11,717 as of 2010. (And here’s an interesting fact — 16 percent of these claims were from males.)

On average, these investigations lead to about $50 million each year in monetary benefits paid to the people who file claims, and these don’t include cases that go to court.

And the fact remains that HP’s own internal investigation exonerated Hurd of sexual harassment, and Fisher has stipulated that there were “inaccuracies” in the original letter.

Still, none of it has to be true for the contents of the letter to be a perfect case study in what not to do. As such, it should be required reading for executives at every level of seniority. In that sense, painful and tawdry as it must have been for those concerned, the letter’s release constitutes a public service.

(And speaking of public service, the image above is the early 1990s-vintage graphic from NBC’s public service announcement campaign.)

Groklaw reported the notifications on Friday. See the full filing here. These patent reexaminations are a routine part of patent lawsuits. One party, usually the one that’s alleged to be infringing, asks the patent office to reexamine the patent and decide whether or not the patent should have been issued in the first place. A rejection isn’t by any means a final nail in the coffin in Oracle’s infringement case against Google. But it doesn’t exactly help Oracle, either.

Oracle has six months to appeal the patent office’s finding, and it can also, as a final step, sue the patent office itself. But these things rarely go that far.

And these rejections are sometimes meaningless to the final outcome of a lawsuit. In 2005, as part of its epic patent litigation against NTP — the case that nearly barred the import of BlackBerry devices into the United States — Research In Motion won several rejections from the patent office, like this one, which I wrote about at the time, only to suffer later defeats in court that led it to pay a $612 million settlement.

Oracle has claimed that Google owes it more than $6 billion for parts of its Java software that were used in the Android mobile operating system; Oracle took over Java after it acquired Sun Microsystems last year. Google has argued that Oracle’s claims for damages are flawed. After face-to-face talks between Oracle CEO Larry Ellison and Google CEO Larry Page failed in September, the trial had been expected to begin in October. But it was delayed, and is now expected to get underway in 2012.

It’s not the only one: Several enterprise software and hardware players are falling right along with Oracle. Salesforce.com, whose primary customer relationship management software rivals Oracle’s, has fallen more than $8, or more than 8 percent. Oracle’s primary software rival, SAP, is down by more than $3, or more than 5 percent. IBM has fallen $6.73, or more than 3 percent. Hewlett-Packard is down 50 cents, or nearly 2 percent. Dell is down 40 cents, or more than 2 percent. Microsoft is falling, too, but not as much.

It looks a lot like what Cannaccord Genuity analyst Richard David predicted in a note to clients this morning. Oracle is something of a bellwether for software company and corporate IT stocks in general. A lot of the problems that sapped Oracle’s results this quarter, David wrote, are specific to Oracle. But in the minds of investors it doesn’t matter:

“Much of the miss was company specific, but it won’t matter this morning. Investors are likely to use this miss as a reason to pound software on Wednesday. We believe Oracle’s miss, combined with Red Hat’s heavily punished but modest scuffle on Tuesday, will first hit infrastructure stocks like VMWare, Citrix Sysems and then for good measure high fliers like Salesforce.com. Our view is more nuanced; Oracle missed because some buyers waited for a new hardware upgrade, and on the software front the firm is behind the curve in cloud applications. We expect Oracle to catch up, but it will be through some R&D and a lot of M&A. We would “back up the truck” on Salesforce if traders knock that stock down because cloud software companies are very likely to gain significant market share from non-cloud vendors.”

Davis cut his rating on Oracle to “Hold” from “Buy,” arguing that the shares will “trade sideways for the next two to three quarters.” Even after an expected “dead cat bounce” — a quick price recovery after a significant fall — Oracle will have some work to do. “Oracle will have to rebuild confidence that the firm is not is not headed to Microsoft’s valuation level over the next few years. Therefore, we can no longer rate Oracle a Buy.”

Not everyone was quite so negative. FBR analyst David Hilal, in a note to clients this morning, lowered his estimates on Oracle’s sales and profits for fiscal 2012. He now expects Oracle to report per-share profits of $2.36, down from $2.44, and cut his sales estimate to $37.7 billion from $39 billion. He also lowered his target to $34 from $38. Even so, he’s still bullish generally, albeit with lower expectations. “The macro debate will now focus on whether IT spending is finally coming under pressure due to broader economic concerns,” Hilal wrote. “While IT spending is not immune to such macro factors, we are not forecasting a material slowdown as we believe enterprises have already been cautious regarding their spending. However, some modest pullback should be expected, particularly post a seasonally strong end to the year.”

BMO Capital analyst Karl Keirstead didn’t agree with Hilal on that point. “Given some weak recent data points from Red Hat, Salesforce.com, Intel and Accenture, we conclude that the macro IT spending backdrop in fact weakened and that the miss was not related to Oracle execution or share losses,” he wrote in a note to clients this morning. “We assumed that Oracle could manage through this tightness and we were obviously wrong.” He lowered his price target to $32 from $38 but maintained a “buy” rating.

Other analysts downgraded Oracle, too. Societé Generale analyst Richard Nguyen cut it to “Hold” from “Buy.” CLSA slashed Oracle shares to “underperform” from “buy,” and lowered its price target to $30 from $36. Deutsche Bank analyst Thomas Ernst lowered his target price to $29 from $33. It’s just one of those days.

So what happened? A few things, as Oracle execs tried to explain on a conference call.

• The currency effect: As President and CFO Safra Catz explained, what had been a 1 percent tailwind for currency effects turned into a 2 percent headwind. With all the violent swings in the value of currencies around the world as compared to the U.S. dollar, Oracle suffered a negative effect that pinched revenue.

• Deals didn’t close during the quarter: Catz said that in the final days and weeks of the quarter, some customers added an extra layer of executive approval to close deals to buy Oracle stuff. That meant that some deals Oracle had expected to close before the quarter’s end moved into the next quarter. Catz said that Oracle has taken steps to better manage deal flow to take this into account. It is consistent, however, with recent statements from other enterprise IT vendors, like IBM and NetApp.
• Transitions: Oracle’s SPARC server business just switched to a new chip called the T4, which was unveiled late in the quarter. The machines require a total upgrade, and that means a lot of testing with existing applications, which can slow down deals for the new machines, while at the same time sapping demand for the prior generation of products. That had a lot to do with hardware sales dropping by 14 percent year over year to $953 million. As Catz put it: “We saw good early demand for the new SPARC SuperCluster, but only released the product for general availability at the very end of the quarter, allowing us to ship only a couple.”

Catz also predicted that hardware sales will decline as much as 14 percent this quarter, although CEO Larry Ellison was bullish on its growth prospects later this year. New software license revenue, a key metric gauging software sales, is expected to grow in a range of 2 percent to 12 percent. Total sales are expected to grow in the range of 3 percent to 7 percent, and per-share earnings are expected to come in between 56 and 59 cents, which is in line with the consensus of analysts.

There were a few things that went right. Ellison did what he usually does on a conference call, and crowed about examples where Oracle is beating a competitor. This time, the targets were IBM, Cisco Systems and SAP, but not his usual punching bag, Hewlett-Packard. Oracle won several competitive deals from Big Blue and Cisco, as well, with customers as varied as Australia’s University of Melbourne, the U.S. Food and Drug Administration and the Hyundai Kia Motor Company.

Ellison also hinted that Apple is a big Oracle customer. He mentioned a “a very large American smartphone manufacturer” that had bought more than 30 Oracle Exadata systems as it built out its cloud. Unless I’m missing something, there’s really only one company that fits that description, and that’s Apple. Its use of Oracle gear within the mix at its North Carolina data centers has been speculated about before, but never confirmed by Apple directly. (Big surprise, that.)

The company reported a profit of 54 cents per share on $8.8 billion. The results fell short of the consensus view that Oracle would report sales of $9.23 billion and a per-share profit of 57 cents. Oracle shares, which had risen by 56 cents, or 2 percent, during the regular trading session, to close at $29.17, fell sharply in after-hours trading. As of 4:15 pm ET, Oracle shares were trading down $1.72, or 6 percent, on the news.

In the plus column, Oracle said its operating margin on a non-GAAP basis improved to 45 percent, and that it expects those margins to keep rising. Operating cash flow grew by 45 percent, as well, to $13.1 billion.

The company boosted its salesforce by 1,700 during the first half of the year, in an effort to boost sales of its Enterprise Resource Planning and Customer Relationship Management software products. Co-President Mark Hurd said the additional sales personnel should help sales improve in the second half of the fiscal year. (The quarter was Oracle’s fiscal second.)

The company said its board of directors approved a $5 billion share buyback and a 6-cent-per-share dividend.

CEO Larry Ellison said in a statement that sales of so-called engineered systems — essentially hardware that contains a lot of exclusive Oracle technology — surged versus the year ago period. Sales of Exadata database hardware and Exalogic servers both grew by 100 percent, he said. He also said that Oracle shipped its first SPARC SuperCluster during the quarter, and expects to commence deliveries of Exalytics Business Intelligence machines this quarter.

Oracle’s statement is below. I’ll be adding more to this post as I go through the press release, and will call out some highlights. The company is hosting a conference call shortly.

(The pitch-perfect image of the Team Oracle plane doing a dive during San Francisco’s Fleet Week was taken by Ingrid Taylar for About.com.)

Oracle Reports Q2 GAAP EPS Up 17% to 43 Cents; Q2 Non-GAAP EPS Up 6% to 54 Cents

Trailing Twelve Month Operating Cash Flow Up 45% to $13.1 Billion

REDWOOD SHORES, CA–(Marketwire -12/20/11)- Oracle Corporation (NASDAQ: ORCL – News) today announced fiscal 2012 Q2 GAAP and non-GAAP total revenues were up 2% to $8.8 billion. Both GAAP and non-GAAP new software license revenues were up 2% to $2.0 billion. Both GAAP and non-GAAP software license updates and product support revenues were up 9% to $4.0 billion. Both GAAP and non-GAAP hardware systems products revenues were down 14% to $953 million. GAAP operating income was up 12% to $3.1 billion, and GAAP operating margin was 35%. Non-GAAP operating income was up 3% to $3.9 billion, and non-GAAP operating margin was 45%. GAAP net income was up 17% to $2.2 billion, while non-GAAP net income was up 6% to $2.8 billion. GAAP earnings per share were $0.43, up 17% compared to last year while non-GAAP earnings per share were up 6% to $0.54. GAAP operating cash flow on a trailing twelve-month basis was $13.1 billion.

“Non-GAAP operating margins increased to 45% in Q2,” said Oracle President and CFO, Safra Catz, “and we expect those margins to keep growing. Operating cash flow over the last twelve months grew to $13.1 billion; that’s up a remarkable 45% compared to the preceding twelve month period.”

“We have expanded our worldwide sales capacity by adding over 1,700 sales professionals in the first half of this fiscal year,” said Oracle President, Mark Hurd. “We believe that this increase in our field organization combined with innovative new products like Fusion Cloud ERP and Cloud CRM will enable solid organic growth in the second half of this year.”

“Sales of our engineered systems accelerated in Q2,” said Oracle CEO, Larry Ellison. “Exadata growth was well over 100% compared to last year, and Exalogic grew more than 100% on a sequential basis. We shipped our first SPARC SuperCluster in Q2 and expect to begin deliveries of our Exalytics system and the Oracle Big Data Appliance in Q3.”

Oracle announced that its Board of Directors authorized the repurchase of up to an additional $5.0 billion of common stock under its existing share repurchase program in future quarters.

The Board of Directors also declared a quarterly cash dividend of $0.06 per share of outstanding common stock. This dividend will be paid to stockholders of record as of the close of business on January 11, 2012, with a payment date of February 1, 2012.

Despite a wobbly economy, especially in Europe, IT spending seems to be holding steady. Brian Schwartz, an analyst with ThinkEquity, checked in with 16 IT industry contacts and asked about their spending plans for the coming year. The answers, he says, point to positive results in Oracle’s report today. “Contacts surveyed, on average, finished 1 percent above their plans in Q2 and estimate their customers’ overall IT budgets will grow about 3 percent in 2012,” Schwartz wrote in a note to clients on Dec. 15.

Also in Oracle’s favor: The priority in IT spending is shifting away from things that generate revenue and toward things that help control costs. “This transition could provide a nice tailwind for Oracle’s many cost-savings products around data-center consolidation,” Schwartz writes.

Of the 16 people surveyed, Schwartz says, seven were positive, five were neutral and four were negative. Those in the positive column said they expect their IT budgets to grow incrementally in 2012, and they seemed bullish on Oracle’s database and middleware offerings, which help reduce the overall footprint of their data centers. Those in the negative column cited uncertainty about Europe and the financial services sector. Some financial customers are cutting their spending on things like outside consultants, and sales cycles for certain products are growing longer.

The consensus view of Wall Street analysts calls for Oracle to report sales of $9.23 billion and a per-share profit of 57 cents. Schwartz rates Oracle a Buy with a $36 price target, which would amount to a 26 percent improvement over Monday’s closing price of $28.61. Oracle shares have fallen by a little less than 9 percent since the end of 2010.

Oracle paints a picture of HP desperate to preserve the profits it makes on support and service contracts generated from customers using Integrity servers, cutting arrangements with Intel to keep pumping out Itanium chips that no one but HP buys, and which Intel would secretly like to forget in order to focus on its highly profitable line of mainstream Xeon server chips. Oracle describes an agreement between HP and Intel called the “Itanium Collaboration Agreement” and calls it a “a pure pay-off to induce Intel to keep churning out processors that it really wanted to kill.”

Here are some other interesting highlights. Remember yesterday how I said that the main issue, at least from HP’s perspective in this suit, is whether or not Oracle agreed to continue to port its software to HP-UX so that it could run on HP’s Integrity servers that use Intel’s Itanium chip.

HP has argued that when the two companies settled a lawsuit concerning Oracle’s hiring of former HP CEO Mark Hurd, that Oracle agreed to do just that. Oracle has argued that it agreed to no such thing and so is perfectly within its rights to walk way from the Itanium platform.

Pick up the action on page 27. You read how, as Oracle tells it, HP sought to insert language into that settlement that included an Oracle pledge to stick with Itanium, which Oracle rejected twice.

It quotes an email from Oracle General Counsel Dorian Daley to HP lawyers proposing the following langauge in a draft agreement:

Reaffirmation of the Oracle-HP Partnership. Oracle and HP reaffirm their commitment to their longstanding strategic relationship and their mutual desire to continue to support their mutual customers. Oracle will continue to offer its product suite on HP platforms and HP will continue to support Oracle products (including Oracle Enterprise Linux and Oracle VM) on its hardware in a manner consistent with that partnership.

HP, Oracle says, then responded with the following proposed language:

Reaffirmation of the Oracle-HP Partnership. Oracle and HP reaffirm their commitment to their longstanding strategic relationship and their mutual desire to continue to support their mutual customers. Oracle will continue to offer its product suite on HP platforms and HP will continue to support Oracle products (including Oracle Enterprise Linux and Oracle VM) on its hardware in a manner consistent with that partnership. Oracle will continue to support all ongoing versions of HP-UX with Oracle’s relevant database, middleware and application products with the availability, marketing and pricing in competitive terms that Oracle has provided HP for the past five years. Oracle will continue to provide access to the Java technology and tools such that HP can continue to support its operating systems (e.g., HP-UX, OpenVMS, Nonstop) in a manner similar to the way it does today. Oracle agrees to continue to provide Solaris for HP’s x86 platforms in a manner similar to what it provides HP today. Oracle agrees to continue to purchase HP server hardware for internal use at a rate similar to what Oracle purchases today.

Oracle rejected it, and by its account, no mention of Itanium or HP-UX was in the final version of the settlement that both signed. The final version was nearly identical to the draft that Daley proposed above. This sequence of events and what the final version of the agreement actually says will be a key issue in the trial. A lot of the rest of the stuff is a bit of Oracle bluster, though it’s interesting bluster.

For instance, Oracle accuses HP of having “fraudulently induced Oracle to enter into the very contract” at the heart of the lawsuit, by negotiating at a time when people on the HP side would have known that the company was about to hire Léo Apotheker and Ray Lane as CEO and chairman. As Oracle puts it:

“Given the well-documented animosity between Oracle and Messrs. Apotheker and Lane, HP knew that had Oracle known of HP’s imminent plans to hire these individuals, Oracle would not have signed the Hurd Agreement, especially any ‘partnership’ commitments or other business restrictions … unrelated to Mr. Hurd’s move to Oracle. … HP had a duty to disclose this exclusively-held material information. Instead, HP knowingly and actively withheld this information.”

HP naturally isn’t taking the latest round of accusations from Oracle silently. The company just issued a statement basically accusing Oracle of trying to distract us all from the fact that it’s in breach of a contract. And the key phrase in the contract — all that back and forth between the Oracle and HP lawyers above — is this one: “An agreement to continue to work together as the companies have,” meaning work together as they did when Oracle still supported Itanium.

This all started back in March when Oracle said it would stop software development for Itanium. It prompted a lot of shocked and angry pronouncements from HP and Intel and counter-claims from Oracle. Itanium customers then rallied to its defense and sought to change Oracle’s mind. It didn’t work. Months passed, and HP resorted to a lawsuit in June that has seen many colorful arguments, and even the odd pop-culture reference.

HP’s press-release rebuttal is below and the full PDF of Oracle’s filing — complete with all the redactions is below that.

PALO ALTO, Calif., Dec. 2, 2011 – HP today issued the following statement in response to Oracle’s amended cross-complaint in the Intel Itanium litigation:

Today’s filing is another example of Oracle attempting to distract from the undeniable fact that it has breached its contractual commitment to HP and ignored its repeated promises of support to our shared customers.

Here are the facts:

— On Sept. 20, 2010, Mark Hurd, Oracle and HP entered into a written settlement agreement. Pursuant to that agreement, HP dismissed its lawsuit against Hurd, and did not further challenge Hurd’s employment at Oracle. In exchange, Oracle contractually committed that it would “continue to offer its product suite on HP platforms … in a manner consistent with [the Oracle-HP] partnership as it existed prior to Oracle’s hiring of Hurd.”

— Oracle confirmed that it was agreeing to continue to port its software products to HP’s platforms in the same manner as it had done prior to its hiring of Hurd. In an email sent to HP on Sept. 12, 2010, Oracle’s general counsel wrote that this provision was “an agreement to continue to work together as the companies have – with Oracle porting products to HP’s platform and HP supporting the ported products and the parties engaging in joint marketing opportunities – for the mutual benefit of customers.”

— Oracle now claims that this provision does not require Oracle to continue to port its database and other software to HP’s platforms. Yet that is exactly what the contract says, and that is exactly what Oracle committed to do in order to convince HP that Oracle’s hiring of Hurd would not alter the relationship between the companies or be used unfairly to undermine HP’s business.

— Oracle initially tried to justify its Itanium decision by falsely ascribing to Intel the position that Itanium is at end of life. Due to Intel’s unequivocal and repeated statements to the marketplace that Itanium is not at an end of life, Oracle has been forced to revise its rationale.

— In its cross-complaint, Oracle tries to rationalize its Itanium decision by arguing that, despite the undisputed existence of committed support for Itanium that stretches to the end of this decade and beyond, Intel would not have made this commitment to Itanium if it were not for a contractual agreement with HP.

— The existence of such a contract completely undermines Oracle’s stated rationale for discontinuing Itanium support by taking the future of Itanium out of the realm of speculation and firmly establishing as a matter of undeniable fact that there is a committed Itanium roadmap that extends out toward the end of this decade. Oracle has the relevant Itanium roadmaps in its possession, yet it continues to refuse to discuss those roadmaps.

— What has become very clear in the course of the litigation is that Oracle’s claim in March 2011 that it was ending support for Itanium because Itanium was at or near an “end of life” was false and a pure pretext to hide Oracle’s real purpose: to take away the choice of Itanium from customers and restrict the competition faced by its Sun servers.

— Indeed, Oracle’s internal documents make clear that its announcement in March 2011 that it would no longer develop or support software for Itanium servers was implemented as part of a business strategy to leverage Oracle’s dominance in database software to try to force Itanium customers to purchase Sun servers. The tactics employed by Oracle in support of this purpose included pricing misconduct, withholding of benchmarking scores for HP servers run on Oracle software, and abusing customers on support issues.

— Oracle is in breach of its contractual commitments to HP, and it has failed to honor its promises to customers. Oracle should be addressing and rectifying this conduct rather than making up claims against HP.

70777_xREDACTEDxxAmendedxCrossxComplaint

The document is a routine filing concerning the timing of the trial and the discovery process. In it, Oracle says that what documents it has received from HP confirms what Oracle has been arguing since this whole thing started: That HP and Intel plan to let the Itanium processor die once it has released two more generations, something HP and Intel have both denied. “HP and Intel have a contractual commitment that Itanium will continue through the next two generations of microprocessors …”

Worse, Oracle alleges that the only reason the chip is still available at all is that “HP is paying Intel to keep it going.” It goes on: “HP has secretly contracted with Intel to keep churning out Itaniums so that HP can maintain the appearance that a dead microprocessor is still alive. The whole thing is a remake of Weekend at Bernie’s.”

Why all the trouble over so obscure a chip? Oracle says it’s all about the support fees that Intel charges. HP makes a lot of money, Oracle says, charging for service and support of its HP UX operating system, which runs on the Itanium chip; it loses money when customers move to systems running more conventional x86-based chips. As Oracle puts it in the filing: “HP achieves a far lower “attach rate” (meaning it gets few service contracts) on the operating systems like Linux that are prevalent on servers running x86 microprocessors. Thus when customers migrate to new platforms, HP loses the service contract. This is a multi-billion dollar problem for HP.” It also helps HP remain competitive with IBM and Oracle’s Sun Microsystems business, Oracle argues in a redacted passage.

“These factors led HP to craft a top-secret plan to create a false perception that Itanium still had a future,” Oracle says in the filing. “HP understands that the future prospects of IT products drive customer purchasing decisions. A buyer who knew that Intel saw no future for Itanium, and was only continuing to invest in the line pursuant to a contractual obligation, would devalue the future prospects of Itanium servers and be less inclined to buy.”

“Oracle Sun has been a victim of this, and according to HP’s documents an intended victim. So why is Oracle the defendant in this case? We now understand it is because Oracle’s decision to stop making new versions of its software for the Itanium system was devastating to HP because it undermined the rationale for paying Intel [redacted] to sustain the illusion of a long-term future for Itanium. Oracle had told too much of the truth.”

HP, whose PR team is working equally late, just sent this emailed statement:

Oracle’s latest filing is nothing more than a desperate delay tactic designed to extend the paralyzing uncertainty in the marketplace created when Oracle announced in March 2011 — in a clear breach of contract — that it would no longer support HP’s Itanium platform. The fact remains that Oracle’s decision to cut off support for Itanium was an illicit business strategy it conjured to try to force Itanium customers into buying Sun servers, and destroy choice in the marketplace. This filing is just the latest in its ongoing campaign to shore up its failing Sun server business and starve thousands of existing Itanium customers who rely on their Itanium processors for mission-critical activities.

As Oracle well knows, HP and Intel have a contractual commitment to continue to sell mission-critical Itanium processers to our customers through the next two generations of microprocessors, thus ensuring the availability of Itanium through at least the end of the decade. HP is resolved to enforcing Oracle’s commitments to HP and our shared customers and will continue to take actions to protect its customers’ best interests. It is time for Oracle to quit pursuing baseless accusations and honor its commitments to HP and to our shared customers in a timely manner.

Intel spokesman Chuck Mulloy had no comment, saying Intel is not a party to the lawsuit, and doesn’t comment on confidential agreements it may or may not have with other companies. Intel CEO Paul Otellini has said in the past the Intel has a long-term roadmap for Itanium that goes beyond the next two generations already disclosed.

Since this whole episode first erupted in March, and escalated into a lawsuit in May, I’ve called it a very public fight about a very obscure chip. Oracle, perhaps looking for something new to fight with HP about, said it would cease developing software created for systems using Intel’s Itanium chip, arguing that it looked like it was going to be retired in the near-ish future. HP, which is the only server vendor worth mentioning that sells Itanium-based systems, was horrified, as was Intel, if for no other reason than they spent a decade or two developing it in hopes it would be the superchip of the future.

Then the future arrived, and it didn’t quite turn out that way. Intel rival Advanced Micro Devices found a way to do 64-bit computing that the marketplace liked better, Intel ultimately embraced the same method for mainstream server chips, and Itanium went on to be a specialized niche product. However, those who use it are a vocal bunch. Some of them petitioned Oracle to change its mind. It hasn’t budged.

So now you know the background. The original filing is embedded below, via Scribd. The best parts are in the first several pages. Happy reading.

Oracle Itanium Filing: “Weekend At Bernie’ss

In a filing yesterday (see below), Judge William Alsup proposed a trial plan to lawyers for both sides, stating that the trial “will not be in 2011.” Alsup said he expects a long trial that will likely be considered a hardship by people selected to sit on the jury. “Although the trial will not be in 2011, the Court needs some lead time to pre-clear a venire for hardship for a long trial,” Alsup wrote in the filing. The word “venire” refers to the jury selection process. Alsup didn’t hint when he expects the trial to begin.

Court-mandated face-to-face talks between Oracle CEO Larry Ellison and Google CEO Larry Page failed last month. The trial had been expected sometime this month.

Oracle has claimed that Google owes it more than $6 billion for parts of its Java software that were used in the Android mobile operating system, which Oracle took over after it acquired Sun Microsystems last year. Google has argued that Oracle’s claims for damages are flawed.

Goog Orcl Delay

Oracle CEO Larry Ellison and Apple’s senior vice president for industrial design Jonathan Ive also spoke, these people said.

Read the rest of this post on the original site »

Asked about the ceaseless speculation that Oracle might take advantage of HP’s current weakened state and make what would be its biggest acquisition ever — an ill-advised one, if you really think about it — Ellison didn’t give a definitive yes or no answer, but took a shot at HP chairman Ray Lane, which you can see in the 80-second video clip below. (You can see the full video of the meeting here, but only if you need some help getting to sleep.)

There is, of course, no love lost between Ellison and HP’s newly elected executive chairman. Lane is a onetime Oracle president and COO pushed out by Ellison in 2000, and his election as chairman of HP’s board last year had been, in Ellison’s eyes, apparently overshadowed only by Léo Apotheker’s selection as HP’s CEO. Now that Apotheker is gone, Lane will likely remain Ellison’s favorite punching bag, with Salesforce.com CEO Marc Benioff running a close second.

Anyhow, the shareholder’s question suggests that the “Oracle in hostile bid for HP” chatter hasn’t died yet, no matter how many ways analysts and others can dismiss it as nonsense. As you can see from Ellison’s initial reaction to the question today, he is, if nothing else, entertained by the speculation.

Update, Oct. 13: HP has just sent a statement from Lane: “I’m focused on HP, not on statements like this.”