But apparently it all did lead up to something. For those just tuning in, here’s how it went down.

About two weeks ago, on Oracle’s quarterly earnings conference call, Ellison was asked by an analyst about Oracle’s position in the market for analyzing and pulling useful intelligence from unstructured data — transcripts of videos and contents of emails, and scores of other things that aren’t neatly arranged in databases. It’s kind of a big deal, as companies grapple with the so-called “big data” problem, and the question was a natural jumping-off point to discussing Hewlett-Packard’s $11.7 billion acquisition of Autonomy. Ellison, by way of an answer, portrayed unstructured data as a feature of the existing Oracle database software, called it “nothing new,” and then slammed HP for paying too much for Autonomy, the British software firm whose specialty happens to be — you guessed it — unstructured data. And, oh, by the way, Ellison said he took a pass on Autonomy when it had been shopped to Oracle because he thought the price was too high.

Much drama then ensued. Autonomy CEO Mike Lynch said his company had never been shopped to Oracle. Not so, said Oracle — and oh, by the way, you left your PowerPoint slides behind. “Those slides?” Lynch countered. “Never seen ’em before in my life. Maybe you need some help with your unstructured data, because you seem confused at the sequence of events.”

You see, the spat occurred just a few days before Oracle OpenWorld, and got Oracle in stories containing the phrase “unstructured data” numerous times.

And what did Ellison talk about in his keynote address Sunday night? Lots of things. One of them was an appliance called the Exalytics Intelligence Machine that does — guess what? — unstructured data. It’s designed, Ellison said, to do all its analysis while the data is loaded into the machine’s main memory, while four 10-core Intel Xeon chips make it scream on the processor side. “Databases run faster, everything runs faster if you keep it in DRAM, if you keep it in main memory,” he said, describing it as data analysis at the “speed of thought.” Structured data, relational data, unstructured data — it does it all, Ellison said. Now all that mishegas makes sense. It’s all about having the last word.

Ellison’s keynote — an hour and change long — is below. If you want to skip forward to the Exalytics stuff, it starts at about the 57-minute mark.

Given the recent feuds between the management teams at the two companies, Oracle’s acquisitive history and HP’s sudden weakness, it doesn’t take much for a popular narrative of Oracle buying HP to emerge. It would be a dramatic denouement to the events of the last year that have found HP and Oracle at increasingly caustic loggerheads. Oracle CEO Larry Ellison would take some kind of victory lap and mount HP on the wall like a of trophy.

The idea gained some currency with an Aug. 21 story in the New York Post (which, like this Web site, is owned by News Corp.) arguing that HP’s $11.7 billion bid for the British software firm Autonomy, having caused shareholders to knock $12 billion and change off HP’s market cap, would therefore make HP more attractive to Oracle.

The meme gained further currency with a Bloomberg News story saying that HP’s board was “concerned” that its weakened condition had left it vulnerable to Oracle.

Let me put it like this: No. Just, no.

The first problem with the notion is this: What parts of HP would Oracle want to own? Answer: Practically none.

First, let’s look at the condition of Oracle: Its mainline software businesses are showing healthy returns, while its hardware business, built on the foundation of Sun Microsystems, the IT hardware concern it acquired last year for $7 billion, is ramping up to full speed. But here’s a fundamental truth: Software carries a higher profit margin than hardware, so when software companies buy hardware companies, they can’t avoid seeing their overall profitability erode.

Consider Oracle’s operating margin during its fiscal fourth quarter — its seasonally strongest quarter — during the last three years. In 2009, before the Sun deal was closed, it was 43.4 percent. In 2010, after the Sun deal was closed, it was 38.3 percent. In 2011 it was 41.6 percent. And during Oracle’s most recent conference call, CFO Safra Catz said Oracle hopes to get back to “pre-Sun” operating margins soon.

Now let’s look at HP and its operating margins: In its most recent quarter ended July, HP’s enterprise, storage and networking business turned in operating margins of 13 percent, which were down from 14 percent in the prior year’s period. The story was the same in practically every other HP business unit: Operating margins in services fell from 15.7 percent to 13 percent; in software they fell from 28 percent to 19.7 percent; imaging and printing margins fell to 14.6 percent from 16.9 percent. The only place they increased was the personal systems group — the PC unit that’s being considered for a spinoff — where they grew year on year from 4.7 percent to 5.9 percent.

Conclusion: Owning HP would do nothing good for Oracle’s profitability, especially at a moment when the stated goal is to nudge them up.

There’s more. As Mark L. Moerdler, an analyst at Bernstein Research, argued in a research note to clients on Sept. 26, software accounts for about 2 percent of revenue at HP. And what software it has is not the type that Oracle typically likes. When Oracle does acquisitions, it grabs companies that make applications that plug holes in its own product portfolio. The majority of HP’s software offerings — Autonomy nothwithstanding — deal with infrastructure management, not exactly a priority for Oracle. It is, however, a business where IBM and Computer Associates participate.

And there are two historically important business units at HP that would be outliers at Oracle: PCs and printers. Oracle has no interest in either one, and it’s hard to see that changing. Combined they make up more than half of HP’s annual revenue. In the hands of Oracle, they would probably end up being spun out, either together or separately, but why buy a whole company only to chop off more than half of it — a half that’s shrinking at that — at what would have to be unfavorable terms.

Let’s not forget the valuation estimate of HP’s $40 billion PC business: Analysts have expected that a hypothetical buyer might pay as little as $8 billion for it, or about one-fifth trailing revenue. Why go to all that trouble?

Further: Why would Oracle buy a company that’s roughly one-quarter exposed to the consumer market. Sure, HP has a retail distribution network that’s the envy of the PC industry. But Oracle would rather sell those retailers systems to help them manage their businesses, not the PCs they in turn resell at razor-thin margins.

If that’s not enough, then there’s one key bit about HP that Oracle would actively dislike. HP, by virtue of being the biggest distributor of Windows-based PCs and servers, is the world’s largest reseller of Microsoft Windows. If there’s anything more utterly antithetical to Oracle’s core values than helping put money in Microsoft’s pocket, I haven’t heard of it.

Finally, there’s the issue of cash. Even in its weakened state, HP is trading at a market cap of $45 billion and change. Assuming a premium for the whole thing, that pushes a hypothetical price tag to $60 billion. That’s too rich, even for Oracle, whose balance sheet as of Aug. 31 contained a combined $31.6 billion in cash and marketable securities. It would have to take on a tremendous amount of debt — amounting to 82 percent of fiscal 2011 sales — to get such a deal started, let alone closed.

HP’s directors and shareholders can rest easy. They have many worries about the Silicon Valley icon and the troubles in which it finds itself. But being acquired by Oracle isn’t one of them.

In his first on-the-record interview since joining Oracle last year, co-President Mark Hurd tells AllThingsD that Oracle is experiencing a lot of company-specific momentum in Europe, where it saw 14 percent revenue growth in quarterly results reported last week.

“When I look at each segment of our business in Europe, if I read to you the growth rates of each of our product segments, it would sound very consistent,” Hurd said. “We didn’t have any one big deal or transaction that stood out. Europe was a bright spot in the quarter for us.”

Hurd also talked about the state of Oracle’s hardware business, much of which it picked up in its acquisition of Sun Microsystems last year. Hurd reiterated previous comments that Oracle aims to focus more of its efforts on selling hardware that contains more Oracle intellectual property, and thus commands a higher price and profit margin, than on commodity hardware. Oracle CEO Larry Ellison raised eyebrows when he said that Oracle wouldn’t mind if its business selling hardware running Intel-based chips — its so-called x86 business — fell to zero.

“We’re focused on adding value to customers. If there’s no Oracle intellectual property in it then you ought to buy it from someone else,” Hurd said. “All of our products are designed to be the best-of-breed in the markets that they serve. If it’s some product that comes from a third party that comes through Oracle where we add no value, that’s the stuff we have no interest in.”

The comments came in an interview with AllThingsD today, Hurd’s first since he joined Oracle last year, which followed his resignation from HP a month before. A fuller version of the interview will be posted soon.

Oracle has reported strong bottom-line growth for several quarters, as the top line benefited from the $7.4 billion acquisition of Sun Microsystems in early 2010 and increased revenue from new licenses and services. But declining sales of Oracle’s hardware products in the fourth quarter raised questions about its decision to expand beyond its traditional software business.

Read the rest of this post on the original site »

James Gosling, the former Sun Microsystems engineer who went to Google after Sun was acquired by Oracle, has joined Liquid Robotics as chief software architect, he said Tuesday. The Sunnyvale, Calif., company–profiled in the Wall Street Journal earlier this year–makes “wave gliders” that ride ocean currents and collect and transmit data such as water temperature, wave heights, whale songs and chemical levels.

Read the rest of this post on the original site »

Next we saw Violin Memory — which makes flash-based storage arrays that are intended to make enterprise applications run faster — land $40 million in venture capital funding.

Now we see a third player entering the “flash madness” narrative. Pure Storage is coming out of stealth today, announcing its plans to sell flash-based storage arrays. It is also announcing that it has landed a $30 million C-round led by Redpoint Ventures, with Samsung Venture Investment joining. (Yes, that would be the venture capital arm of the South Korean electronics giant that happens to be the world’s biggest manufacturer of flash memory.) Greylock Partners and Sutter Hill Ventures also participated. The latest round brings Pure’s total funding raised to date to $55 million.

So what is Pure Storage all about? I met up with CEO Scott Dietzen last week and got the download.

The fundamental problem with enterprise storage is that hard drives just can’t keep up with everything else that’s gotten faster in the data center. Flash memory is fundamentally faster, it uses less energy and it takes up less space. We all know this.

The problem with flash is that it has always tended to be more expensive than hard drives. Today, you can buy a one terabyte hard drive for $100 or less. But just try getting that same amount in flash memory and see if the price isn’t, well, a lot higher.

The same principles apply in the data center. CIOs would love to convert to flash-based systems, as long as they’re reliable and affordable and work with the applications and other hardware they already have.

Pure Storage is essentially promising to deliver just that, Dietzen says. The company’s first product is an all-flash storage array that is 10 times faster and 10 times smaller than hard-disk-based systems. It’s called the Pure Storage FlashArray, and it is being aimed at mainstream enterprises in a manner that’s easy to deploy.

Pure’s founders are John Colgrove — one of the founding engineers at Veritas, now part of Symantec — and John Hayes, a founding engineer at Bix, which was ultimately swallowed up by Yahoo. Dietzen hails from Yahoo as well, by way of its acquisition of Zimbra, where he was CTO.

An early key hire was Michael Cornwell, who was lead technologist for flash at Sun Microsystems (now part of Oracle). Cornwell also worked at Apple, where he was Manager of Storage Engineering for the iPod division, and oversaw that product’s transition to — you guessed it — flash memory. Remember the first iPod nano? That was his baby.

Another key name: Greylock venture partner Frank Slootman, the former CEO of Data Domain, is on Pure’s board.

So what’s so special about a storage array built on flash memory? “Disks get slower every year,” Dietzen says. “Intel says processors have gotten 175 times faster over the last 15 years.” Disks just keep getting more data packed onto them, which doesn’t really make them any faster. The mechanical arm inside the disk that grabs data from the platter really can’t go much faster. “Disks today are comparably slower than tape was 15 years ago,” he says.

This creates a problem. Storage needs are going up, but hard drives are slowing data centers down, preventing them from reaching their full potential. It’s only because of cost — about $5 per gigabyte — that hard drives are still appealing. Enterprise-grade flash, on the other hand, tends to cost $40 to $100 per gigabyte, and because flash is historically less reliable, you have to buy double what you really need.

Pure’s play is to get over the cost hurdle. Dietzen says the company can get the cost down to $5 per gigabyte and less.

How does it do that? By reducing the amount of data you actually store. What happens in enterprise environments is that various bits of data get copied and recopied, over and over. Imagine a big filing cabinet with 50 copies of each document scattered around in different folders, when you really only need one. Suddenly the size of that file cabinet need not be so big. The same applies in data storage: Why bother having 10 copies of the same block of data, when one or two will do?

Using a technique known as deduplication, a system can eliminate all those unneeded copies and thus streamline the whole operation. Deduplication, combined with compression, was the primary principle behind Slootman’s Data Domain, which is now part of EMC.

But deduplication is expensive on hard drives, and really doesn’t make sense. Because the mechanical arm in a hard drive is always searching around for where its next needed block of data is to be found, if you employ deduplication, you end up with a bunch of reference signs telling the arm where to go, Dietzen says. The end result is that the disk has to spin more, not less. Flash memory chips don’t have that problem. “We make that process fast, because there’s no performance hit to the deduping process,” he says.

On top of that, Pure has created some algorithms that make the process a lot more granular than on hard-disk-based systems, by working with smaller disk-sector sizes. How small? He wouldn’t say exactly.

Unlike other storage companies — like, say, EMC — Pure’s array, Dietzen says, is built from the ground up for running flash. “The disk-centric companies are slotting flash into places where disks used to be, but they’re not changing the software to take advantage of the flash, to protect the flash from uneven wear and other things.”

A few early companies have tried the hardware, among them the law firm of Fenwick & West, whose CIO Matt Kesner is quoted in Pure’s press release as saying that the data used for various workloads was reduced from 50 to 90 percent.

One key thing that’s going on in the data center these days is virtualization — running several virtual computers within one single physical computer. When you run a lot of virtual machines, you have a lot of data that, like the paper in that big file cabinet, is essentially the same. Dietzen says that Pure’s flash array is able to eliminate a lot of that data. “Even if those virtual machines are a mix of Windows and Linux, there are a lot of commonalities between them,” he says. It’s not uncommon to see the data footprint for virtual machines reduced by a factor of 15 or 20 to one.

And that has caused some interesting reactions among early customers trying out the array. “Some people try it and are shocked when they put 15 terabytes on it and see there’s only one terabyte and think we’ve lost a lot of their data,” Dietzen says. “It’s a little scary at first, but then they run all their workloads and see all the data is there.”

“You’re both asking for the moon and you should be more reasonable,” Judge William Alsup told lawyers for both companies, according to a Reuters report.

Alsup told Oracle that the damages it expects to collect are too high, while Google’s argument that it owes Oracle nothing is “ridiculous.” Oracle has said its damages calculations range from $1.4 billion to as high as $6 billion. It recently told the court it is seeking $2.6 billion.

Alsup also talked about how internal Google emails appeared to show its executives knew it was using Java in Android. “I’m not saying there was willful infringement, but how are you going to answer this?” Alsup asked attorneys for Google during the hearing, according to the Mercury News.

The tone of exasperation with both sides seems to indicate that Alsup wants the two companies to start settlement talks. Oracle sued last year, accusing Google of infringing on Java patents which Oracle now owns as a result of its acquisition of Sun Microsystems.

Alsup also granted Oracle’s request to grill Google CEO Larry Page and several other current and former Google employees in a pretrial deposition. (See the judge’s order below.) Oracle had sought the order last week, arguing that Page, as Google’s president, had been directly involved with its 2005 acquisition of Android and had participated in Java licensing discussions with Oracle CEO Larry Ellison last year. Google had opposed the request.

The judge also granted Oracle’s request to depose two other current and former Googlers, including Bob Lee, who’s now CTO at Square, but he denied the request to depose Dipchand “Deep” Nishar, a senior vice president at LinkedIn. (Update: I revised this paragraph to correct Nishar’s name. I also initially said the judge had granted Oracle’s request to depose Nishar when in fact he denied it. Sorry about that.)

Java Docket 229

Analysts polled by Thomson Financial expect IBM to report sales of $25.35 billion and a per-share profit of $3.03. Analyst Chris Whitmore of Deutsche Bank Securities says, in a note to clients today, that he expects sales that are slightly above the consensus at $25.9 billion, which would amount to growth of more than nine percent over the year-ago quarter, and earnings of $3.01 or slightly below.

Whitmore says that checks of IBM’s sales and distribution channels indicate that demand remains strong for IBM’s mainframe systems as well as servers running its Power Architecture chip, and he says it’s taking meaningful share away from Oracle’s UltraSparc business, the line of servers Oracle absorbed when it acquired Sun Microsystems last year.

The service business should turn in a beefy quarter on the heels of new contract wins. Expect service revenue to come in line with previous forecasts of $12 to $13 billion, Whitmore says, with help from a favorable environment for foreign currencies.

That’s not to say there aren’t worries: Whitmore points out that IBM announced only five deals during the quarter, which is half as many as in the year-ago quarter. It’s also been disclosing less information about each deal, and only one — with India Infoline — was north of $50 million. “IBM’s services bookings figure is the biggest wild card this quarter due to the limited data,” he writes. Still, he expects it to track in line with prior forecasts, mainly because several five- and 10-year deals have been announced, even though their size hasn’t been disclosed.

We suspect consensus bookings expectation is $12B to $13B for the June Q and believe IBM is tracking in line with this estimate with solid long-term signings, as several multi-year deals (five and 10 years) were announced (although not sized).

Even so, Whitmore expects no change to IBM’s confident prediction that it will deliver $20 per share of earnings in 2015, and that implies annual growth of between 11 and 12 percent, which for now doesn’t seem unreasonable. As usual, all eyes will be looking for any hint that Big Blue is throttling back on its shorter-term guidance.

IBM has been a fairly solid performer this year, having seen its share price increase by more than 19 percent since the start of the year, beating both the Dow Jones Industrial Average and the Standard & Poor’s 500. Its shares closed Friday at $175.54, up $1.31, but were trading lower in premarket action this morning. We’ll see how it all turns out later in the day. See you then.

In a nine-page letter to the court, which you can read below, Oracle explained that Page, then a Google president, made the decision to acquire Android in 2005, and that later he participated in the licensing talks that occurred between Sun Microsystems and Google concerning Android’s use of Java. He also participated in further communications with Oracle CEO Larry Ellison after that company acquired Sun last year.

Oracle is also seeking to take a deposition of three other people in the case:

Dipchand “Deep” Nishar: The Wall Street Journal described Nishar as an “unsung Google hero” in 2008 when he left to join LinkedIn as its vice president of product. Oracle cites his LinkedIn profile as saying he “started and managed Google’s mobile initiatives worldwide” from 2005 to 2007. Oracle says that Nishar was involved with the Java negotiations between Sun and Google, and wrote several of the documents that Oracle says are going to prove relevant in the case.

Bob Lee: Currently the CTO at Square, Jack Dorsey’s mobile payment start-up, Lee was before that a software engineer at Google whom Oracle portrays in the letter as having “led the core library development for Android.” Oracle says his testimony “would be relevant both with respect to certain aspects of Oracle’s liability and damages theories,” and that documents Lee wrote, which Oracle expects to produce as evidence, demonstrate an “intimate knowledge of Sun’s licensing practices, which is relevant to Oracle’s claims of willful infringement.”

Tim Lindholm: A former Sun Microsystems employee, Lindholm, Oracle says, created some of the Java technologies at issue in the lawsuit. As Oracle puts it: “He constructed one of the very first Java virtual machines, and came to Google with intimate knowledge of the Java platform architecture.” Lindholm not only built the first Java virtual machine, he cowrote a book on it. “In addition, Mr. Lindholm participated in the negotiations that took place between Sun and Google for a Java license,” Oracle says.

Coming only days after the judge in the case, William Alsup, notified Google that he has some tough questions about some of the underlying facts in the case — there is the awkward fact that Google did initially negotiate both with Sun and Oracle for a Java license and then walked away — this request is Oracle’s way of turning up the heat on Google.

Oracle sued Google last August, saying that Android infringes on Java patents it owns. (Original complaint here.) Oracle recently told the court it thinks Google should cough up $2.6 billion in damages.

Oracle’s letter contains the text of a Google statement opposing the deposition requests, saying the request is late and that deposing Page is a “harassing demand” and irrelevant to the case at hand. “Oracle comes to this Court ‘gnashing [its] teeth’ with an eleventh-hour attempt to cram extra depositions into the last couple weeks of the discovery period,” the statement says.

Google argues that Oracle has already deposed Andy Rubin, Google’s VP of mobile platforms, and Dan Bornstein, whom it describes as the “primary architect” of one of the Java virtual machines at issue in the case. (See Bornstein talk about it in this video from Google I/O in 2008.) These two should meet Oracle’s needs, Google says.

Oracle rebutted that Google has asked to depose Ellison, and that Google had sought to prevent Oracle from deposing former Google CEO and current Chairman Eric Schmidt.

The companies are supposed to have wrapped up the discovery phase ahead of the trial by July 29, but these new requests would seem to push that phase into August and ultimately delay the start of the trial.

oraclevgooglepagedepoletter

The case, which Oracle brought last August, claiming that Google’s Android operating system infringes on Java patents it owns as a result of its acquisition of Sun Microsystems, has been bogged down over what’s called a Daubert motion, which is a pre-trial challenge aimed at excluding the presentation of certain evidence, usually expert testimony, to the jury. As part of the wrangling, in June Oracle said it planned to seek $2.6 billion in damages in the case.

So today, a notice came down from Judge William Alsup concerning some pointed questions that he intends to ask Google. “It appears that early on Google recognized that it would infringe patents protecting at least part of Java,” Alsup writes in the filing, but that Google later abandoned licensing talks because the terms seemed too expensive. He then goes on to ask, “Does Google acknowledge that Android infringes at least some of the claims if valid?” The next hearing on the matter is July 21 and clearly Alsup has some tough questions for Google’s lawyers.

Oracle, which didn’t comment on the filing, has said that Sun had offered Google reasonable licensing terms, but that Google chose to press ahead with Android without a license. Google didn’t respond to a message seeking comment today. But what it looks like to me is that Alsup is trying to get both parties to agree that some infringement took place. If that’s true, then there’s not much left to fight over — aside from the size of the check Google will write. The text of the notice is below.

ORACLE AMERICA, INC.,
Plaintiff,
v.
GOOGLE INC.,
Defendant.
/
No. C 10-03561 WHA
NOTICE REGARDING
ADDITIONAL QUESTIONS
FOR JULY 21 HEARING

In reading the Daubert briefing, it appears possible that early on Google recognized that it would infringe patents protecting at least part of Java, entered into negotiations with Sun to obtain a license for use in Android, then abandoned the negotiations as too expensive, and pushed home with Android without any license at all. How accurate is this scenario? Does Google acknowledge that Android infringes at least some of the claims if valid? If so, how should this affect the damages analysis? How should this affect the questions of willfulness and equitable relief? Counsel should be prepared to address these issues at the hearing.

Dated: July 12, 2011.

WILLIAM ALSUP
UNITED STATES DISTRICT JUDGE

In the ongoing talent drain at Yahoo, longtime Yahoo search veteran Chi-Chao Chang (pictured right) is the next to swirl away from the Internet giant.

Chang was VP and GM of the global search business at Yahoo and has been at the company since 1999.

More importantly, he has been a key exec in Yahoo’s troubled search alliance with Microsoft, so there’s another plus for Yahoo (and by plus, I mean minus). It is not clear where Chang is headed.

On his LinkedIn profile, Chang described his job thus:

“I am responsible for Yahoo’s global search operations and marketplace, and am the executive manager of the Microsoft Search Alliance for the US/CA marketplace. My team runs in-region operations and marketplace analysis for Americas, Asia and Europe.”

But that’s not all today!

Also departing Yahoo is a top PR exec, May Petry (pictured left). She has held a number of different communications jobs at Yahoo over the years, including for its Connected Life unit, corporate and, most recently, for its Americas unit. Petry, who has previously worked at BEA Systems and Sun Microsystems, will head to Hewlett-Packard to run PR for its webOs unit.

(Note to May: I am just as interested in that action-packed business, so get ready!)

I contacted Yahoo for a comment (but let’s just assume I am right, because I am).

The weakness in hardware sent shares down by more than 4 percent in after-hours trading. Oracle said that in the wake of its acquisition of Sun Microsystems a year ago, the company is focusing more on selling a lower volume of hardware at a higher profit margin. That process of transition is still underway as you can read in my liveblog coverage from the earnings conference call below.

2:12 pm: And the call is underway. President Safra Catz is making some opening remarks.

There’s the first reference to hardware. “We’re running the Sun business in a more profit-aware manner than before.” Hardware gross margins were 56 percent. Later this year I expect the growth in the Sun products to be “quite obvious.”

“We could be back at pre-Sun operating margins quite quickly as there remains a lot of leverage in our operating model.”

Catz: “We now have $29 billion in cash and marketable securities.”

Guidance: As you remember, we had a spectacular Q1 last year. Assuming exchange remains at current levels: New software is expected to show 10 to 20 percent growth, hardware is plus or minus 5 percent.

Total revenue expected to grown 9 to 12 percent non-GAAP.

EPS 45 to 48 non-GAAP.

2:17 pm: And here’s Larry. “We’re already nearly twice as big as IBM, and taking share away from them in databases.”

We did a number of cloud computing deals. We did a deal with Salesforce.com this year. We did a deal with the biggest and best names in mobile devices and cloud computing. (Could he be referring to Apple?)

The expansion of our Exadata business plus our Exalogic business, should turbocharge our hardware business.

And here’s Mark Hurd. We sold a lot of software. Software growth was broad based. It was the first time we’ve ever sold more than $1 billion in apps.

Our sequential growth in Exadata was more than 50 percent. Proctor & Gamble, J.P. Morgan Chase and Apple (yes, Ellison was talking about Apple earlier) have helped us cross the 1,000-system threshold. (Paraphrasing Hurd there.)

2:21 pm: Time for Q&A from the analysts.

First question from Morgan Stanley: The hardware business: How material was the headwind relative to the shift in the model? What gives you confidence that you can get it growing again? And a question about attach rates.

Hurd answers: He is explaining attach rates. We’ve moved to a model where we have the service lined up to the sales activity. Selling units that have no gross margin is easy to do. We are focused on selling hardware systems at a higher price, that are of a higher value to the customer and that stay installed longer.

Question from Merrill Lynch: A question about guidance. How you might have incorporated a questionable macroeconomic forecast. And a second question about attach rates.

Larry jumps in: The attach rate to Exalogic and Exadata is 100 percent. They are becoming a bigger part of our overall hardware business. That improves our profitability. Exadata is growing faster than our traditional Sun line. We sell more and more engineered systems and fewer undifferentiated systems. This allows us to increase our sales of Middleware because it runs better on Exalogic.

Ellison: We sell more database and middleware because of Exadata and Exalogic.

Catz on the economy: We’ve got guys around the world who roll in a forecast for us. But its very much the same. The truth is the economy is as it is, and we continue to grow. This was an organic growth quarter for us. We’ve got a lot of very Oracle-specific momentum going.

Hurd: We added 800 people to the sales organization this quarter. If that gives you an idea of our confidence of where the market is.

Question from Credit Suisse: Question about the sales force change that the analyst focused on in his pre-earnings note last month.

Hurd on the sales force: We put more territories in the field by getting more density of coverage. We believe we are under-distributed. When we get in front of more customers we sell more software.

Hurd: One salesperson had 20 customers. We think that person can sell just as much software calling on five customers.

Ellison: We’re going to add a couple of appliances. One is a large memory addition to Exadata for Big Data. As memory becomes cheaper and larger scale. We’ll be announcing in the fall at Oracle Openworld.

He’s now answering a question about Hadoop boxes. He says they don’t replace databases. The Big Data accelerator includes some of the open source components like Hadoop and some other Oracle pieces that can speed up the MapReduce process that Hadoop does. Oracle has always followed database technology trends…and kept up and quite often led on innovation.

Ellison: IBM still hasn’t come out with an appliance that runs their DB2 database very fast. Instead they ran out and did an acquisition. (Seems IBM is the going to be the victim of his verbal jabs this call, not Hewlett-Packard.)

Question from J.P. Morgan: Hardware margins were strong. The higher margin business was better than the low margin. But this is the second quarter in a row that hardware has decrased. Is it because the commodity business is shrinking faster?

Hurd: Its just the fundamentals of building a business. We are putting more coverage out in the market. Making sure we attach all the peripherals. We want to grow the top line, but we want to grow it right. Getting these high margin sales is key. You’re going to see material growth in Exadata and Exalogic. We’ll be focused on some competitors that have some key vulnerabilities.

Catz: We used to resell Hitachi, but the other big storage we sold was LSI, which during the quarter was sold to NetApp. Our selling of those storage products overall is down, but selling our own storage products is up.

Hurd: You see the same thing in the server business. The higher margin products have higher growth rates, and the x86 line is slower.

Catz: We see deals come in that aren’t profitable and so we walk away from them. We want to make money. We’re funny that way.

Question from UBS: About the forecast for new license revenue.

Catz: We always have some spillover. We look at what the guys are forecasting. The Exadata and Exlogic systems really help because you have to buy software. On the app side, we’ve been on a roll. I add my own little bit of conservatism. The summer means chasing the contracts while people are on vacation.

Question for Elllison: You thought there would be 50 to 100 customers for Oracle Fusion.

Ellison: We have a number of Fusion customers that are live, and it’s being rolled out completely. We’re the only application vendor that offers the same technology on our cloud, or you can put it on your private cloud. And if you want we’ll run it for you.

Ellison: We think we’ve been competing very well with SAP, very effectively. They have no answers regarding the cloud at all. They have nothing. (Okay, now SAP gets a little bit of Larry’s abuse.)

Question from Lazard Capital: A question about Exalogic. What’s driving the growth and are there any significant customer wins?

Hurd: With Exalogic you go to Java applications and want to speed them up versus when you’re running them on x86. It’s an extremely attractive value proposition.

Question from Wells Fargo: You have a lot of cash on the balance sheet. How are you thinking about acquisitions? Valuations aren’t exactly low. (Oracle has $29 billion.)

Ellison: We had 19 percent growth without acquisitions. We can grow through acquisitions when they are attractive and make sense. Right now they aren’t and so we aren’t doing them. Right now we’re focusing on organic growth, which means increasing the sales force and introducing new products. We think we have a lot to sell. We can grow by acquistions when the opportunity presents itself and when the economics make sense. Right now they don’t make sense.

Catz: Every once in awhile we find a jewel. Price does matter to us. We just want to make sure it’s a good business case when we do it. Prices have recently been quite ridiculous.

And now a follow-up question on Catz’s earlier comment on returning to pre-Sun operating margins.

Catz: We ingested a money-losing hardware company and we still have the highest operating margins in the software industry. There is no reason why this year couldn’t be really spectacular.

With the software business and the enormous installed base who renew with us every year, there’s still a lot of room left in our model.

And that’s a wrap!

According to an internal memo from Juniper Networks, which you can see below, one of its top tech execs, David Yen (pictured here), is departing immediately.

Sources said Yen is headed to Cisco to run its servers business, but the networking giant has not returned a request for comment.

Yen had most recently been EVP and GM of Juniper’s fabric and switching technologies unit. He joined Juniper in 2008 as EVP of emerging technologies.

But Yen was better known for his previous 20-year stint at Sun Microsystems. His last job there was running its chip division.

The impetus for Yen’s departure might have been the formation of the Platform Systems Group, run by Stefan Dyckerhoff, which is prominently mentioned in the memo from Juniper CEO Kevin Johnson. Dyckerhoff was elevated to the job in late January.

Sources said Yen did not get that job and was unhappy with the move.

But read into it yourself:

Team Juniper:

In February, we announced the evolution of our business groups to better position us to focus on two core business models: Systems and Software.

A key element of that strategy was the formation of the Platform Systems Group (PSG) under the leadership of Stefan Dyckerhoff. The mission of PSG is to optimize systems and silicon development across the full range of Junos-based platforms to accelerate our growth.

As part of the next phase of PSG’s growth, R.K. Anand, who leads QFabric development and our Data Center Business Unit (DCBU) and Alex Gray, who leads our Campus and Branch Business Unit (CBBU), will join PSG and report directly to Stefan. This move positions us to drive a fully integrated approach to our end-to-end systems strategy, as we continue to leverage the synergies across our breakthrough innovations in the core, the edge, the data center, and the campus and branch environment. Under Stefan’s leadership, PSG is now positioned to drive the go-to-market focus we have around domain-focused solutions that incorporate systems products from across PSG.

As part of this transition, David Yen is leaving Juniper effective immediately. David has a desire to return to his roots in servers that he gained during his nearly 20-year career at Sun Microsystems. We appreciate David’s contributions.

We are successfully accelerating momentum and adoption of our systems offerings. The response to both our QFabric data center architecture and to the Converged Supercore–two disruptive innovations unveiled in the quarter–has been overwhelmingly positive. These two offerings represent the best of Juniper innovation in systems, software and silicon.

As demonstrated by our strong performance over the past year, we continue to execute on our multi-year growth agenda, driven by our innovation roadmap. The new network is here, and we are delivering on our vision to capture the opportunity before us. Together with our partners, we will transform the economics and experience of networking for our customers.

Thank you for your hard work and dedication. I look forward sharing in Juniper’s continued success with you.

Regards,

Kevin Johnson

Analyst Chris Whitmore with Deutsche Bank Securities previewed the quarter in a note to clients this morning, and said he thinks IBM closed the quarter on the strong note. While the consensus calls for IBM to report $24 billion in sales and per-share earnings at $2.30, Whitmore is slightly more bullish than the Street on revenues–at $24.1 billion–and less so on earnings–at $2.24.

Checks indicate that IBM’s Power-based systems are taking business away from servers using Oracle’s Ultrasparc-based systems, the server business it took over when it acquired Sun Microsystems last year, though we heard nothing about that from Oracle when it reported earnings on March 24. On top of that, Whitmore foresees strength in the services business, and expects that IBM will report service signings in the range of $12 billion to $12.5 billion.

One headwind to watch: Japan. IBM derives about 10 percent of revenue from Japan and could take a hit on its results following the disastrous earthquake and tsunami that devastated that country last month, Whitmore says. Strength in other areas of the world may offset any weakness in Japan. “We expect management to duly update investors as to what, if any, impact these factors would have on IBM’s results going forward,” he wrote.

Whitmore expects revenues to grow a little more than five percent companywide, which includes a little help from currency rates. He says hardware and software sales both should grow 10 percent year on year, while services will show growth of less than 3 percent. Maybe the strength has something to do with all the publicity generated from winning at “Jeopardy” two months ago.

A few other points to watch: Deals. IBM publicly announced only four deals this quarter versus seven in the year-ago quarter, and only one was valued at more than $100 million. With so little data, it’s hard to get a solid feel for services bookings, Whitmore says, though he expects the bookings figure to track largely with the consensus.

(Image via from an 1980 IBM Poster designed by the late Paul Rand.)

Intel used its usual hyperbole to describe the big step forward it has taken with with Xeon E3 and E7 families of chips. In one slide of its presentation deck to reporters on a conference call today, it said that 18 racks of 2006-vintage servers using its dual-core chips from back then could be replaced by a single rack full of servers using its newest Xeon E7-4800 chip. Swapping out the old servers for the new ones would also cut the annual energy cost by 93 percent.

The refresh is part of Intel’s bid to go after the $15 billion ultra-high end of the server market, where powerful, expensive and often very customized machines running IBM Power7 chips or Oracle/Sun SPARC chips hold sway. But here’s where the shifting sands of semiconductor politics get a little complicated. For years, Intel has coveted this market and had planned for a very long time and spent billions on designing and building its Itanium chip to go after the big iron.

Remember last month when Oracle said it would stop building software that supports Intel’s ultra-high end Itanium chip? The kerfuffle that followed included rebuttals by Intel and Hewlett-Packard. Finally, Oracle had the last word, saying in effect that Intel wasn’t being entirely honest about its plans and that in fact it eventually planned to kill Itanium in favor of its higher-volume Xeon chip. (While Oracle happily buys lots of Intel’s Xeon chips for its Sun servers, the real target in all this was HP, which is for all intents and purposes the only company selling Itanium-based servers in meaningful numbers and one competitor Oracle has been taking every opportunity to disparage.)

With memories of that three-way scrum still fresh, it was no surprise at all to hear Kirk Skaugen, VP of Intel’s Data Center Group, defend Itanium, reminding reporters and analysts assembled for the launch event today that the anniversary of the Itanium chip’s release in 2002 is coming up on May 29. He then went on to defend Itanium and score points againt Intel rival AMD in one breath, saying that the Itanium ecoystem, constantly criticized for being much smaller than Intel initially envisioned, amounted to about $4 billion in server sales last year, bigger than the $2.8 billion in sales of servers running AMD chips. He then reiterated Intel’s promise to keep development of Itanium chips on track: Poulson and Kittson, code names for future Itanium chips, are in the pipeline for release.

Yet even after all that, it was hard not to side with Oracle’s interpretation of the situation. The key moment came when Skaugen said, “There’s no workload in the world that Xeon can’t handle.” Hmm. Does that mean a Xeon chip could in some scenarios replace an Itanium?

Confused, I turned to Dean McCarron of Mercury Research, an Arizona-based outfit that tracks the market for x86 chips (chips used in PCs, servers and workstations manufactured by Intel, Advanced Micro Devices and VIA Technologies).

Years ago, he said, there wasn’t much that differentiated a Xeon server chip from a Pentium used in a PC. But over the years that’s changed. “Xeon has grown up,” he said. Many of the features that Itanium included as suitable for specific tasks have migrated down the line and into Xeon chips. “While there’s still a lot of cases where an Itanium is the right choice for the customer, the fact is that over time Xeon has gotten better and is able to fit into more segments of the server market.” There may be some cases, McCarron said, where a customer who would have insisted on an Itanium a few years ago might be more willing to consider a less expensive Xeon.

Here’s what may be going on. McCarron told me that Intel’s share of the market for server chips stood at 93.4 percent at the close of 2010, while AMD’s stood at a paltry 6.6 percent. In a market where one percentage point amounts to about 50,000 servers–which on average contain roughly two server chips each–Intel’s Xeon is in need of new territory in which it can grow. By definition, that means attacking the market for big iron where systems running IBM’s Power7 and to a lesser extent Oracle’s Sun SPARC chips dominate. This will also mean Intel will bump into itself: Xeon will probably eat into Itanium’s business. That’s going to take some complicated, nuanced positioning.

As Skaugen put it today, just before his more memorable line about Xeon being able to handle any workload in the world, he said the coexistence of Xeon and Itanium is one of choice. Xeon, once positioned at the lower-cost-but-higher-volume end of the server market, is now, as he put it, “side by side” with Itanium. What’s unclear is how much longer that will continue. Expect Intel to shed more light on this at its developer forum in Beijing later this month.

If there is any doubt as to whether Chris Melissinos is qualified to curate the “Art of Video Games” exhibit, scheduled to open next year at the Smithsonian American Art Museum, it vanishes after entering his Northern Virginia home.

The walls of his office are adorned with game platforms–he owns 42 different systems, by his last count–dating back nearly four decades.

Melissinos proudly shows off a circuit board from an original Pong unit, and Game Boy game boxes line his windowsills. In the basement, past the arcade cabinet he custom-built himself is a room that can only be described as a gaming cave, complete with drawers upon drawers of titles for various systems, rows of comfortable chairs and an enormous screen on which he and his family play Playstation 3.

“Games have always been a part of my life, since I was a kid,” he said. “I developed my first game at 12.”

With a background in programming, he began a career with Sun Microsystems 17 years ago, and in 2000 convinced then-CEO Scott McNealy that the company should begin to have a presence in the world of gaming.

Melissinos was appointed Chief Gaming Officer at Sun Microsystems, a position he held for nearly a decade. His high profile in the gaming community led to his being asked by the Smithsonian to curate the upcoming exhibit.

Melissinos considers himself part of the “bit-baby” generation–that is, the first to grow up with computers in the home. He now has children of his own, who are top-notch gamers themselves.

The fact that the bit-babies now have children old enough to appreciate video games, Melissinos said, is part of what makes now the right time for an exhibit like this one to be displayed at the Smithsonian, which is known for, among other things, chronicling culturally significant trends and milestones in American history.

Now, several decades after the industry’s inception, the evolution of the medium of video games is also being examined as a story itself.

But he also contends that the video game as an art form has always been worth putting on display. Even though most art exhibits focus on visual works, Melissinos insists that viewing a game in the context of art involves not only its visual and musical components, but also the storyline, dialogue and mechanics.

“To really understand the medium, it has to be about more than just the visuals,” he said.

Melissinos also outlined the notion of the “three voices” in video games, something he feels makes the genre even more significant in the art world.

The voice of the artist is present in any artistic work, and those of the characters exist in any artistic work with an actual or implied story. However, the added component of the player or players, who give meaning to the characters and story and make decisions affecting their fates is the third, unique voice.

Melissinos insisted that this third voice is critical to games as an artistic medium. “When you’re 12, you have no control over anything in your life, except perhaps for the choices you make in a game,” he noted.

Something else that sets this exhibit apart from others in art galleries, or even within museums in general, is the way that it is being put together in an interactive, Web 2.0 way.

Melissinos selected 240 different games on 20 different platforms, organized into five different eras of gaming since the 1970′s and four different genres.

Users can vote for the games on the list that they think best represent the medium at www.artofvideogames.org through April 17, and the top 80 vote getters will be featured in the exhibit.

Although Melissinos has given up control of the final game selection to the Web-going public, he said that in picking the initial 240 options, he exerted all the power he needed to as curator.

“So far the public is doing its job,” he said. “And I’ll be able to tell the story I need to no matter what games win.”

Here is an interview I did with Melissinos about the upcoming exhibit, with lots and lots of oldies but goodies:

]]> http://allthingsd.com/20110403/video-games-as-art-with-an-upcoming-smithsonian-exhibit-pong-equals-picasso/feed/ 0 http://allthingsd.com/20110324/oracle-delivers-on-earnings-and-on-its-promise-to-profitably-acquire-sun/ http://allthingsd.com/20110324/oracle-delivers-on-earnings-and-on-its-promise-to-profitably-acquire-sun/#comments Thu, 24 Mar 2011 22:51:54 +0000 Arik Hesseldahl http://newenterprise.allthingsd.com/?p=4371 The Oracle machine kept on chugging along in the third quarter as profits rose 78 percent to $2.1 billion, or 54 cents a share before items, versus $1.19 billion a year earlier. Revenue was $8.8 billion, up 37 percent from the year ago period.

The company also raised its quarterly dividend by a penny per share, or 20 percent, making this the third year in a row it has boosted its dividend. It said it doesn’t expect significant impact on its operations in Japan following the earthquake. There had been some concerns.

Oracle said it expects profit–excluding one-time expenses–will be in the 69- to 73-cent range this quarter, beating the 66-cent average estimate of analysts. Revenue is expected to grow year-on-year in the range of 9 to 13 percent, which works out to a range of between $10.4 billion and $10.7 billion.

The results were led by sales of new software licenses, a key measure of new business as opposed to sales to existing computers, which rose 29 percent to $2.2 billion. This handily beat the company’s guidance for growth in new licenses of 10 to 20 percent.

Software license updates rose 13 percent to $3.7 billion. Hardware sales were $1 billion, but since Oracle closed on its Sun acquisition during this quarter a year ago, a year-on-year comparison doesn’t apply.

The strong earnings report comes a day after Oracle launched a quarrel with hardware rival Hewlett-Packard and chipmaker Intel by saying it would no longer develop software that runs on systems using Intel’s Itanium Processor because it expects Intel is quietly planning to kill the chip. Intel denied the claim, saying two new versions of Itanium are in the pipeline, while HP, which sells most of the systems containing the chip, said it was “shocked.” Oracle stuck to its guns, saying it was only trying to help its customers plan accordingly.

Speaking of HP, with Oracle CEO Larry Ellison serving on jury duty, it fell to President Safra Catz to deliver this quarter’s obligatory dig at HP during a conference call with analysts.

With Oracle’s hardware business showing a healthy hardware margin–which is interesting in light of the fact that the results contain the hardware assets of Sun Microsystems–Catz reiterated a prior promise to deliver a $1.5 billion profit on the Sun business by the end of this fiscal year. That makes Sun a good purchase, she said, when compared to HP’s acquisition of 3Par, though time will tell if Oracle can deliver on the promised $2 billion profit in year two.

It’s probably not a fair comparison. Sun was trading at an extremely depressed valuation when Oracle stepped in. Only months before, Sun had been trading at the value of its cash holdings. 3Par, on the other hand, saw its valuation triple as the result of a punishing bidding war between HP and Dell. However Catz isn’t the first one to say HP paid too much. But as usual, any chance to tweak HP’s nose is fair game at Oracle, as you can hear in the audio clip below.

Safracatz1 by ahess247

]]> http://allthingsd.com/20110324/oracle-delivers-on-earnings-and-on-its-promise-to-profitably-acquire-sun/feed/ 0 http://allthingsd.com/20110210/cloudy-with-a-chance-of-transformation-new-microsoft-server-and-tools-head-nadella-speaks/ http://allthingsd.com/20110210/cloudy-with-a-chance-of-transformation-new-microsoft-server-and-tools-head-nadella-speaks/#comments Thu, 10 Feb 2011 16:40:49 +0000 Kara Swisher http://kara.allthingsd.com/?p=40589

After he was appointed the new president of Microsoft’s important Server and Tools Division from his top engineering post at its come-from-behind Bing search unit, Satya Nadella now finds himself a leader of a business that also needs to keep catching up.

In a wide-ranging interview with BoomTown yesterday, Nadella talked about both his four-year stint at Bing and how he looked forward to the challenges of his new job.

Nadella got the nod, he said, after CEO Steve Ballmer went through a process of what was Microsoft’s “position in this business and a certain set [of ideas] about who should come in next.”

Interestingly, almost 20 years earlier, after working at Sun Microsystems, Nadella had started in the same area of Microsoft he will now lead.

Quoting the famous T.S. Eliot lines–”We shall not cease from exploration, and the end of all our exploring will be to arrive where we started and know the place for the first time”–Nadella was an evangelist for Windows NT.

Eventually, his career brought him to the search arena, most recently to the most aggressive and expensive effort yet by Microsoft with Bing to try to eat into the massive and lucrative lead of Google.

“Those were fairly dark days for us,” noted Nadella, pointing out that any market share gains by Microsoft seemed impossible.

But, according to numerous surveys, it has been only uphill for Bing, especially after it started to really spend and also inked its search and online advertising deal with Yahoo, a partnership that Nadella was a key player in striking.

“We have, depending on which one you look at, grown five share points,” he said. “But behind that, I am most proud of launching a brand and a product that is delivering.”

Of the recent controversy in which Google accused Bing of lifting its results, Nadella borrows another quote, this time from Gandhi.

“‘First they ignore you, then they ridicule you, then they fight you, then you win,’” he said, noting Bing has always said it uses toolbar and other public user data. “The real debate is whether we are better.”

In any case, as Nadella sees it, the Bing experience has helped him prepare for his new job, noting he was in charge of building a 200,000-machine grid to serve the various online services at Microsoft.

“I have been CIO of a cloud platform where there are only two of that size,” he said. “So, I know what it is like to be a customer of those services.”

His hope for his next job, he said, is to make it the next-generation cloud platform, while also serving the needs of current customers with its current product.

‘We have a product and brand that are really foundational, but there is a threshold to it,” Nadella said. “We have to serve the needs of our existing customers, while also moving them to the cloud and building a next-generation offering.”

At Bing, he said, “every day is upside, since we came from so far behind, whereas in server and tools, we are the leader.”

Big competitors are different and the same too, when it comes to the cloud.

“Amazon has done a good job, but not in the same game as us,” said Nadella, ticking off Google, Oracle and VMware as rivals in different ways too. “It’s a nascent marketplace.”

Acquisitions, he said, will also be important. “We are always looking at what opportunities there are,” he said.

His overall view?

“I think that the challenge is how to operate in a space where we have a $15-plus-billion-dollar business and we know the paradigm is shifting and managing that shift where we are the disruptors and also the leaders at the same time.”

In other words, between a rock and a hard place, a place Nadella knows well from Bing.

“We can’t be stuck in current paradigm,” he said. “And we can’t shoot too far ahead of ourselves either.”

To get a good sense of his style as he moves from consumers to enterprise, here’s a video interview I did with Nadella back in mid-2009, just after the Microsoft search deal, and another I did this past summer at one of his regular search updates for the media.

]]> http://allthingsd.com/20110210/cloudy-with-a-chance-of-transformation-new-microsoft-server-and-tools-head-nadella-speaks/feed/ 0 http://allthingsd.com/20110208/inside-facebooks-big-move-to-menlo-park/ http://allthingsd.com/20110208/inside-facebooks-big-move-to-menlo-park/#comments Tue, 08 Feb 2011 09:00:39 +0000 Liz Gannes http://networkeffect.allthingsd.com/?p=3322 Facebook is holding a press conference later today to announce it will move to a campus in Menlo Park, Calif., that the company expects to become its long-term home.

News of the move was first reported in the Palo Alto Daily Post in November, and multiple reports of real-estate transactions have been published since. (Those realtors are a chatty bunch!)

Facebook will finally make things official on Tuesday at Menlo Park City Hall.

Its relatively new office complex is on the east side of Highway 101, near the Dumbarton Bridge and not much else. It was formerly occupied by Sun Microsystems, which moved out after being bought by Oracle. When Sun occupied the buildings, most employees had private offices, so Facebook has already been working to tear down walls to create the sort of open floor plan it enjoys at its current office. According to a former Sun employee, every time he’s passed by in recent weeks, the dumpsters have been overstuffed with detritus.

Coincidentally, the address for the new office park is 1601 Willow Road; Facebook’s current main building is 1601 S. California Avenue in Palo Alto.

Facebook’s current offices in Stanford Research Park are definitely less cool than the company’s original home, which was surrounded by restaurants and cafés in downtown Palo Alto. And eastern Menlo Park is much, much less cool. It’s also less bikeable and convenient to public transportation.

But it is considerable consolation to employees that the campus is more accessible to San Francisco, especially relative to most other nearby major tech campuses in the deep south Peninsula and South Bay.

Facebook moved to its current offices in just 2009, and has since expanded down the street to a building on Page Mill Road that currently holds much of its nontechnical staff. The company currently employs 2,000 people, although sources say it expects to grow to as many as 3,500 before the end of 2011.

Staffers don’t have much reason to venture out, since they are fed three gourmet meals a day plus unlimited snacks.

Prior to the 2009 move, Facebook had expanded to 10 or more buildings in downtown Palo Alto, where it had operated since formalizing operations after being founded by Mark Zuckerberg and some of his Harvard classmates in 2004. The company celebrated its seventh birthday last week.

For most of those years, Facebook offered employees a $600 monthly stipend if they lived within a mile of the offices. When the company uprooted itself two years ago to California Avenue and ended the stipend program, many employees moved their homes out of the immediate area. Facebook now offers multiple shuttles per day from San Francisco and from Caltrain stations near its offices.

Moving from Palo Alto’s main business district to a quiet office park owned by Stanford was a big change for the company, but a necessary one after it outgrew the downtown area. Many of the company’s former downtown offices are now occupied by the analytics start-up Palantir.

Those noisy, frequent shuttle buses that come with a swarm of young employees migrating to work every day are among the annoyances that caused much tension with the residential neighborhood that surrounds Facebook’s current office on California Avenue. Residents of the College Terrace neighborhood have persuaded the city of Palo Alto to institute an actively enforced two-hour parking limit, in part to keep Facebooker vehicles contained in the company’s designated parking lots.

Commenters on local news discussion boards complain that these NIMBY folks drove Facebook, its employees’ business and corporate tax revenue out of town. But the reality is that the social networking giant is too big for its current space, which it had said from the beginning was temporary.

The new Menlo Park campus has 57 acres and one million square feet of office space, and Facebook has already reportedly purchased nearby buildings, likely to ensure it has room for further growth.

Plus, fostering a close-knit pod of employees all living within walking distance of the office has become less important as Facebook expanded. With the company saying it’s likely to go public next year, expectations are that many employees will be buying mansions in the suburbs and pieds-à-terre in the city soon enough.

(You might ask, why do I know so much about the minutiae of Facebook’s office locations? Well, in addition to having covered the company for the last six years or so, I grew up in Palo Alto, my mother lives around the block from Facebook’s current offices (where I am now in constant fear of parking tickets) and my husband (as mentioned in my ethics statement) has done research for the company off and on for the last three years.)

]]> http://allthingsd.com/20110208/inside-facebooks-big-move-to-menlo-park/feed/ 1