RAC Caps Otherwise So-So Quarter For Oracle

Wall Street wasn't bowled over by the big picture but comparisons were hard because Oracle completed its $10-billion-plus acquisition of PeopleSoft just under a year ago.

However, sales of Real Application Clustering, or RAC, rose 36 percent year over year for the quarter ending November 30. Co-President Safra Catz characterized this as an acceleration, an assessment shared by Oracle partners. Sales of Enterprise Manager, another high-end option, were up 41 percent year over year, Catz said.

"I think we've moved out of the early adopter phase," said Ron Zapar, president of Re-Quest, a Chicago area Oracle partner. People are now more than interested in clustering, they're buying it, he noted.

Scott Jenkins, managing partner and CEO of The EBS Group, Lenexa, Kansas, agreed. "We're seeing a pretty good pipeline of new deals, mostly with RAC. The high-availabilty and middleware stuff is pretty exciting and collaboration is getting some traction."

RAC has been on the market for years but penetration is just taking off, partners said. "Why now? It's finally baked! It works, it's fairly easy to install and [product] versions are coming together," said one partner requesting anonymity. "One of the things that's haunted Oracle in the past is you might have had current apps running on an ancient database and in-between middleware. That's not happening so much anymore."

In addition, last year the company opened up the RAC option, which had been available with only the Enterprise Edition database for an additional $20,000 per CPU, to Standard Edition database, which lists for $15,000 per CPU compared to $40,000 per CPU for EE.

With the addition PeopleSoft and its human resources management and ERP stable, Oracle seems to be holding its own, if not gaining ground, observers said. Oracle CEO Larry Ellison has said the way to grow the apps business is to make acquisitions and he has certainly put his company's money where his mouth is.

Sales of new software licenses rose 9 percent in North America, a bright spot compared to Europe where struggling economies and a strengthening dollar hurt.

Database license sales were up 5 percent overall. Database remains Oracle's bread and butter business and it remains under siege by rivals with resources to spend on market share gains: Microsoft and IBM.

There is also a persistant fear that Standard Edition will erode sales of the higher-margin Enterprise Edition. That fear that resellers report is materializing in the field.

"There are now very few distinctions between EE and SE, so most customers who evaluate today take a hard look at SE," said Jenkins.

Zapar concurred. "If their applications don't need more than four CPUs or the higher end options other than RAC, they go with standard," he noted. "Of course, that's better than them going to SQL Server."

Ellison reiterated on the earnings call Thursday night that the company must continue to boost its applications power.

Toward that end, it expects its acquisition of Siebel Systems to close early next year.