Oracle Says Sun Operations Turning A Profit

As part of its fiscal 2010 fourth-quarter results announcement Thursday, Oracle said its Sun operations are now profitable -- in contrast to the $147 million loss Sun reported one year ago for its fiscal fourth quarter ended June 30, 2009.

Oracle acquired Sun in January for $7.5 billion and Oracle’s fourth quarter, ended May 31, was the first full quarter the software giant has owned Sun.

For the fourth quarter Oracle reported revenue of $9.5 billion, up 39 percent from $6.9 billion in the same quarter last year. Net income grew 25 percent to $2.4 billion form $1.9 billion one year earlier. Oracle said the results included $1.2 billion in hardware sales from Sun.

The company said new software license sales increased 14 percent from $2.7 billion last year to $3.1 billion in the just completed quarter. Software license updates and product support revenue were up 12 percent from $3.1 billion last year to $3.4 billion.

During an earnings call with analysts Thursday Safra Catz, Oracle co-president, said one step Oracle has taken is ending Sun’s practice of annually reselling “hundreds of millions of dollars” worth of products from other vendors, one example being storage systems from Hitachi.

But Oracle executives clearly intend to grow sales of Sun hardware even as they make the Sun operation profitable. “This quarter we saw sales growth for Sun’s hardware products,” Catz said, adding that customers seemed more confident about the future of Sun hardware.

“We are focused on growing the Sun business and growing it rapidly,” said Charles Phillips, Oracle's other co-president, on the call, noting that Oracle is hiring more Sun sales representatives. “We’re going to more than double the Sun sales force.”

Phillips was quick to correct an analyst who asked a question about “eliminating” the Sun channel, a reference to Oracle’s plan to sell directly to some of Sun’s biggest customers who were previously serviced by Sun resellers.

“We’re not eliminating the Sun channel at all,” Phillips said quickly. He noted that 43 percent of Oracle’s sales are made through the channel, a number that was higher for Sun. While Oracle will be transitioning some large Sun customers to a direct-sales relationship -- a shift that Phillips said has already begun -- he said it would be done slowly over time to avoid disruption.

And Phillips said Oracle recognizes the importance of Sun solution providers. “The ones that are adding value, we want to continue to work with for many, many years,” he said.

For all of fiscal 2010 Oracle reported revenue of $26.8 billion -- up 15 percent from $23.3 billion in fiscal 2009. Earnings for the entire year grew 10 percent to $6.1 billion from $5.6 billion from fiscal 2009. New software license sales for the year were up 6 percent to $7.5 billion, while software license updates and product support revenue increased 11 percent to $13.1 billion.