Ellison: Oracle Gaining On 'Vulnerable' HP

HP's response to Ellison's comments has been added to this story.

REDWOOD SHORES, Calif. ( TheStreet) -- Oracle ( ORCL), which posted strong second-quarter results on Thursday, is rapidly gaining ground on HP ( HPQ) and IBM ( IBM) in the high-end server market, according to CEO Larry Ellison.

The database giant comfortably beat Wall Street's second-quarter estimates after market close on Thursday, citing sales of new software licenses and database/middleware products. Hardware, however, dominated the conference call to discuss the results, with Ellison again using the Exadata database machine to take swipes at IBM and HP.
Larry Ellison

Oracle's Exadata pipeline is now at $2 billion, he explained, up from $1.5 billion a quarter ago. "In data warehousing it's not unusual for our Exadata to be 10 times faster than the competition," he said, describing HP's high-end servers as "slow and expensive."

Warming to his theme, the fiery Oracle boss added that HP is particularly vulnerable to market share losses and predicted a significant jump in Exadata sales between the second and third quarters. "We think that Exadata will be a nice turbo-charger for our overall database business," he added.

HP, however, shot back at Oracle. "HP is the number one provider of enterprise servers in the world," said an HP spokesperson, in an email to TheStreet. The company's Enterprise Storage and Servers (ESS) segment grew revenue 25% year-over-year during the fourth quarter, she added.

The tech giant also aimed at jab at Oracle's Sun acquisition. "Larry Ellison bought a money-losing business that had steady market share declines for years," said the spokesperson. "Sun customers are running to HP in droves because they recognize we deliver superior technology, performance and pricing."

Exadata, a pre-packaged mix of hardware and software, is touted by Oracle as ideal for cloud computing and grids, which are widely used in areas such as oil and gas exploration. This message seems to be getting through.

"Exadata continues to gain momentum," noted Brad Zelnick, an analyst at Macquarie Securities, in a note released on Friday. The analyst said that customers have largely been trialing Exadata, but between 30% and 35% have already placed a second order for the technology.

JMP analyst Pat Walravens, however, believes that Exadata could become a double-edged sword for Oracle during the coming months. "Our due diligence suggests that customers that order the Exadata machines have to wait as long as two months to receive them," he said in a note released Friday, adding that a number of Exadata orders may not yet be recognized as revenue. "On the positive side, it may indicate that demand for the product is just that strong but on the negative side, it may indicate that the supply chain challenges Oracle experienced soon after taking over Sun may not be completely resolved."

Despite posting better-than-expected revenue in database/middleware and software updates, Oracle's overall hardware sales were slightly below expectations during the second quarter. The company's hardware revenue came in at $1.11 billion versus Wall Street's estimate of $1.15 billion.

JMP nonetheless maintained its market outperform rating on Oracle, which gave healthy third-quarter guidance on Thursday. Excluding items, Oracle expects third-quarter earnings between 48 cents a share and 50 cents a share, comfortably above Wall Street's estimate of 47 cents a share.

Investors warmed to Oracle's results on Friday. The company's stock surged $1.68, or 5.55%, to $31.95, far outpacing the modest advance in tech stocks that saw the Nasdaq rise 0.27%. Shares of IBM gained 74 cents, or 0.51%, to reach $145.28, while HP was flat at $41.95.

--Written by James Rogers in New York.

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