Ellison's Cloud Adds to Oracle's Luster

REDWOOD SHORES, Calif. ( TheStreet) -- Larry Ellison added to Oracle's ( ORCL) luster at its OpenWorld event this week, unveiling a new Public Cloud offering and boosting the company's hardware business.

Ellison was in a typically belligerent mood when unveiling the Public Cloud in San Francisco on Wednesday, deriding rival Salesforce.com's ( CRM) cloud technology as a "roach motel," further fueling the growing feud between the two companies.
Larry Ellison unveiled Oracle's Public Cloud this week

Point-scoring aside, initial reaction to Oracle's virtualization-based cloud has been positive, with analysts seeing the technology as a crucial move for the database giant.

"We believe the Oracle Cloud is a positive step in embracing 'cloud' and providing Oracle customers increased flexibility in how they purchase and deploy Oracle products," explained Brad Zelnick, an analyst at Macquarie Securities, in a note. "Oracle believes cloud margins will be higher than for others given it owns all of the necessary IP."

Ellison also hammered home the theme of "openness" during his keynote. Because Oracle's cloud is based on open standards, he explained, it offers full interoperability with other cloud technologies, as well as customers' on-premise data centers.

"Larry did an amazing job bringing this concept home in his speech," said Al Hilwa, an analyst at tech research firm IDC, in an email to TheStreet. "The way Oracle is running its cloud application and platform is to make it a mirror of what people run on site."

Hilwa also sees Oracle's extensive use of virtualization within its cloud as a masterstroke, enabling it to quickly carve up pieces of the service for customers.

"From a marketing perspective, it is easier to sell isolated virtualized instances for applications," added the analyst.

Oracle, which recently reported solid first-quarter results, was also banging the drum about its hardware business in San Francisco. Specifically, Oracle's fiery CEO set a bullish target for the company's Exadata database machine.

"Ellison stated a new goal of selling 3,000 Exadata units this year (up from 2,000 prior)," noted Macquarie's Zelnick. The new target bodes well for Oracle's margins at a time when it's shifting focus from commodity servers towards high-end hardware such as its Exadata, Exalogic and SPARC M-Series products.

Pat Walravens, an analyst at JMP Securities, maintained his market outperform rating on Oracle, citing an analyst meeting that took place at OpenWorld.

"During the Q and A, Oracle co-presidents Mark Hurd and Safra Catz suggested that sustained 20% EPS growth is achievable -- which is bullish given that our above-consensus estimates imply EPS growth of 10% in fiscal year 2012 and fiscal year 2013," he wrote. "The likely drivers for such upside are further operating margin expansion and greater revenue growth -- both of which we think are most likely to be influenced by the hardware business."

Oracle shares, however, dipped 34 cents, or 1.13%, to $29.67 on Friday, mirroring the broader retreat in tech stocks that saw the Nasdaq slip 1.33%.

Salesforce.com has not yet responded to TheStreet's request for comment on this story.

--Written by James Rogers in New York.

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