Oracle Launches Off the Shelf Database Solution for Small, Mid-Size Businesses

September 27th, 2011 by Trefis Team
+12.36%
Upside
116
Market
130
Trefis
ORCL: Oracle logo
ORCL
Oracle

Oracle (NASDAQ:ORCL) announced last week that its Exadata database appliance was showing triple digit unit sales growth driving database software sales as well. However, the Exadata offering is aimed only at large corporations and is too expensive for small and medium sized businesses. Last week, it announced the launch of its new Database Appliance product in the form of a tightly integrated solution which can be run right out of the box. [1] It is ideal for small companies looking for online transaction processing, analytic applications and data warehousing solutions and will be priced much lower than Exadata. Oracle competes with SAP (NYSE:SAP), Microsoft (NASDAQ:MSFT), IBM (NYSE:IBM) and HP (NYSE:HPQ) in the enterprise software and hardware.

We currently have a $40 Trefis price estimate for Oracle, which stands nearly 30% above its current market price. Its database and hardware businesses account for more than 40% of its total price estimate.

Focus on Integrated Solutions to Drive High Margin Hardware & Software Sales

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Oracle had a great quarter with revenue growth of over 16%. Its hardware business has been a concern due to low margins ever since it acquired Sun, and it has been working slowing inching its margins closer to pre-Sun levels with gross hardware margins now at 54%.

On its earnings call, Oracle announced that it would be phasing out low margin hardware and launching new profitable hardware products with integrated database and middleware software. With this move, it expects to drive software as well as hardware sales, as enterprises increasingly look for an integrated solution from one vendor, instead of deploying and maintaining their own infrastructure.

With Exadata and now this new database appliance for SMBs, Oracle is looking to expand its market share in the database market, which is currently about 50%. We estimate that it should increase to about 54% by the end of the forecast period.

See our complete analysis for Oracle.

Notes:
  1. New Oracle database appliance aims at small, mid-size firms, Computer World [↩]