Exadata and Exalogic Driving Oracle’s Growth

by Trefis Team
+8.96%
Upside
87.14
Market
94.95
Trefis
ORCL
Oracle
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Oracle (NASDAQ:ORCL) recently announced its fiscal year Q3 2011 earnings results, in which it specifically mentioned that its Exadata and Exalogic line of products are one of the most important products driving growth for Oracle. [1] Exadata machines are high performance machines and is a complete package of servers, storage, networking and software. Exalogic machines provide a complete cloud-computing infrastructure for the deployment of applications. [2] [3] Oracle believes that these products will continue to drive its software and hardware growth and take market share away from software players like SAP (NYSE:SAP), Microsoft (NASDAQ:MSFT) and IBM (NYSE:IBM), and from hardware players like IBM and HP (NYSE:HPQ).

After the earnings announcement, we have updated the Trefis price estimate for Oracle stock to $37.94 from $38.16. Our price estimate stands 16% above market price.

Exadata and Exalogic Driving Growth for Oracle

According to the company, the Exadata and Exalogic line of products saw a sequential revenue growth of over 50%. [1] The company also mentioned that its products are leveraging the fast growth of cloud-computing market. Incidentally, a few weeks back, we discussed how the cloud market growth trickles down to benefit Oracle in our note titled SaaS Market Growth Trickles Down to Lift Oracle Stock. The SaaS, or the Software as a service, market is a subset of the overall cloud computing market.

The company provided a glowing outlook for the two products:

We saw sequential unit and revenue growth of over 50% in Exadata and Exalogic. As we head into Q4, we expect to see even higher growth. The pipeline for Exalogic is building very rapidly as well with customers building out their private clouds with both Exalogic and Exadata.

And yes, we’re in the cloud, whether it’s collaborating with Amazon, so that customers can launch an entire Oracle software stack on EC2 or whether it’s working directly with a very large federal law agency to build out a private cloud, gain a 10x performance increase as they improve their mission and better protect the United States. Public or private, we’re in the cloud. [1]

We believe that these products will help drive growth in the coming quarters. In another article titled Oracle’s Exadata & Software Give Oracle 20% Upside, we discussed the outlook for Exadata and how its software business is getting a boost from this growth. The article discussed that the faster hardware makes the software access faster as well, which could be the main factor behind its software growth.

See our full analysis and $37.94 price estimate for Oracle

Notes:
  1. See SeekingAlpha: Oracle FY Q3 2011 earnings conference call transcript, March 24th 2011 [] [] []
  2. See Oracle’s description of Exadata []
  3. See Oracle’s description of Exalogic []
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