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October 22, 2009

Stallman correct about Oracle's database business erosion

But this should have little impact on Oracle's intentions for MySQL

By Savio Rodrigues
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After finishing my post about Monty Widenius's views on the Oracle acquisition of MySQL via Sun, I read that Richard Stallman (RMS) had published an open letter on the topic.

Matt Asay writes: "Has anyone read this RMS/KEI/ORG ltr? It's living in dreamland. ORCL buying MySQL to prevent "erosion" of its core DB biz? What erosion???"

[ MySQL co-founder and creator Michael "Monty" Widenius has said Oracle should sell the database. | Oracle's Larry Ellison last week offered reassurances that Sun technologies will not go away. ]

Since Matt and I agree on much more today than two years ago, I began reading the open letter with less than an open mind. However, since I haven't really followed Oracle's database business, I decided to look into Oracle's financial reports to confirm or reject the "erosion" claim. I have to say, RMS may not have a black belt in pragmatism, but he's right -- not that I think this fact changes Oracle's likelihood of shepherding MySQL appropriately, but more on this point later.

I've plotted two revenue growth lines for Oracle over the past two years and a quarter. The blue line represents Oracle's total revenue growth for fiscal year 2008, 2009, and for the first quarter of fiscal 2010. Oracle had a great fiscal 2008, with nearly 25 percent year-to-year revenue growth. More recently, Oracle's total revenue declined by 5.2 percent in the first quarter ended Aug. 31 -- not a shocking story considering the economy and Oracle's $20-billion-plus yearly revenue base.

The red line, however, is where it gets interesting.  Oracle reports database and middleware revenue together. This category is largely made up of Oracle's database products and its middleware products resulting from the BEA acquisition. Even before the BEA acquisition, IDC estimated Oracle's database revenue to be nearly nine times larger than BEA's middleware revenue. For our purposes, we can assume that Oracle's "database and middleware" segment is extremely sensitive to Oracle's database sales.

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dennisbyron 22-Oct-09 2:45am
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Savio You're too far removed from your market research days :) . You're mixing apples and oranges (and bananas and melon and... you have a whole fruit salad going here). You are not backcasting for BEA middleware products and many other middleware acquisitions included in that "database" number, including a good chunk of Hyperion and other acquisitions that have nothing to do with "database." It is also not logical to say "Even before the BEA acquisition, IDC estimated Oracle's database revenue to be nearly nine times larger than BEA's middleware revenue. For our purposes, we can assume that Oracle's database and middleware segment is extremely sensitive to Oracle's database sales." Not the case. With BEA and other acquisitions revenues added in, the Oracle "database/middleware" revenue total is less "sensitive" to the database market. Also, as you know, that IDC number includes maintenannce revenue estimates so whatever the "sensitivity percentage" is (not 90%) it is also not comparable with the license-only percentage numbers in your graph And your graph also mixes quarterly and annual runrates? And the quarter you picked is Oracle's historically bad first quarter, which is also the "summer quarter." So the real question is "what is happening in the overall database market and is Oracle gaining or losing share?" There I can't help you. I'm also too far removed from my market research days. But I suggest you and Stallman and Monty need to decide on what "database market" means. If relational databases are becoming commodities than maybe a MySQL or similar open source product is eating into classic Oracle RDBMS. But meanwhile Oracle has moved on to embedded databases and Exadata and... and... Dennis
Savio Rodrigues 26-Oct-09 4:38am
Hi @dennisbyron, indeed, I am far removed from market research these days! :-) But, a few things: 1] It's a year to year comparison, so even though fiscal 1q is historically the worst quarter for Oracle, the comparison is against a year ago's "worst quarter". 2] Valid point re IDC data including both new license and maintenance. However, I've seen internal estimates of BEA new license revenue and total revenue before and after the Oracle acquisition, and there is no way that the "DB & MW" category is impacted by BEA's license revenue to an appreciable degree. Even before the acquisition, BEA's total license revenue was $500M (http://bit.ly/43SHgF) for all of 2008, this compares to $5B in 2008 new DB & MW license revenue for Oracle during the same period. So even a absolute collapse or explosion in BEA's middleware license revenue would have little impact on the DB & MW new license category. 3] PLEASE don't put me in RMS's camp - I'm merely pointing out what the data shows. :-) Savio

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