orcl 10 12 2010 drexalove - credit suisse

DISCLOSURE APPENDIX CONTAINS IMPORTANT DISCLOSURES, ANALYST CERTIFICATIONS, INFORMATION ON TRADE ALERTS, ANALYST MODEL PORTFOLIOS AND THE STATUS OF NON-U.S ANALYSTS. U.S. Disclosure: Credit Suisse does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.

12 October 2010 Americas/United States

Equity Research Software / OVERWEIGHT

Dr. Exalove STRATEGIC ANALYSIS

or: How I Learned to Stop Worrying (about Sun) and Love Exadata Why Oracle Is a Winner In The Consolidating Data center (and Not Just Software). Because of Oracle’s strength in the database layer, we believe that Oracle is uniquely positioned to increase server performance and lower storage hardware costs through innovation in the software stack that cannot be replicated by hardware vendors—i.e., Oracle is dictating “down the stack” but server and storage hardware vendors cannot dictate “up the stack.” Because Oracle offers the “secret sauce” software features of Exadata that link directly back to the Oracle Database only if the customer purchases the complete, integrated Exadata system, server vendors cannot match the price/performance gains and storage vendors cannot equal the data compression rates as could be achieved through Exadata for Oracle Database workloads.

Can Oracle Gain Market Share but Also Shrink Competitors’ Markets? Although the main selling point of Exadata is the system’s extreme performance gains, we believe a unique (and often overlooked) value proposition of Exadata is to lower the total cost of ownership of the server, networking, and storage infrastructure underlying instances of the Oracle Database, which we believe equals $11.6 billion annually. By selling Exadata as an integrated appliance, we believe that Oracle can reduce this capital expenditure by $1.8 billion (or 15%). Therefore, Exadata positions Oracle to gain market share in server hardware versus IBM, HP, and Dell and storage hardware versus EMC, Hitachi, IBM, and NetApp but also shrink the market for storage networking and hardware altogether. Although enterprises could be concerned with increasing their exposure to Oracle (thereby providing the company with more leverage or “lock-in” in negotiations), we believe that CIOs are beginning to acknowledge the large potential cost savings (and higher performance) associated with Exadata.

Massive Market Opportunity. We estimate Exadata’s annual server opportunity to be $4.7 billion from data warehousing, data analytics, and OLTP workloads on the Oracle Database. Additionally, we calculated that the annual revenue potential of Exadata Storage Servers and Exadata Storage Server Software to equal $2.4 billion and $2.7 billion, respectively. In total, Exadata offers Oracle a massive $9.8 billion market opportunity by simply selling these integrated systems into Oracle’s database software installed base. Therefore, given that Sun Microsystems generated less than $1.6 billion in server and storage hardware systems revenue from these workloads in Oracle’s fiscal 2010, Exadata presents a meaningful driver to Oracle’s growth rate versus consensus.

Oracle: Our #1 Pick. Although Wall Street continues to struggle with Oracle’s acquisition of Sun Microsystems, we believe that the market underappreciates how disruptive a force Oracle’s integrated appliance strategy—from Exadata to Exalogic—could be in the server, networking, and storage hardware markets. Combining this dynamic with our positive outlook for the company’s software business, Oracle is our top pick in large-cap software.

Research Analysts

Philip Winslow, CFA 212 325 6157

[email protected]

Dennis Simson, CFA 212 325 0930

[email protected]

Sitikantha Panigrahi 415 249 7932

[email protected]

12 October 2010

Dr. Exalove 2

Table of Contents The Download… 3 Can Oracle Gain Server & Storage Hardware Share but Also Shrink Competitors’ Markets? -- Oh Yeah! 4

What’s Oracle’s Revenue Opportunity? 5 Oracle’s Server Hardware Revenue Opportunity 7 Oracle’s Storage Hardware & Software Revenue Opportunity 8 “Lowering TCO for Customers & Shrinking Competitors’ Markets. That’s What Exadata Does!” 10 Performance, Workload Consolidation, & Scalability Matter As Much As Cost Savings 13

Why Oracle Is a Winner in the Consolidating Data Center (and Not Just Software) 16 Why Server Competitors Can’t Match the Oracle Exadata Database Machine 17 Exadata Smart Scan 20 Exadata Storage Index 21 Why Storage Competitors Can’t Match the Exadata Storage Server 21 Hybrid Columnar Compression 22 Exadata Smart Flash Cache 24 I/O Resource Management (IROM) 25

Valuation 26 Estimates 33 Sources & References 39

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Dr. Exalove 3

The Download… What’s The Call?

■ Although most investors view Oracle as a “winner” in the consolidating data center sector, due to the company’s strength in both database and middleware software and growing market share in enterprise applications, we believe that Oracle continues to build a robust and growing pipeline for the Oracle Exadata Database Machine (which is greater than Wall Street appreciates) and that Oracle’s appliance strategy—from Exadata to Exalogic—positions Oracle to be a disruptive force in the server, networking, and storage hardware markets.

■ As a result of Oracle’s strength in the database layer, we believe that Oracle is uniquely positioned to increase server performance and lower storage hardware costs through innovation in the software stack that cannot be replicated by hardware vendors—i.e., Oracle is dictating “down the stack” but server and hardware vendors cannot dictate “up the stack.”

What’s Consensus Missing? ■ Because Oracle offers the “secret sauce” software features of Exadata

that link directly back to the Oracle Database (e.g., hybrid columnar compression, smart scans, and storage indexing) only if the customer purchases the complete, integrated Exadata system, server hardware vendors cannot match the price/performance gains and storage vendors cannot equal the data compression rates as could be achieved through Exadata for Oracle Database workloads.

What’s The Stock Thesis? ■ In addition to our positive view of Oracle’s long-term corporate strategy

and management’s ability to execute, our Outperform rating on Oracle is driven by Oracle’s leverage to a rebound in enterprise applications spending (and, as a derivative, a recovery in investments for underlying database and middleware technologies) and a replacement cycle for large-scale application deployments augmented by the pending release of Oracle Fusion Applications. Additionally, we believe that Wall Street underappreciates how disruptive a force Oracle’s integrated appliance strategy—from Exadata to Exalogic—could be in the server, networking, and storage hardware markets. As such, Oracle is our top pick in large-cap software.

What’s The Impact To The Model? ■ We estimate the server opportunity of the Oracle Exadata Database

Machine to be $4.7 billion in annual revenue from data warehousing, data analytics, and OLTP database workloads. Additionally, we calculated that the annual revenue potential of Exadata Storage Servers and Exadata Storage Server Software associated with the physical database servers to equal $2.4 billion and $2.7 billion, respectively.

What’s The Next Catalyst/Data Point? ■ We expect SAP to report preliminary Q3 2010 financial results on

October 27, 2010.

What’s The Valuation? ■ Oracle trades at a NTM EV/UFCF multiple of 12.9x and NTM P/E

multiple of 13.9x our estimates, which represents a premium to the S&P 500 of 4.5% (compared with the stock’s 10-year average premium of 14.6%).

■ In comparison, the software industry trades at a NTM P/E multiple of 17.6x and NTM EV/UFCF multiple of 10.8x, and the S&P 500 trades at a NTM P/E multiple of 13.3x.

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Can Oracle Gain Server & Storage Hardware Share but Also Shrink Competitors’ Markets? -- Oh Yeah! Oracle positions Exadata as a competing solution for both specialized, optimized data warehouse systems from Netezza and Teradata and scalable IBM Power systems, as well as integrated, optimized systems aimed at OLTP workloads to compete on the basis of price and performance with IBM’s most scalable servers running DB2 or Oracle database products.1 However, although Exadata offers unmatched performance, we believe the most unique (and most overlooked) value proposition by the Oracle Exadata Database Machine is to lower the total cost of ownership of the server, networking, and storage hardware underlying instances of the Oracle Database. Specifically, because of Oracle’s strength in the database layer, we believe that the company is uniquely positioned to increase server performance and lower storage hardware costs through innovation in the software stack that cannot be replicated by hardware vendors—i.e., Oracle is dictating “down the stack” but server and hardware vendors cannot dictate “up the stack” into the software layer. (See Exhibit 1.)

Exhibit 1: “Enterprise Stack” Product Portfolio by Vendor

Open Standards

Database

Operating System

Servers

Storage PartnerStorageTek/ZFS/Exadata IBM Systems Storage StorageWorks

Management

Applications

Development

Middleware

Partner PartnerSymmetrix/Celerra/CLARiiON/Centera

Networking ProCurve/3Com Partner PartnerPartner Nexus/CatalystPartner Partner

x86/SPARC/Exadata/Exalogic

System z/p/x ProLiant/Integrity Partner PartnerPartner UCS

Open Standards Closed, Proprietary

Oracle VM PowerVM Partner

Solaris/OracleUnbreakable Linux

Oracle 11g/MySQL

AIX/zOS

DB2

Fusion Middleware

Java Development Tools

Applications UnlimitedFusion Applications

Enterprise Manager

WebSphere

Rational

Partner

Tivoli

Partner

Sybase ASE/IQ

NetWeaver

PowerBuilder

Business Suite 7

Partner

Virtualization Partner

HP-UX/NonStop/OpenVMS

Partner

Partner

Partner

Partner

OpenView/Mercury/Opsware

Partner

Partner

Partner

Partner

Partner

Partner

Partner

Hyper-V

Windows

SQL Server

.NET

Visual Studio

Microsoft Dynamics

System Center

VMware

Partner

Greenplum

tc Server

SpringSource

Partner

Ionix

Source: Company data, Credit Suisse.

Because Oracle offers the “secret sauce” software features of Exadata that link directly back to the Oracle Database (e.g., hybrid columnar compression, smart scans, and storage indexing) only if the customer purchases the complete, integrated Exadata system, server hardware vendors cannot match the performance gains in Oracle Database workloads and storage vendors cannot equal the data compression rates that could be achieved through Exadata. Therefore, we believe Exadata positions Oracle to gain market share in server hardware versus IBM, HP, Fujitsu, and Dell and storage hardware versus

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Dr. Exalove 5

EMC, Hitachi, and NetApp but also shrink these companies’ markets, thereby freeing up IT budgets for other investments. As such, Exadata X2 offers Oracle a massive market opportunity by simply cross-selling these integrated server and storage hardware systems into Oracle’s database software installed base—before we even consider possible market share gains versus IBM DB2, Microsoft SQL Server, etc. database installations.

What’s Oracle’s Revenue Opportunity? In our opinion, Oracle can monetize the Exadata Storage Server and the Exadata Database Machine by cross-selling these hardware systems into the installed base of Oracle’s database software for data warehousing, data analytics, and OLTP workloads. We estimate the server opportunity of the Oracle Exadata Database Machine to be $4.7 billion in annual revenue from data warehousing, data analytics, and OLTP database workloads.

Additionally, we estimate that the revenue potential of Exadata Storage Servers and Exadata Storage Server Software associated with the physical database servers sold as part of the Oracle Exadata Database Machine equal $2.4 billion and $2.7 billion, respectively. Therefore, given that Sun Microsystems generated approximately $4.9 billion in hardware systems revenue in Oracle’s fiscal 2010, of which we estimate that approximately $1.1 billion and less than $0.5 billion was derived from server and storage hardware revenue from these workloads, respectively, we believe that the massive $9.8 billion market opportunity offered by the Oracle Exadata Database Machine could represent a meaningful driver to Oracle’s growth rate versus current expectations.

Therefore, we estimate that the annual revenue opportunity of selling Exadata (i.e., both storage and server hardware revenue, as well as storage server software revenue) underneath Oracle software database instances for data warehousing, data analytics, and OLTP workloads equals approximately $9.8 billion. (See Exhibit 2 on the following page.)

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Exhibit 2: Oracle Exadata Database Machine Revenue Opportunity

Sun Microsystems DW, DA, & OLTP Server

Revenue (Existing):~$1.1 billion

ODBM DW, DA, &OLTP Server

Revenue (Incremental):~$3.6 billion

ExadataDatabaseMachine

(ex. Storage)DW, DA, & OLTP

Server Revenue

Opportunity:~$4.7 billion

x =

% of DW, DA, &OLTP Server

Market RunningOracle DB:

43.6%

Data Warehousing (DW),Data Analytics (DA), & OLTP

Server Market:~$10.7 billion

+

Oracle ExadataDatabase Machine

DW, DA, & OLTP RevenueOpportunity:~$9.8 billion

=

+

=

ExadataStorage

Server SoftwareASP:

~$10,000

x

Disks PerExadataStorageServer:

12

x

ExadataStorageServer

SoftwareDW, DA, & OLTP

RevenueOpportunity:~$2.7 billion

Exadata StorageServer

Shipments:~57,000

AverageOracle

DiscountTo List:

60%

x =

ExadataStorage

Server SoftwareASP:

~$10,000

x


12

x





Shipments:~57,000

AverageOracle

DiscountTo List:

60%

x =

ExadataStorage

Server SoftwareASP:

~$10,000

x


12

x





Shipments:~57,000

AverageOracle

DiscountTo List:

60%

x


DW, DA, & OLTP Revenue


AverageOracle

DiscountTo List:

25%

=

ExadataStorage

Server ASP:~$55,000

x


Shipments:~57,000

x

Enterprise DiskStorage Consumption

(Structured Data With Replication) :

~4,200 PB

x



43.6%

%

Raw CapacityPer Exadata

Storage Server:~18.1 TB

=Yield/

Compression:~0.57

x




AverageOracle

DiscountTo List:

25%

=

ExadataStorage

Server ASP:~$55,000

x


Shipments:~57,000

x



~4,200 PB

x



43.6%

%



=Yield/

Compression:~0.57

x




AverageOracle

DiscountTo List:

25%

=

ExadataStorage

Server ASP:~$55,000

x


Shipments:~57,000

x



~4,200 PB

x



43.6%

%



=Yield/

Compression:~0.57

x

Source: IDC, Credit Suisse.

12 October 2010

Dr. Exalove 7

Oracle’s Server Hardware Revenue Opportunity In our opinion, Oracle can monetize the Exadata Storage Server and the Exadata Database Machine by cross-selling these hardware systems with sales of Oracle’s database software for data warehousing, data analytics, and OLTP workloads. Within the market for data warehousing, data analytics, and OLTP servers with database workloads, servers running Oracle’s database account for approximately 44% of hardware spending. (See Exhibit 3.) This relative level of spending is congruous with the fact that Oracle continues to be the leading database platform vendor with 43.4% share of database software revenue in 2009.

In comparison, servers from Sun Microsystems account for approximately 10% of hardware spending on data warehousing, data analytics, and OLTP servers with database workloads. (See Exhibit 4.) Based on this data, servers from Sun Microsystems account for approximately 23% of spending on servers running Oracle’s database for OLTP, data warehousing, and data analytics workloads. (See Exhibit 5.)

Exhibit 3: Revenue from Servers running Oracle vs. Other

Database Vendors for Data Warehousing, Data Analytics,

& OLTP

Exhibit 4: Data Warehousing, Data Analytics, & OLTP

Database Server Revenue by Sun Microsystems vs. Other

OEMs

Revenue from Servers running

Oracle Database for

Data Warehousing, Data Analytics,

& OLTP44%

Revenue from Servers running Other Database

Software Vendors for

Data Warehousing, Data Analytics,

& OLTP56%

Sun Microsystems

10%

Other OEMs90%

Source: IDC, Credit Suisse. Source: IDC, Credit Suisse.

Exhibit 5: Revenue from Data Warehousing, Data Analytics, & OLTP Servers running

Oracle Database by Sun Microsystems vs. Other OEMs

Sun Microsystems23%

Other OEMs77%


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Dr. Exalove 8

Therefore, with an estimated market for server hardware running data warehousing, data analytics, and OLTP database workloads of $10.7 billion in 2010, the revenue opportunity for the Oracle Exadata Database Machine (excluding revenue associated with the accompanying Exadata Storage Servers) reaches approximately $4.7 billion (or roughly 43.6% of addressable market). Given that Sun Microsystems generates approximately $1.1 billion in annual revenue from data warehousing, data analytics, and OLTP database servers, the incremental annual revenue opportunity equals $3.6 billion. (See Exhibit 6.)

Exhibit 6: Oracle Exadata Database Machine Server Revenue Opportunity

Sun Microsystems DW, DA, & OLTP Server

Revenue (Existing):~$1.1 billion

ODBM DW, DA, &OLTP Server

Revenue (Incremental):~$3.6 billion

ExadataDatabaseMachine

(ex. Storage)DW, DA, & OLTP

Server Revenue


x =



43.6%

Data Warehousing (DW),Data Analytics (DA), & OLTP

Server Market:~$10.7 billion


Oracle’s Storage Hardware & Software Revenue Opportunity Our prior tops-down analysis that we published with our report titled “Extreme Makeover, Exadata Edition” on July 14, 2010 suggested a revenue opportunity for Oracle of $16.3 billion for Exadata Storage Servers associated with the physical database servers sold as part of the Oracle Exadata Database Machine. Essentially, the $16.3 billion potential market equaled the total revenue opportunity for Exadata Storage Servers and Exadata Storage Server Software if all customers utilized high performance SAS storage cells. Conversely, in today’s report, we present a bottoms-up analysis of the Exadata Storage Server and Exadata Storage Server Software that we believe better quantifies the “real world” revenue opportunity by incorporating our analysis of the most likely mix of disk storage based on performance (as most enterprises would be more likely to select high capacity versus high performance storage cells) in addition to our previous assumptions regarding discounting from list pricing, data compression rates, capacity ratios, and data storage utilization levels into our calculations.

As the beginning point of our analysis, we estimate that the annual market for storage hardware that underlies data warehousing, data analytics, and OLTP workloads represents approximately 4,200 PB of raw disk capacity, which is derived from IDC’s estimate for traditional structured data as well as the associated replicated data. We assume that the share of this storage capacity associated with instances of the Oracle Database is roughly equal to the revenue share of database servers running the Oracle Database of 43.6%. Based on this percentage share, we arrive at the raw capacity storage share driven by Oracle’s database software of approximately 1,800 PB. We then calculated that each Exadata Storage Server cell has raw capacity of 18.1 TB given that customers are more weighted toward high capacity drives versus high performance drives. Specifically, our 18.1 TB estimate assumes that 65% of Exadata customers will opt for the high capacity SATA storage cell with 24 TB of raw capacity over the high performance SAS storage cell with 7.2 TB of raw capacity.

However, in order to make an apples-to-apples comparison of market storage capacity to Exadata’s potential storage share, we must adjust for different user data yields of raw capacity as well as different compression ratios of this user data. Firstly, we assume that

12 October 2010

Dr. Exalove 9

20% of the raw storage capacity is tied to OLTP workloads, which typically do not compress data, and the remaining 80% is tied to data warehousing and data analytics workloads, which currently utilize an average compression rate of 2.5 times. Exadata’s advanced compression technologies offer savings on disk space for primary, standby, and backup databases and can improve the performance of data warehousing queries. With Hybrid Columnar Compression, Oracle can achieve ten times or more compression. Secondly, we need to adjust for the user data yield from the raw disk storage capacity. Within the Exadata Storage Server, user disk capacity is an estimate of space available for table rows after mirroring all the disk space, allowing space to recover from disk failures, and setting aside space for database structures like logs. Actual user data varies by application, but Oracle states that customers can typically expect 2 TB of uncompressed user data capacity per Exadata storage cell for the 7.2 TB high performance cell and 7 TB of uncompressed user data capacity for the 24 TB high capacity cell. We note that the perceived low yields of these drives are a function of the mirroring that Oracle currently deploys as opposed to the more popular choice of the data redundancy of RAID parity used in external storage arrays, which typically yields user capacity of approximately 80% of raw disk capacity. However, the advanced compression technologies, which allow Oracle to compress the user data significantly more than traditional storage systems, more than make up for the lower yield due to the use of mirroring.

We calculate a compression/yield factor by weighting the data warehousing/data analytics compression differential of typical storage systems and Exadata and then adjust the total raw disk capacity for the yield differential. Specifically, we arrive at a 0.35 total compression factor by using an 80% weighting for the data warehousing/data analytics compression differential of 0.19 (i.e., 2.5 times for typical storage compression divided by 13 times for Exadata compression) and a 20% weighting for no compression differential on OLTP workloads (i.e., compression ratio equal to one). We then apply a 1.6 times yield differential (i.e., customer needs approximately double the 80% of raw disk capacity to yield the same amount of user data) to arrive at a total compression/yield factor of 0.57.

Based on our average raw capacity per storage server and compression/yield assumptions, we calculate that the annual Exadata Storage Server shipment opportunity could reach approximately 57,000 units. Applying the $55,000 list price and assuming a 25% discount to list, we calculate an overall Exadata Storage Server market opportunity of approximately $2.4 billion. (See Exhibit 7.)

Exhibit 7: Exadata Storage Server Revenue Opportunity




AverageOracle

DiscountTo List:

25%

=

ExadataStorage

Server ASP:~$55,000

x


Shipments:~57,000

x



~4,200 PB

x



43.6%

%



=Yield/

Compression:~0.57

x




AverageOracle

DiscountTo List:

25%

=

ExadataStorage

Server ASP:~$55,000

x


Shipments:~57,000

x



~4,200 PB

x



43.6%

%



=Yield/

Compression:~0.57

x




AverageOracle

DiscountTo List:

25%

=

ExadataStorage

Server ASP:~$55,000

x


Shipments:~57,000

x



~4,200 PB

x



43.6%

%



=Yield/

Compression:~0.57

x


Sun Microsystems maintained approximately 4.4% of the mid-range and high-end disk array storage market, which equaled $12.3 billion in 2009. EMC is the market leader of external disk arrays with over one-quarter share of overall sales. IBM is the distant second in the market with roughly half of EMC’s market share. Given that Sun Microsystems generates approximately $540 million in annual revenue from mid-range and high-end disk array storage, which includes sales of storage hardware not tied to the Oracle Database, the incremental annual revenue opportunity from Exadata equals more than $1.8 billion. (See Exhibit 8.)

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Dr. Exalove 10

Exhibit 8: Mid-range and High-end Disk Array Storage Revenue by Vendor, 2009

Dell8.1%

EMC27.7%

Fujitsu2.8%

Hitachi Data Systems11.1%HP

10.3%

IBM13.0%

NetApp9.7%

Oracle (Sun Microsystems)4.4%

Other Vendors13.1%


The Exadata Storage Server Software is priced on a per disk basis at a $10,000 list price. Given that there are twelve disks per Exadata Storage Server, the total software list price per storage server cell is $120,000. Based on our storage server shipment estimate of 57,000 and our checks which indicate close to a 60% discount for the software, we arrive at a total storage software revenue opportunity for Exadata of $2.7 billion. (See Exhibit 9.)

Exhibit 9: Exadata Storage Server Software Revenue Opportunity

=

ExadataStorage

Server SoftwareASP:

~$10,000

x


12

x





Shipments:~57,000

AverageOracle

DiscountTo List:

60%

x =

ExadataStorage

Server SoftwareASP:

~$10,000

x


12

x





Shipments:~57,000

AverageOracle

DiscountTo List:

60%

x =

ExadataStorage

Server SoftwareASP:

~$10,000

x


12

x





Shipments:~57,000

AverageOracle

DiscountTo List:

60%

x


“Lowering TCO For Customers & Shrinking Competitors’ Markets. That’s What Exadata Does!” As previously stated, we believe that the Oracle Exadata Database Machine positions Oracle to gain market share in server hardware versus IBM, HP, and Dell and storage hardware versus EMC, Hitachi, IBM, and NetApp but also shrink spending on networking and storage infrastructure underneath instances of the Oracle Database altogether, thereby freeing up IT budgets. Specifically, by selling the Oracle Exadata Database Machine as an integrated appliance, we believe that Oracle can reduce capital expenditures on the server, networking, and storage infrastructure underlying Oracle Database instances by $1.8 billion (or 15%). (See Exhibit 10.) As such, we estimate that Oracle’s Exadata strategy essentially puts more than $10.0 billion of annual server, networking, and storage hardware and software revenue from existing vendors, such as IBM, HP, Dell, EMC, Hitachi, NetApp, Cisco Systems, Brocade, QLogic, Emulex, etc., at risk.

We estimate that Oracle’s Exadata strategy essentially puts more than $10.0 billion of annual server, networking, and storage hardware and software revenue from exiting vendors, such as IBM, HP, Dell, EMC, Hitachi, NetApp, Cisco Systems, Brocade, QLogic, Emulex, etc., at risk. (See Exhibit 10.)

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Dr. Exalove 11

Exhibit 10: Revenue from Infrastructure Underlying Oracle Database Instances by

Technology – Traditional Database Model vs. Oracle Exadata Database Machine US$ in millions, unless otherwise stated

Traditional

Database Model Oracle Exadata

Database Machine $ Difference % Difference Server $4,670 $4,670 - 0%

Storage $4,770 $2,359 (2,411) -51%

Storage Software $859 $2,745 1,886 220%

Networking $946 $- (946) -100%

HBAs $308 $- (308) -100%

Total $11,553 $9,775 (1,779) -15%

Source: IDC, Gartner, Credit Suisse.

For example, by moving workloads from a typical server and SAN storage environment to an integrated appliance, we believe that customers can reduce total cost of ownership by reducing overall storage spending and eliminating certain SAN-related components (e.g., storage networking and host bus adapter). (See Exhibit 11.) A storage area network (SAN) is a high-performance network that moves data between heterogeneous servers and storage resources and consists of several components for data access and redundancy.2

Exhibit 11: Simple Database SAN Configuration vs. Oracle Exadata Database Machine

Database Server Grid Exadata Storage Grid

InfiniBand Network• Redundant 40Gb/s switches

• Unified server & storage network

• 14 High-per formance low-cost sto rage servers

• 100 TB High Performance disk or336 TB High Capacity disk

• 5.3 TB PCI Flash

• Data mirrored across storage servers

• 8 Dual-processor x64 database servers

or

• 2 E ight-processor x64 database servers

Source: Dell, Oracle, Credit Suisse.

Migrating to Exadata appliances reduces the size of the overall storage hardware market. Given the compression technologies within the Exadata storage layer, we believe customers can more than halve their typical storage spend for the same amount of user data. Specifically, we estimate that storage sales associated with data warehousing, data analytics, and OLTP workloads running Oracle Database software could be reduced from $4.8 billion to $2.3 billion. Importantly, given that Sun Microsystems maintained less than 5% share of the mid-range and high-end external storage market, we believe Oracle is positioned to be a net revenue and market share gainer in the storage hardware market driven by increased sales of Exadata at the expense of other storage vendors. EMC is currently the dominant SAN provider with Symmetrix on the high-end and CLARiiON in the mid-range.

That said, while Oracle can drive above-average compression rates to lower storage hardware costs, the storage software associated with the Exadata Storage Server is by no means cheap, as one license of Exadata Storage Server Software is priced at $10,000 per disk, which equates to a list price of $120,000 per storage cell. Thus, the capital expenditure for storage software directly associated with managing the storage hardware infrastructure would increase from roughly $859 million to $2.7 billion, representing a 220% increase, if the entire installed base of Oracle Database were to migrate to Exadata. This premium pricing is not surprising given that Oracle believes that the intellectual property within the software is what actually distinguishes Exadata from a traditional component product ecosystem. Because Oracle offers the “secret sauce” software features of Exadata that link directly back to the Oracle Database (e.g., hybrid columnar compression, smart scans, and storage indexing) only if the customer purchases the

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complete, integrated Exadata system, server hardware vendors cannot match the performance gains in Oracle Database workloads, and storage vendors cannot equal the data compression rates as could be achieved through Exadata.

With Exadata’s integrated system architecture, networking costs could be eliminated in terms of SAN switches and host bus adapters (HBAs), which are critical components of a traditional SAN infrastructure that connect servers to storage arrays. In our analysis, we assume that the annual capital expenditure on storage networking and HBAs of $946 million and $308 million, respectively, in a traditional database server to SAN model could be eliminated due to the integrated InfiniBand network inside of Exadata. Specifically, Sun Quad Data Rate (QDR) InfiniBand switches and cables are integrated to form a 40 GB/second InfiniBand fabric for both database server to Exadata storage server communication and RAC internode communication.

Exhibit 12: Storage Area Network Modular and Fixed

Switch Revenue by Vendor, 2009

Exhibit 13: Storage Area Network Host Bus Adapter

Revenue by Vendor, 2009

Brocade72%

Cisco Systems23%

QLogic5%

QLogic55%

Emulex36%

LSI4%

Others4%

Brocade1%

Source: Gartner. Source: Gartner.

In addition to these savings in capital spending, because the Oracle Exadata Database Machine is delivered complete system (with all the required software and server, networking, and storage hardware having been pre-built and pre-tested), organizations can quickly implement Exadata appliances without weeks/months of configuration, troubleshooting and tuning, or the added cost of installation/consulting services. Additionally, with Sun Microsystems now under Oracle, there is a single point of contact for all hardware and software from Oracle.

Ultimately, although enterprises could be concerned with increasing their exposure to Oracle (thereby providing the company with more leverage or “lock-in” in negotiations), we believe that CIOs are beginning to acknowledge the potentially massive cost savings associated with Exadata. (See Exhibit 14.) Therefore, we believe that Oracle’s acquisition of Sun Microsystems and the introduction of the Oracle Exadata Database Machine based on hardware systems from Sun Microsystems better positions Oracle to capture a larger percentage of the underlying server and storage hardware market, which could meaningfully impact Oracle’s traditional OEM partners, such as IBM, Hewlett-Packard, and Dell, as well as storage vendors, including EMC, Hitachi, IBM, and NetApp.

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Exhibit 14: Selected Exadata Customers

Source: Oracle.

Performance, Workload Consolidation, & Scalability Matter As Much As Cost Savings The key to the Oracle Exadata Database Machine is the way in which Oracle has designed and integrated various software and hardware technologies to complement each other to deliver additional performance and scalability for Oracle Database workloads. Traditionally, although vendors optimized server and storage technologies within their own spheres, these solutions are designed in a generic nature so as to be applicable to many types of differing workloads, which potentially reduces performance in the software layer versus a vertically-integrated system. For example, a storage area network (SAN) solution aimed at remote-PC document and video data could undercut the optimization of a data warehouse data store.12

In comparison, the strategy underlying the Oracle Exadata Database Machine is to vertically integrate server, networking, and storage hardware (which customers previously purchased as generic components) with the company’s software to deliver an optimized, integrated system running the Oracle Database for both data warehouse and OLTP workloads. For example, Exadata has database intelligence built into the Exadata Storage Servers, which enables SQL processing, to leverage both the storage servers and database servers to improve performance.3 Oracle’s storage software offloads data-intensive query processing from servers running Oracle Database 11g software and does the query processing closer to the data. The result is faster parallel data processing and less data movement through higher bandwidth connections.4

By supporting both data warehouse and OLTP workloads on a highly-scalable, high-performance, integrated system, we believe that IT departments are looking for Exadata systems to take on workloads often combined in scalable Unix servers or data center mainframes supporting mission-critical applications, which are closely watched by senior managers who want timely business results to increase competitiveness. If queries can be returned in a fraction of the current query times (providing a significant performance boost), this should help Oracle gain senior IT management acceptance of their hardware systems.13 The growing need for the analysis of business data makes Exadata X2 an interesting option for organizations particularly with replacing or upgrading existing SMP systems given X2’s ability for combined workloads of data warehousing and OLTP.14 As such, the business value for Exadata from a server performance and data scalability can be summarized as follows:

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■ Performance. The major selling point for Exadata is the significant performance improvements for data warehouses (estimated by Oracle at 10-100 times of standard data warehouses), as well as the significant performance improvements for OLTP applications (estimated by Oracle at 20 times).10

■ Linear Scalability. Performance scales linearly with increase in data volumes. Typically, the effect of the data bandwidth bottleneck is that the larger the database, the slower the performance. The database machine scales to eight full rack database machines by just adding cables, and even more if external InfiniBand switches are used. This effectively scales the storage to hundreds of Exadata Storage Servers, resulting in multi-petabyte databases. The data is mirrored across storage servers so the architecture also provides for fault tolerance and redundancy.10

Because of these dynamics, Oracle positions Exadata X2 as competing with specialized, optimized data warehouse systems from Netezza and Teradata, as well as the scalable IBM Power systems running the Oracle Database. Furthermore, Exadata provides an integrated, optimized system aimed at specific workloads and competes on the basis of price and performance with IBM’s most scalable servers running DB2 or Oracle Database products for large-scale OLTP systems.1 In our opinion, Oracle’s proposition of combining OLTP and data warehouse workloads onto a single platform appeals strongly to C-level managers.15 (See Exhibit 15.)

Exhibit 15: Database Workload Consolidation on the Oracle Exadata Database Machine

ConsolidateDatabase

Workloads

Source: Oracle, Credit Suisse.

For example, database deployments often have bottlenecks limiting the movement of data from disks to servers, including internal storage array bottlenecks, which could limit performance of OLTP applications; limited fibre channel HBAs; and mis-configured SANs. Additionally, pipes between disks and servers can be too slow for data size, which could severely restrict performance for data warehousing.16 The Oracle Exadata Database Machine addresses these bottlenecks by adding more pipes for a more parallel architecture and also makes the pipes wider than conventional storage. With the ability to process data in storage, the database machine ships less data through the pipes. The Flash Cache feature also provides for rapid response. There has been an increasing understanding of the advantage of business analysis for strengthening competitiveness,

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yet the high cost of running data warehouses and their complex administration have thus far been a barrier. We expect Oracle Exadata X2 to play a meaningful role in expanding the market base through its performance and ease of use.14

With the addition of flash memory and the optimizations that Oracle embedded in the database and storage software in Exadata X2, the database machine can handle random OLTP processing as well as the more sequential I/O common to data warehousing. In terms of data warehousing, the Oracle Exadata Database Machine can provide high volume parallel hardware to quickly process large amounts of data and Exadata has the ability to run data intensive processing directly in storage. This provides for a complete set of analytical capabilities including online analytical processing (OLAP), statistics, data mining, etc. The growing need for the analysis of business data makes Exadata X2 an interesting option for organizations particularly with replacing or upgrading existing SMP systems given X2’s ability for combined workloads of data warehousing and OLTP, which, in turn, increases the market opportunity for the systems.14

In terms of OLTP, while Oracle also credits its grid architecture and scale-out storage abilities for its OLTP capabilities, the primary enabler is the flash technology, which helps solve the disk random I/O bottleneck. Oracle Smart Flash Cache technology transparently transfers frequently accessed data to the flash cards in Exadata storage to allow better performance for random I/O. Oracle claims that the Oracle Exadata Database Machine is the first flash-optimized database that provides better I/O response time and reduces the number of disks needed for I/O.

Ultimately, because Oracle offers the “secret sauce” software features of Exadata that link directly back to the Oracle Database only if the customer purchases the complete, integrated Exadata system, server hardware vendors cannot match the price/performance gains in Oracle Database workloads in our opinion.

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Why Oracle Is a Winner in the Consolidating Data Center (and Not Just Software) Because of Oracle’s strength in the database layer, we believe that the company is uniquely positioned to drive increased server performance and lower storage hardware costs through innovation in the software stack that cannot be replicated by hardware vendors—i.e., Oracle is dictating “down the stack,” but server and hardware vendors cannot dictate “up the stack.” Because Oracle offers the “secret sauce” software features of Exadata that link directly back to the Oracle Database (e.g., hybrid columnar compression, smart scans, and storage indexing) only if the customer purchases the complete, integrated Exadata system, server hardware vendors cannot match the performance gains in Oracle Database workloads and storage vendors cannot equal the data compression rates as could be achieved through Exadata. Therefore, we believe that Oracle’s acquisition of Sun Microsystems and the introduction of the Oracle Exadata Database Machine based on hardware systems from Sun Microsystems better positions Oracle to capture a larger percentage of the underlying server and storage hardware market, which could meaningfully impact Oracle’s traditional OEM partners, such as IBM, Hewlett-Packard, and Dell, as well as storage vendors, including EMC, Hitachi, IBM, and NetApp.

Exadata Storage Server Software, which runs within the Exadata Storage Server, represents the “secret sauce” of the Exadata system. Exadata Storage Server Software imparts the database intelligence to the storage and working in concert with the Oracle Database. The Oracle Exadata Storage Server Software is the software component of the Oracle Exadata Storage Server that provides the enhanced Exadata storage services, including Smart Scan offload functionality, I/O Resource Management (IORM), Storage Indexes, Hybrid Columnar Compression, and Exadata Smart Flash Cache management.10 In our opinion, when combined with a pre-configured server and storage hardware platform, these unique software features, which integrated uniquely into Oracle’s database software, enable Oracle to offer an complete, integrated system from the database software to the data storage layer that server hardware vendors cannot match the performance gains in Oracle Database workloads and storage vendors cannot equal the data compression rates as could be achieved through Exadata:

■ Exadata Smart Scans. Exadata has database intelligence built into the storage servers, which allows SQL processing, to leverage both the storage servers and database servers to improve performance.3 Oracle’s storage software offloads data-intensive query processing from Oracle Database 11g servers and does the query processing closer to the data. The result is faster parallel data processing and less data movement through higher bandwidth connections. This architecture also offers linear scalability and increased reliability.4

■ Exadata Storage Indexes. Exadata Storage Index technology helps eliminate unnecessary I/O operations. Many SQL operations will run dramatically faster because large numbers of I/O operations are automatically replaced by a few in-memory lookups.

■ Hybrid Columnar Compression. Traditionally, data has been organized within a database block in a “row” format. However, with Hybrid Columnar Compression, data is transparently reorganized into a column-oriented format to achieve better compression, achieving ten times or more compression.5,6

■ Exadata Smart Flash Cache. In terms of OLTP, while Oracle also credits its grid architecture and scale-out storage abilities for its OLTP capabilities, the primary

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enabler is the Flash technology, which helps solve the disk random I/O bottleneck. Oracle Smart Flash Cache technology transparently transfers frequently accessed data to the flash cards in Exadata storage to allow better performance for random I/O. Oracle claims that the Oracle Exadata Database Machine is the first flash-optimized database that provides better I/O response time and reduces the number of disks needed for I/O.

■ I/O Resource Management (IORM). Outside of just pure data warehousing and OLTP performance benefits, one of the biggest benefits that has resonated among potential Oracle Exadata Database Machine customers is the ability to consolidate databases. Exadata implements I/O Resource Management, which ensures that different users and tasks within a database are allocated the correct amount of I/O resources.

Although the aforementioned features of Exadata Storage Server Software, which are not made available to customer outside of the integrated Exadata system but represents the “secret sauce” that uniquely positions Oracle relative to both server and storage hardware vendors, are the main technology-driven reasons why organizations consider purchasing an Exadata, another primary reason is simplicity. Oracle performs the configuration, balancing the hardware and software for predictable performance. Because the Oracle Exadata Database Machine is delivered complete system (with all the required software and server, networking, and storage hardware having been pre-built and pre-tested), organizations can quickly implement Exadata appliances without weeks/months of configuration, troubleshooting and tuning, or the added cost of installation/consulting services. Additionally, with Sun Microsystems now under Oracle, there is a single point of contact for all hardware and software from Oracle.

Ultimately, while Oracle’s Raw Iron project may have been ahead of its time in the late 1990s, the integration of Sun Microsystems creates a very marketable Oracle “enterprise stack” in the form of Exadata, as businesses investing in high-end enterprise applications have grown to expect more enterprise umbrella deals and become more comfortable with the appliance form factor (i.e., firewall/VPN appliances, routers/switches, email security devices, etc.). In our opinion, Oracle will likely continue to focus its efforts on turning the Sun Microsystems acquisition into a best practice of the prepackaged software/hardware combinations to improve its competitive positioning against IBM, Hewlett-Packard, Dell, EMC, Hitachi, NetApp, among others.

Why Server Competitors Can’t Match the Oracle Exadata Database Machine When the Oracle Exadata Database Machine X2-2 (formerly known as Exadata V2) was unveiled, Oracle stated that the Oracle Exadata Database Machine (OEDM) and Exadata Storage Server could handle both data warehousing and online transaction processing (OLTP). Based on our checks, the Oracle Exadata Database Machine with Exadata Storage Server enhances the value proposition of Oracle’s appliance offerings for customers as compared to the HP Oracle Database Machine and Exadata Version 1 (V1) as these integrated systems could be marketed toward OLTP applications in addition to data warehousing. Additionally, during OpenWorld 2010, Oracle launched Oracle Exadata Data Machine X2-8, a high end version of the Exadata Database machine, which comes with two eight-core database servers. With the recent announcements, the Oracle Exadata Database Machine product family now includes four configurations of Oracle Exadata Database Machine: the new Oracle Exadata X2-8 full-rack and the Oracle Exadata X2-2 quarter-rack, half-rack and full-rack systems.

Oracle has worked with Sun Microsystems in the past in the hardware market, unveiling its Raw Iron project in 1999. Raw Iron was targeted at servers dedicated to running Oracle databases with the goal being to eliminate the need for running Windows 2000, which was expected to have an excessive amount of coding. The project ultimately failed as the company experienced delays in schedules and lack of interest from customers.

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When Oracle unveiled the Exadata Version 2 machine in September 2009, the company stated that the Oracle Exadata Database Machine with Exadata Version 2 at its core was the world’s fastest machine for both data warehousing and online transaction processing (OLTP). Built using industry standard hardware components plus FlashFire technology from Sun, Oracle Database 11g Release 2 and Oracle Exadata Storage Server Software Release 11.2, Oracle Exadata X2 is available in four models: the new Oracle Exadata X2-8 full-rack and the Oracle Exadata X2-2 quarter-rack, half-rack, and full-rack systems.

Exhibit 16: Oracle Exadata Database Machine Rack

Source: Oracle.

The Oracle Exadata Database Machine is a pre-configured bundle of software, servers, and storage, built for online transaction processing (OLTP), data warehousing (DW), and consolidation of mixed workloads. The Oracle Exadata Database Machine is built upon the Oracle Database and Oracle Exadata Storage technology, as well as hardware from Sun Microsystems. Delivered as a package of software, servers, and storage, the Oracle Exadata Database Machine is simpler and faster to implement as compared to the traditional database model.7

The Oracle Exadata Storage Server is optimized for use with the Oracle Database. The machine is a combination of Sun-supplied hardware and the Exadata Storage Server Software. The Exadata Storage Server Software runs on the Exadata Storage Server. The Exadata Storage Server is used to store one or more Oracle Databases and attaches, through an InfiniBand network, to database servers running the Oracle Database. The Exadata Storage Server delivers performance for Oracle Database processing by offloading database processing from the database server to the Exadata Storage Server, providing advanced compression technology and through the use of solid-state Flash technology.7

The system chosen is based on the processing and I/O bandwidth required for the database application. Each Database Machine runs the same software, is upgradeable and includes common hardware components. The main components of the Oracle Exadata Database Machine include:

■ Industry standard Oracle Database 11g database servers. The Oracle Exadata Database Machine X2-2 can consist of up to eight database servers with Oracle Enterprise Linux and Oracle Real Application Cluster. Solaris 11 Express will be an alternative operating system on the database servers, available in the future. The servers include two Intel Xeon six-core X5670 processors (2.93GHz), 96GB of memory, four 300 GB SAS drives, a dual port InfiniBand Host Channel Adapter (HCA), two 10 GB/second Ethernet ports, four 1 GB/second Ethernet ports, and dual-redundant, hot-swappable power supplies. In terms of high availability the servers have hot-swappable disks, redundant power, and redundant fans. (See Exhibit 18.)

■ Exadata Storage Servers, either SAS or SATA. The Exadata Storage Servers are the building blocks for the parallel storage grid. The database machine can hold up to

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fourteen storage servers, which include Intel Xeon L5640 processors (2.26GHz) and 24 GB of memory. The storage servers also are built with Oracle Enterprise Linux and run Oracle Exadata Storage Server Software. (See Exhibit 19.) Exadata Smart Flash Cache is incorporated in each Exadata Storage Server. (See Exhibit 20.)

■ InfiniBand network. Sun Quad Data Rate (QDR) InfiniBand switches and cables are integrated to form a 40 GB/second InfiniBand fabric for database server to Exadata storage server communication and RAC internode communication. (See Exhibit 21.)

■ Ethernet switch. An Ethernet switch is provided for remote administration of the Database Machine. It is used to segregate the management and administrative traffic from user client traffic to enhance security and management of the system.

■ Keyboard, Video, Mouse (KVM). KVM is included for configuration and local administration of the system.

Exhibit 17: Oracle Exadata Database Machine Models

Source: Oracle.

Exhibit 18: Exadata Database Server Exhibit 19: Exadata Storage Server

Source: Oracle. Source: Oracle.

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Exhibit 20: Sun FlashFire Exhibit 21: InfiniBand Network


The Oracle Exadata Database Machine is built on a grid architecture, which provides high performance, redundancy, and incremental scalability. The system is componentized and has a parallel architecture, which allows it to be expanded incrementally by adding storage servers, database servers, and network switches. This architecture also provides fault tolerance as data is mirrored across storage servers and Oracle RAC creates a grid of compute servers. If any of the components fail, the machine does not fail as a whole as there is no single point of failure.

Exhibit 22: Oracle Exadata Database Machine Architecture

Source: Oracle.

Exadata Smart Scan A key feature with the Exadata Storage Server Software is Smart Scan, which performs SQL processing in the storage server and reduces the amount of data to be sent from the storage system to the database server. With traditional storage, all database intelligence resides on the database servers. In contrast, Exadata has database intelligence built into the storage servers, which allows SQL processing, to leverage both the storage servers and database servers to improve performance. Most large-scale data warehouse SQL queries operate only upon a subset of the rows and columns in the tables. While the entire table may need to be scanned to find the relevant data, a relatively small amount of the rows and columns need to be processed to compute the final results. Smart Scans execute the basic filtering on Exadata storage servers and then only the relevant data is

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sent to the database servers for further SQL processing, improving the query performance of large queries by an order of magnitude.3 (See Exhibit 23 and Exhibit 24.)

Exhibit 23: Traditional Scan Processing Exhibit 24: Exadata Smart Scan Processing


Smart Scan technology only returns the relevant columns to the database and the scan processing occurs within the Exadata storage and not in the database, which frees host CPU cycles and eliminates a large amount of unproductive messaging. This is in contrast to traditional scan processing in which all the database intelligence resides in the database hosts, and, as a result, a very large percentage of data returned from storage will be discarded by the database servers, which consumes valuable resources and impacts performance.

Exadata Storage Index Exadata Storage Index technology is another powerful feature of the Exadata Storage Software that helps avoid I/O operations. The Exadata Storage Server Software creates and maintains a Storage Index in Exadata memory. The Storage Index keeps track of minimum and maximum values of columns for tables stored on that cell. When a query is used to filter records, but before any I/O is done, the Exadata software examines the Storage Index to determine if rows with the specified column value exist in the cell by comparing the column value to the minimum and maximum values maintained in the index. If the column value is outside the range, scan I/O for that query is avoided. Many SQL operations will run dramatically faster because large numbers of I/O operations are automatically replaced by a few in-memory lookups. To minimize operational overhead, Storage Indexes are created and maintained transparently and automatically by the Exadata Storage Server Software.8

Why Storage Competitors Can’t Match the Exadata Storage Server The Oracle Exadata Storage Server is a storage product optimized for use with Oracle Database applications. Once again, Exadata is the building block of the Oracle Exadata Database Machine.8 Oracle Exadata Storage Servers combine Oracle’s “smart” storage software and industry-standard Sun hardware to deliver fast database storage performance. As with Exadata V1, to overcome the limitations of conventional storage, Exadata X2’s storage servers use a parallel architecture to increase data bandwidth

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between the database server and storage. Oracle’s storage software offloads data-intensive query processing from Oracle Database 11g servers and does the query processing closer to the data. The result is faster parallel data processing and less data movement through higher bandwidth connections. This architecture also offers linear scalability and increased reliability.4

Exhibit 25: Oracle Exadata Storage Cell

Source: Oracle.

The Exadata Storage Server Software runs within the Exadata Storage Server, imparting the database intelligence to the storage and working in concert with the Oracle Database. The Oracle Exadata Storage Server Software is the software component of the Oracle Exadata Storage Server that provides the enhanced Exadata storage services, including Smart Scan offload functionality, I/O Resource Management (IORM), Hybrid Columnar Compression, Storage Indexes and Exadata Smart Flash Cache management.7 The storage software is licensed per disk, so one would need twelve disk licenses of Exadata Storage Server Software for each unit of the Exadata Storage Server. The storage software licenses can be purchased as a perpetual license or a term license.

While the Oracle Exadata storage which was deployed in a grid scale-out architecture using InfiniBand networking was introduced in Exadata V1, the intelligent storage was enhanced in Exadata X2 to obtain even greater performance. With Exadata V1, Oracle claimed that the intelligent, scale-out storage grid was able to run queries at a rate of 14GB/second off disk, which was 5-10 times faster than larger storage devices. With Exadata X2, Oracle claims that the disk performance is 50% faster than Exadata V1. Oracle claims that three things contribute to this performance: (1) query processing is done inside storage; (2) the storage architecture is built to scale out as opposed to monolithic storage architecture; and (3) the InfiniBand network runs at 40 GB/second.5

Hybrid Columnar Compression Another key piece to the Exadata story is the advanced compression technologies which were introduced with Exadata X2, which are a key part of the performance benefits over Exadata V1. Hybrid Columnar Compression offers savings on disk space for primary, standby, and backup databases and can improve the performance of data warehousing queries.4

With Hybrid Columnar Compression, data is transparently reorganized into a column-oriented format to achieve better compression. (See Exhibit 26.) Oracle’s previous generations of compression usually achieved two to four times compression on user data. With Hybrid Columnar Compression, Oracle typically achieves ten times or more compression. Two modes are available for Hybrid Columnar Compression: a very fast mode called Warehouse Compression (typically 10:1 compression ratio) and a mode that optimizes space called Archive Compression (typically 15:1 compression ratio).5,6

Traditionally, data has been organized within a database block in a “row” format, where all column data for a particular row is stored sequentially within a single database block. Having data from columns with different data types stored close together limits the amount of storage savings achievable with compression technology. An alternative approach is to store data in a “columnar” format, where data is organized and stored by column. Storing

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column data together, with the same data type and similar characteristics, increases the storage savings achieved from compression. However, according to Oracle, storing data in this manner can negatively impact database performance when application queries access more than one or two columns, perform a number of updates, or insert small numbers of rows per transaction.6

Exhibit 26: Exadata Hybrid Columnar Compression

Source: Oracle.

Oracle’s Exadata Hybrid Columnar Compression technology utilizes a combination of both row and columnar methods for storing data (hence the “Hybrid”). This approach achieves the compression benefits of columnar storage, while avoiding the performance shortfalls of a pure columnar format. A compression unit is used to store a set of Exadata Hybrid Columnar-compressed rows. When data is loaded, column values are detached from the set of rows, ordered and grouped together and then compressed. After the column data for a set of rows has been compressed, it is fit into the compression unit.6

Exhibit 27: Data Compression Comparison by Product

Source: Oracle.

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Exadata Smart Flash Cache Oracle Exadata Smart Flash Cache, based on Sun FlashFire technology, was introduced with Exadata V2 and is a major contributor to the performance of Oracle Exadata X2. Oracle Exadata Smart Flash Cache addresses the random disk I/O bottleneck by transparently moving frequently used data to Sun FlashFire cards. A smart memory hierarchy allows Oracle Exadata X2 to process transactions faster. (See Exhibit 28.)

Exhibit 28: Oracle Exadata Database Machine Smart Flash Cache

Source: Oracle.

Exadata Smart Flash Cache is the fundamental technology of the Oracle Exadata Database Machine that provides the significant performance benefits. Exadata Smart Flash Cache is incorporated in each Exadata Storage Server. With 14 Exadata Storage Servers in a 42U Rack, 5.3 TB of Exadata Smart Flash Cache is integrated into the Oracle Exadata Database Machine Full Rack.17 Every Exadata Storage Server comes with 384 GB of Exadata Smart Flash Cache. The Exadata Smart Flash Cache stages frequently accessed data to avoid doing physical I/O and enable the system to efficiently do the random I/O common to OLTP systems, significantly increasing the I/O rate the system can deliver.7

Exhibit 29: Smart Flash Comparison Full Rack Half Rack Quarter Rack

5.3 TB Exadata Smart Flash Cache



Up to 50 GB/second of uncompressed Flash data bandwidth



Up to 500 GB/second of compressed Flash data bandwidth



Up to 50,000 SAS or 25,000 SATA disk IOPS Up to 25,000 SAS or 12,500 SATA Disk IOPS Up to 10,800 SAS or 5,400 SATA Disk IOPS

Up to 1,000,000 Flash IOPS Up to 500,000 Flash IOPS Up to 225,000 Flash IOPS

Source: Oracle, Credit Suisse.

Oracle’s Exadata Smart Flash Cache is not a disk replacement. Software intelligence determines how and when to use the Flash storage and how best to incorporate flash into the database as part of a coordinated data caching strategy. Oracle is using flash PCIe cards in Exadata X2 as opposed to flash disks. Adding flash disks into an existing storage subsystem without having to change anything else does not realize the full potential of the technology as disk controllers and directors were not designed to keep up with the performance that flash disks enable. Using flash PCIe cards avoids a slow disk controller limiting flash performance.9

With the Smart Flash Cache directly in the Oracle Exadata Storage Server, frequently accessed data is kept in very fast flash storage while most of the data is kept in more cost

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effective disk storage. The flash cache knows when to avoid trying to cache data that will never be reused or will not fit in the cache.

I/O Resource Management (IROM) Outside of just pure data warehousing and OLTP performance benefits, one of the biggest benefits that has resonated among potential Oracle Exadata Database Machine customers is the ability to consolidate databases. Exadata implements I/O Resource Management, which ensures that different users and tasks within a database are allocated the correct amount of I/O resources. Thus, resources can be distributed to different user groups or tasks dependent on need and importance, which is useful for mixed workload environments. In a multi-database OLTP environment, the I/O resource management ensures different databases are allocated the correct relative amount of I/O bandwidth and different users and tasks within a database are also allocated the correct relative amount of I/O bandwidth. Thus, when Exadata storage is shared between multiple databases one can prioritize the I/O resources allocated to each database, preventing one database from monopolizing disk resources and bandwidth to ensure user defined SLAs are met.10

One of the biggest culprits of ongoing costs is the large number of special-purpose systems that are maintained across large organizations. By consolidating these disparate systems onto database machines, one can theoretically achieve high performance for all the respective applications while driving a lower cost platform than managing these systems separately. Exadata and Automatic Storage Management (ASM) allow all storage servers to be shared across databases with shared configuration, providing full storage grid performance available to all databases. The I/O resource manager prioritizes I/O to ensure predictable performance so that there is no need for isolated storage islands.10

The traditional data warehouse workload of queries and reporting is well along the path toward a data warehouse with a mix of several distinct workloads, which includes continuous data loading, batch data loading, standard reports, tactical business analytics, ad hoc queries, as well as business intelligence functionality in OLTP applications. These different workload types are creating more issues for vendors than the actual size of the data warehouse. Complicating matters is that the size and duration of relevant data for each prospective customer differs significantly. Gartner predicts that through 2012, mixed workload performance will remain the single most important performance issue in data warehousing.11

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Valuation Oracle currently trades at a next-12-months (NTM) enterprise value to unlevered free cash flow multiple of 12.9, which represents a meaningful discount to the company’s 15-year average multiple of approximately 25.3, and in line with the 5-year average of 13.0. Additionally, Oracle trades one standard deviation below the company’s 15-year NTM EV/UFCF average. (See Exhibit 30 and Exhibit 31.)

Exhibit 30: Oracle NTM EV/UFCF Multiple, 15-Year Trend US$, unless otherwise stated

0.0x

20.0x

40.0x

60.0x

80.0x

100.0x

120.0x

Sep-95 Jul-96 May-97 Mar-98 Jan-99 Nov-99 Sep-00 Jul-01 May-02 Mar-03 Jan-04 Nov-04 Sep-05 Jul-06 May-07 Mar-08 Jan-09 Nov-09$-

$5

$10

$15

$20

$25

$30

$35

$40

$45

$50

Average: EV/FCF NTM 25.3x Standard Deviation: + / - 20.6x EV/FCF NTM Price

Source: FactSet, Credit Suisse.

Exhibit 31: Oracle NTM EV/UFCF Multiple, 5-Year Trend US$, unless otherwise stated

0.0x

2.0x

4.0x

6.0x

8.0x

10.0x

12.0x

14.0x

16.0x

18.0x

Sep-05 Jul-06 May-07 Mar-08 Jan-09 Nov-09$-

$5

$10

$15

$20

$25

$30

Average: EV/FCF NTM 13x Standard Deviation: + / - 1.7x EV/FCF NTM Price


Oracle also currently trades at a NTM price to earnings multiple of 13.9, a significant discount to the stock’s 15-year average multiple of 26.0 and in line with the 5-year average of 13.9. Additionally, Oracle trades near one standard deviation below the company’s 15-year average. (See Exhibit 32 and Exhibit 33.)

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Exhibit 32: Oracle NTM P/E Multiple, 15-Year US$, unless otherwise stated

0.0x

20.0x

40.0x

60.0x

80.0x

100.0x

120.0x

Sep-95 Jul-96 May-97 Mar-98 Jan-99 Nov-99 Sep-00 Jul-01 May-02 Mar-03 Jan-04 Nov-04 Sep-05 Jul-06 May-07 Mar-08 Jan-09 Nov-09$-

$5

$10

$15

$20

$25

$30

$35

$40

$45

$50

Average: P/E NTM 26x Standard Deviation: + / - 17.4x P/E NTM Price


Exhibit 33: Oracle NTM P/E Multiple, 5-Year Trend US$, unless otherwise stated

0.0x

2.0x

4.0x

6.0x

8.0x

10.0x

12.0x

14.0x

16.0x

18.0x

20.0x

Sep-05 Jul-06 May-07 Mar-08 Jan-09 Nov-09$-

$5

$10

$15

$20

$25

$30

Average: P/E NTM 13.9x Standard Deviation: + / - 1.7x P/E NTM Price


In addition, Oracle currently trades at a premium of 4.5% to the S&P 500 on a NTM price to earnings multiple basis, a relative discount one standard deviation below Oracle’s 15-year average premium. Specifically, Oracle’s relative premium/discount to the S&P 500 equalled 25.9% premium and 0.4% discount on average over the past 15 and five years, respectively. (See Exhibit 34 and Exhibit 35.)

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Exhibit 34: Oracle NTM P/E Multiple Discount/Premium to S&P 500, 15-Year Trend

-50.0%

0.0%

50.0%

100.0%

150.0%

200.0%

250.0%

300.0%

350.0%

400.0%

Sep-95 Jul-96 May-97 Mar-98 Jan-99 Nov-99 Sep-00 Jul-01 May-02 Mar-03 Jan-04 Nov-04 Sep-05 Jul-06 May-07 Mar-08 Jan-09 Nov-09

Oracle Corp. P/E NTM Discount/Premium to S&P 500 Average: Premium/Discount : 25.9% Standard Deviation: + / - 33.0%


Exhibit 35: Oracle NTM P/E Multiple Discount/Premium to S&P 500, 5-Year Trend

-30.0%

-20.0%

-10.0%

0.0%

10.0%

20.0%

30.0%

Sep-05 Jul-06 May-07 Mar-08 Jan-09 Nov-09

Oracle Corp. P/E NTM Discount/Premium to S&P 500 Average: Premium/Discount : -0.4% Standard Deviation: + / - 11.1%


Oracle’s NTM earnings growth rate is forecast to increase 12.9 percentage points less than the S&P 500, compared with the five-year average of 11.2 percentage points more. Additionally, Oracle has grown earnings per share over the past 15 years at an average annual rate of 9.0 percentage points greater than the S&P 500. (See Exhibit 36 and Exhibit 37.)

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Exhibit 36: Oracle NTM EPS Year-over-Year Growth Discount/Premium to S&P 500,

15-Year Trend

-60.0%

-40.0%

-20.0%

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

120.0%


Oracle Corp. NTM EPS Year-over-year Growth (%) Discount/Premium to S&P 500

Average Premium / Discount: 9.0%

Standard Deviation: + / - 16.0%

`


Exhibit 37: Oracle NTM EPS Year-over-Year Growth Discount/Premium to S&P 500,

5-Year Trend

-20.0%

-15.0%-10.0%

-5.0%0.0%

5.0%10.0%

15.0%20.0%

25.0%30.0%

35.0%


Oracle Corp. NTM EPS Year-over-year Growth (%) Discount/Premium to S&P 500



`


In addition, Oracle currently trades at a discount of 21.4% to the software industry on a NTM price to earnings multiple basis, a relative discount within one standard deviation of Oracle’s 5-year and 15-year average discounts. Specifically, Oracle’s relative discount to the software industry equalled 20.3% and 24.7% on average over the past 15 and five years, respectively. One standard deviation below these averages equates to discounts of 34.6% and 34.8%, respectively. (See Exhibit 38 and Exhibit 39.)

12 October 2010

Dr. Exalove 30

Exhibit 38: Oracle NTM P/E Multiple Discount/Premium to Software, 15-Year Trend

-80.0%

-60.0%

-40.0%

-20.0%

0.0%

20.0%

40.0%

60.0%

80.0%


Oracle Corp. P/E NTM Discount/Premium to Sector average Average: Premium/Discount : -20.3% Standard Deviation: + / - 14.3%


Exhibit 39: Oracle NTM P/E Multiple Discount/Premium to Software, 5-Year Trend

-45.0%

-40.0%

-35.0%

-30.0%

-25.0%

-20.0%

-15.0%

-10.0%

-5.0%

0.0%


Oracle Corp. P/E NTM Discount/Premium to Sector average Average: Premium/Discount : -24.7% Standard Deviation: + / - 10.2%


While Oracle stock’s trading at a 21.4% earnings discount to the software industry, Oracle’s NTM earnings growth rate is forecast to increase 4.4 percentage points more than the software industry, compared with the five-year average of 10.2 percentage points. Additionally, Oracle has grown earnings per share over the past 15 years at an average annual rate of 5.1 percentage points greater than the software industry (See Exhibit 40 and Exhibit 41.)

12 October 2010

Dr. Exalove 31

Exhibit 40: Oracle NTM EPS Year-over-Year Growth Discount/Premium to Software,

15-Year Trend

-60.0%

-40.0%

-20.0%

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%


Oracle Corp. NTM EPS Year-over-year Growth (%) Discount/Premium to Sector average



`


Exhibit 41: Oracle NTM EPS Year-over-Year Growth Discount/Premium to Software,

5-Year Trend

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%


Oracle Corp. NTM EPS Year-over-year Growth (%) Discount/Premium to Sector average



`


In addition, Oracle currently trades at a discount of 16.0% to the Credit Suisse Technology Index on a NTM price to earnings multiple basis. Oracle’s relative discount to the Credit Suisse Technology Index equalled 29.2% on average over the past five years. One standard deviation above this average equates to a discount of 21.7%. (See Exhibit 42.)

12 October 2010

Dr. Exalove 32

Exhibit 42: Oracle NTM P/E Multiple Discount/Premium to Credit Suisse Technology

Index (CSTI), 5-Year Trend

-50.0%

-45.0%

-40.0%

-35.0%

-30.0%

-25.0%

-20.0%

-15.0%

-10.0%

-5.0%

0.0%

Jan-05 Jun-05 Nov-05 Apr-06 Sep-06 Feb-07 Jul-07 Dec-07 May-08 Oct-08 Mar-09 Aug-09 Jan-10 Jun-10

Average Premium/Discount : -29.2% Standard Deviation :+/- 7.5% Oracle Corp. NTM P/E Premium/Discount to CSTI


Our price target of $32.00 represents a NTM P/E multiple of 15.9 and NTM EV/UFCF multiple of 14.9. (See Exhibit 43.)

Exhibit 43: Oracle: Valuation Matrix US$ in millions, unless otherwise stated

Revenue $27,035.0 $34,578.3 $36,957.9 $35,134.1Support Rev. $13,177.0 $14,415.0 $15,763.9 $14,796.2EPS (Pro Forma) $1.67 $1.99 $2.19 $2.01CFO $8,478.0 $9,821.5 $12,337.0 $10,370.0FCF $8,248.0 $9,426.5 $11,955.0 $10,009.9UFCF $8,844.8 $9,856.6 $12,324.7 $10,447.9

EV/R 5.0x 3.9x 3.7x 3.8xEV/Support Rev. 10.2x 9.4x 8.6x 9.1xP/E (Pro Forma) 16.6x 14.0x 12.7x 13.9xEV/CFO 15.9x 13.7x 10.9x 13.0xEV/FCF 16.4x 14.3x 11.3x 13.5xEV/UFCF 15.3x 13.7x 11.0x 12.9x

EV/R 5.8x 4.5x 4.2x 4.4xEV/Support Rev. 11.8x 10.8x 9.9x 10.5xP/E (Pro Forma) 19.1x 16.1x 14.6x 15.9xEV/CFO 18.4x 15.9x 12.6x 15.0xEV/FCF 18.9x 16.6x 13.1x 15.6xEV/UFCF 17.6x 15.8x 12.7x 14.9x

2011E 2012E NTM

Est

imat

esC

urr

ent

Tar

get

2010

Source: Company data, Credit Suisse estimates.

12 October 2010

Dr. Exalove 33

Estimates Exhibit 44: Oracle: Credit Suisse vs. Consensus – August 2010 and November 2010 US$ in millions, unless otherwise stated Quarterly Variance Analysis -- Credit Suisse vs. Consensus

CS Consensus CS ConsensusNov-10E Nov-10E $ ∆ % ∆ Feb-11E Feb-11E $ ∆ % ∆

Revenue 8,443$ 8,331$ 112$ 1.3% 8,211$ 8,398$ (188)$ -2.2%Cost of goods sold 2,212 2,105 107 5.1% 2,019 2,089 (70) -3.3%Gross profit 6,232 6,226 5 0.1% 6,192 6,310 (118) -1.9%

Gross margin 73.8% 74.7% 75.4% 75.1%

Operating expenses 2,788 2,825 (36) -1.3% 2,792 2,871 (79) -2.7%Operating income 3,443 3,401 42 1.2% 3,400 3,439 (39) -1.1%

Operating margin 40.8% 40.8% 41.4% 40.9%

Interest and other, net (172) (163) (9) 5.4% (160) (150) (10) 6.7%Pro forma pretax income 3,271 3,238 33 1.0% 3,240 3,289 (49) -1.5%

Effective tax rate 28.5% 28.6% 28.5% 28.4%Net income 2,339 2,313 26 1.1% 2,317 2,354 (37) -1.6%

EPS $0.46 $0.46 $0.00 0.9% $0.46 $0.46 ($0.01) -1.7%FD shares outstanding 5,086 5,072 14 0.3% 5,089 5,084 5 0.1%

OCFPS $0.35 $0.20 $0.15 75.6% $0.55 $0.51 $0.04 6.9%Capital spending 91 100 (9) -9.1% 86 99 (13) -13.2% Source: Company data, FactSet, Credit Suisse estimates.

Exhibit 45: Oracle: Credit Suisse vs. Consensus – Fiscal 2011 and Fiscal 2012 US$ in millions, unless otherwise stated Annual Variance Analysis -- Credit Suisse vs. Consensus

CS Consensus CS Consensus2011E 2011E $ ∆ % ∆ 2012E 2012E $ ∆ % ∆

Revenue 34,578$ 34,562$ 16$ 0.0% 36,958$ 36,937$ 21$ 0.1%Cost of goods sold 8,573 8,549 24 0.3% 8,844 9,060 (216) -2.4%Gross profit 26,006 26,013 (7) 0.0% 28,114 27,876 237 0.9%

Gross margin 75.2% 75.3% 76.1% 75.5%

Operating expenses 11,419 11,546 (128) -1.1% 11,992 11,921 72 0.6%Operating income 14,587 14,467 120 0.8% 16,121 15,956 165 1.0%

Operating margin 42.2% 41.9% 43.6% 43.2%

Interest and other, net (595) (585) (11) 1.8% (517) (612) 95 -15.6%Pro forma pretax income 13,992 13,882 110 0.8% 15,604 15,344 261 1.7%

Effective tax rate 27.7% 27.6% 28.5% 28.2%Net income 10,113 10,050 63 0.6% 11,157 11,023 134 1.2%

EPS $1.99 $1.98 $0.01 0.4% $2.19 $2.19 ($0.00) -0.1%FD shares outstanding 5,087 5,078 9 0.2% 5,099 5,031 68 1.4%

OCFPS $1.93 $2.29 ($0.36) -15.7% $2.42 $2.59 ($0.17) -6.7%Capital spending 395 429 (34) -7.9% 382 466 (84) -17.9% Source: Company data, FactSet, Credit Suisse estimates.

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Dr. Exalove 34

Exhibit 46: Oracle: Historical & Projected Quarterly Income Statement US$ in millions, unless otherwise stated

Fiscal 2010 by Quarter Fiscal 2011 by QuarterAug-09 Nov-09 Feb-10 May-10 Aug-10 Nov-10E Feb-11E May-11E 2009 2010 2011E 2012E

Total revenue 5,063$ 5,872$ 6,469$ 9,631$ 7,588$ 8,443$ 8,211$ 10,336$ 23,494$ 27,035$ 34,578$ 36,958$

Software licenses 1,028 1,653 1,718 3,135 1,286 1,905 1,962 3,528 7,123 7,534 8,681 9,577 % of revenue 20.3% 28.2% 26.6% 32.6% 16.9% 22.6% 23.9% 34.1% 30.3% 27.9% 25.1% 25.9%

Software updates & support 3,126 3,261 3,323 3,467 3,475 3,580 3,644 3,716 11,996 13,177 14,415 15,764 % of revenue 61.7% 55.5% 51.4% 36.0% 45.8% 42.4% 44.4% 36.0% 51.1% 48.7% 41.7% 42.7%

Hardware systems products - - 273 1,233 1,079 1,190 857 1,240 - 1,506 4,366 4,152 % of revenue 0.0% 0.0% 4.2% 12.8% 14.2% 14.1% 10.4% 12.0% 0.0% 5.6% 12.6% 11.2%

Hardware systems support - - 224 688 680 675 664 669 - 912 2,689 2,652 % of revenue 0.0% 0.0% 3.5% 7.1% 9.0% 8.0% 8.1% 6.5% 0.0% 3.4% 7.8% 7.2%

Services 909 958 931 1,108 1,068 1,093 1,083 1,183 4,375 3,906 4,427 4,813 % of revenue 18.0% 16.3% 14.4% 11.5% 14.1% 12.9% 13.2% 11.4% 18.6% 14.4% 12.8% 13.0%

Cost of software updates & support 222 260 277 287 303 282 300 304 1,075 1,046 1,189 1,285 % of updates & support revenue 7.1% 8.0% 8.3% 8.3% 8.7% 7.9% 8.2% 8.2% 9.0% 7.9% 8.2% 8.1%

Cost of hardware systems products - - 180 668 556 644 477 669 - 848 2,347 2,251 % of hardware systems products revenue NM NM 65.9% 54.2% 51.5% 54.1% 55.7% 54.0% NM 56.3% 53.8% 54.2%

Cost of hardware systems support - - 115 305 300 296 290 290 - 420 1,176 1,134 % of hardware systems support revenue NM NM 51.3% 44.3% 44.1% 43.9% 43.6% 43.4% NM 46.1% 43.7% 42.7%

Cost of services 779 829 812 965 892 989 952 1,028 3,694 3,385 3,860 4,174 % of services revenue 85.7% 86.5% 87.2% 87.1% 83.5% 90.5% 87.9% 86.9% 84.4% 86.7% 87.2% 86.7%

Cost of revenue 1,001 1,089 1,384 2,225 2,051 2,212 2,019 2,291 4,769 5,699 8,573 8,844 Gross profit 4,062 4,783 5,085 7,406 5,537 6,232 6,192 8,045 18,725 21,336 26,006 28,114

Gross margin 80.2% 81.5% 78.6% 76.9% 73.0% 73.8% 75.4% 77.8% 79.7% 78.9% 75.2% 76.1%

Operating expenses:Sales and marketing 944 1,113 1,220 1,721 1,310 1,468 1,454 1,869 4,571 4,998 6,101 6,578 % of revenue 18.6% 19.0% 18.9% 17.9% 17.3% 17.4% 17.7% 18.1% 19.5% 18.5% 17.6% 17.8%

Research and development 628 664 777 1,013 1,044 1,066 1,077 1,098 2,612 3,082 4,285 4,353 % of revenue 12.4% 11.3% 12.0% 10.5% 13.8% 12.6% 13.1% 10.6% 11.1% 11.4% 12.4% 11.8%

General and administrative 172 150 202 257 236 255 261 281 691 781 1,033 1,061 % of revenue 3.4% 2.6% 3.1% 2.7% 3.1% 3.0% 3.2% 2.7% 2.9% 2.9% 3.0% 2.9%

2,745.0 3,016.0 5,000.1 4,810.9 5,539.6 # 12,643 14,560 19,992 20,837 Total operating expenses 1,744 1,927 2,199 2,991 2,590 2,788 2,792 3,248 7,874 8,861 11,419 11,992 Operating income 2,318 2,856 2,886 4,415 2,947 3,443 3,400 4,797 10,851 12,475 14,587 16,121

Operating margin 45.8% 48.6% 44.6% 45.8% 38.8% 40.8% 41.4% 46.4% 46.2% 46.1% 42.2% 43.6%

Stock options expense 84 104 112 121 129 150 142 130 342 421 551 588 % of revenue 1.7% 1.8% 1.7% 1.3% 1.7% 1.8% 1.7% 1.3% 1.5% 1.6% 1.6% 1.6%

Interest and other, net (178) (155) (261) (225) (122) (172) (160) (141) (486) (819) (595) (517) Pretax income 2,140 2,701 2,625 4,190 2,825 3,271 3,240 4,656 10,365 11,656 13,992 15,604

Pro forma taxes 600 740 680 1,142 696 932 923 1,327 2,972 3,162 3,878 4,447 Effective tax rate 28.0% 27.4% 25.9% 27.3% 24.6% 28.5% 28.5% 28.5% 28.7% 27.1% 27.7% 28.5%

Pro forma net income 1,540$ 1,961$ 1,945$ 3,048$ 2,129$ 2,339$ 2,317$ 3,329$ 7,393$ 8,494$ 10,113$ 11,157$ Pro forma net margin 30.4% 33.4% 30.1% 31.6% 28.1% 27.7% 28.2% 32.2% 31.5% 31.4% 29.2% 30.2%

Pro forma EPS (fully-diluted) $0.30 $0.39 $0.38 $0.60 $0.42 $0.46 $0.46 $0.65 $1.44 $1.67 $1.99 $2.19FD shares outstanding 5,063 5,064 5,076 5,090 5,083 5,086 5,089 5,092 5,130 5,073 5,087 5,099

Fiscal Year Ends May


12 October 2010

Dr. Exalove 35

Exhibit 47: Oracle: Historical & Projected Quarterly Growth Analysis Fiscal 2010 by Quarter Fiscal 2011 by Quarter

Aug-09 Nov-09 Feb-10 May-10 Aug-10 Nov-10E Feb-11E May-11E 2009 2010 2011E 2012ESequential growthRevenue -26.4% 16.0% 10.2% 48.9% -21.2% 11.3% -2.8% 25.9% 3.9% 15.1% 27.9% 6.9%

Software licenses -62.5% 60.8% 3.9% 82.5% -59.0% 48.2% 3.0% 79.8% -5.2% 5.8% 15.2% 10.3%Software updates & support 1.8% 4.3% 1.9% 4.3% 0.2% 3.0% 1.8% 2.0% 14.2% 9.8% 9.4% 9.4%Hardware systems products NM NM NM 351.6% -12.5% 10.3% -28.0% 44.6% NM NM 189.9% -4.9%Hardware systems support NM NM NM 207.1% -1.2% -0.7% -1.6% 0.8% NM NM 194.8% -1.4%Services -14.6% 5.4% -2.8% 19.0% -3.6% 2.3% -0.9% 9.2% -4.6% -10.7% 13.3% 8.7%

Cost of software updates & support -23.2% 17.1% 6.5% 3.6% 5.6% -7.0% 6.5% 1.3% 8.9% -2.7% 13.7% 8.1%Cost of services -11.8% 6.4% -2.1% 18.8% -7.6% 10.9% -3.8% 8.0% -7.0% -8.4% 14.0% 8.1%

Gross profit -28.8% 17.7% 6.3% 45.6% -25.2% 12.5% -0.6% 29.9% 6.1% 13.9% 21.9% 8.1%

Sales and marketing -27.9% 17.9% 9.6% 41.1% -23.9% 12.1% -0.9% 28.5% -1.2% 9.3% 22.1% 7.8%Research and development -9.9% 5.7% 17.0% 30.4% 3.1% 2.1% 1.1% 1.9% -0.6% 18.0% 39.0% 1.6%General and administrative -9.0% -12.8% 34.7% 27.2% -8.2% 8.1% 2.2% 8.0% -6.4% 13.0% 32.3% 2.7%

Total operating expenses -20.6% 10.5% 14.1% 36.0% -13.4% 7.7% 0.1% 16.3% -1.5% 12.5% 28.9% 5.0%

Operating income -34.0% 23.2% 1.1% 53.0% -33.3% 16.8% -1.3% 41.1% 12.3% 15.0% 16.9% 10.5%

Pro forma pretax income -36.7% 26.2% -2.8% 59.6% -32.6% 15.8% -1.0% 43.7% 7.4% 12.5% 20.0% 11.5%

Pro forma net income -33.7% 27.3% -0.8% 56.7% -30.2% 9.9% -1.0% 43.7% 8.8% 14.9% 19.1% 10.3%

Pro forma EPS (fully-diluted) -34.0% 27.3% -1.1% 56.3% -30.1% 9.8% -1.0% 43.6% 10.8% 16.2% 18.7% 10.1%

Year-over-year growthRevenue -6.6% 3.3% 17.5% 40.0% 49.9% 43.8% 26.9% 7.3%

Software licenses -16.9% 1.7% 13.3% 14.2% 25.1% 15.3% 14.2% 12.5%Software updates & support 3.3% 11.3% 12.0% 12.9% 11.2% 9.8% 9.6% 7.2%Hardware systems products NM NM NM NM NM NM 214.0% 0.5%Hardware systems support NM NM NM NM NM NM 196.6% -2.7%Services -21.6% -15.3% -8.7% 4.0% 17.5% 14.1% 16.3% 6.8%

Cost of updates & support -20.4% 2.4% 9.5% -0.7% 36.5% 8.4% 8.3% 5.9%Cost of services -23.9% -11.4% -4.7% 9.3% 14.5% 19.3% 17.2% 6.5%

Gross profit -1.4% 6.4% 15.6% 29.7% 36.3% 30.3% 21.8% 8.6%

Sales and marketing -13.6% -1.5% 17.5% 31.4% 38.8% 31.9% 19.2% 8.6%Research and development -6.4% 9.6% 21.8% 45.3% 66.2% 60.5% 38.6% 8.4%General and administrative -5.5% -1.3% 20.2% 36.0% 37.2% 70.0% 29.0% 9.5%

Total operating expenses -10.4% 2.1% 19.3% 36.2% 48.5% 44.7% 27.0% 8.6%

Operating income 6.6% 9.5% 13.0% 25.7% 27.1% 20.6% 17.8% 8.6%

Pro forma pretax income 2.1% 9.8% 8.2% 23.9% 32.0% 21.1% 23.4% 11.1%

Pro forma net income -0.3% 12.3% 9.3% 31.2% 38.2% 19.3% 19.1% 9.2%

Pro forma EPS (fully-diluted) 3.1% 15.0% 8.8% 30.0% 37.7% 18.8% 18.8% 9.2%



12 October 2010

Dr. Exalove 36

Exhibit 48: Oracle: Historical & Projected Balance Sheet US$ in millions, unless otherwise stated


Current assetsCash and cash equivalents 20,565 20,784 17,489 18,469 23,637 24,853 24,830 25,697 12,624 18,469 25,697 35,638

Trade receivables, net of allowance 2,584 3,086 3,898 5,585 3,721 5,044 5,067 7,043 4,430 5,585 7,043 7,519 Inventories 315 259 235 235 235 235 - 259 235 235 Other receivables - - - - - - - - - - - - Prepaid and deferred tax assets 710 703 1,299 1,159 1,142 1,121 1,145 977 661 1,159 977 1,030 Other current assets 586 662 978 1,532 1,529 952 1,241 1,644 866 1,532 1,644 1,755

Total current assets 24,445 25,235 23,979 27,004 30,264 32,204 32,518 35,596 18,581 27,004 35,596 46,177 Long-term investments

Long-term cash investments - - - - - - - - - - - - Property and equipment, net of depreciation 1,924 1,956 2,869 2,763 2,835 2,835 2,815 2,815 1,922 2,763 2,815 2,802 Intangible assets, net 6,886 6,584 9,868 9,321 9,124 8,446 7,816 7,141 7,269 9,321 7,141 4,911 Goodwill 18,867 19,098 20,415 20,425 20,901 20,901 20,901 20,901 18,842 20,425 20,901 20,901 Deferred tax assets - - - - - - - - - - - - Other assets 876 960 2,255 2,065 2,131 1,380 1,342 2,216 802 2,065 2,216 2,366

Total assets 52,998 53,833 59,386 61,578 65,255 65,767 65,392 68,669 47,416 61,578 68,669 77,157

Current liabilitiesCommercial paper and other ST borrowings 1,001 1,001 4,220 3,145 2,260 2,260 2,260 2,260 1,001 3,145 2,260 2,260 Accounts payable 260 255 616 775 706 545 504 553 271 775 553 591 Income taxes payable - - - - - - - - - - - - Accrued compensation 1,033 1,129 1,452 1,895 1,438 1,634 1,844 2,058 1,409 1,895 2,058 2,174 Accrued restructuring - - - - - 650 666 683 - - 683 754 Deferred revenue 5,283 4,395 5,389 5,900 6,903 5,875 6,184 6,817 4,592 5,900 6,817 7,561 Other current liabilities 1,583 1,754 2,574 2,976 2,493 2,493 2,493 2,493 1,876 2,976 2,493 2,493

Total current liabilities 9,160 8,534 14,251 14,691 13,800 13,456 13,951 14,864 9,149 14,691 14,864 15,833

Long-term liabilitiesNotes payable, LT 13,723 13,751 11,498 11,510 14,778 14,778 12,532 12,532 9,237 11,510 12,532 12,532 Income taxes payable 2,485 2,592 3,275 2,695 2,679 2,725 2,768 2,808 2,423 2,695 2,808 2,987 Deferred tax liabilities 465 351 339 424 349 349 349 349 480 424 349 349 Accrued restructuring - - - - - - - - - - - - Deferred revenue 287 239 293 321 375 319 336 371 250 321 371 411 Minority interests - - - - - - (14) (18) - - (18) (39) Other 391 451 879 738 762 762 762 762 432 738 762 762

Total liabilities 26,511 25,918 30,535 30,379 32,743 32,389 30,684 31,667 21,971 30,379 31,667 32,834

Total shareholders' equity 26,487 27,915 28,851 31,199 32,512 33,378 34,708 37,002 25,445 31,199 37,002 44,323 Total liabilities and shareholders' equity 52,998 53,833 59,386 61,578 65,255 65,767 65,392 68,669 47,416 61,578 68,669 77,157



12 October 2010

Dr. Exalove 37

Exhibit 49: Oracle: Historical & Projected Revenue Breakdown US$ in millions, unless otherwise stated


Total revenue 5,063$ 5,872$ 6,469$ 9,631$ 7,588$ 8,443$ 8,211$ 10,336$ 23,494$ 27,035$ 34,578$ 36,958$ % growth in revenue y-o-y -6.6% 3.3% 17.5% 40.0% 49.9% 43.8% 26.9% 7.3% 3.9% 15.1% 27.9% 6.9%% growth in revenue seq -26.4% 16.0% 10.2% 48.9% -21.2% 11.3% -2.8% 25.9%

CONSTANT CURRENCYTotal revenue -1% 0% 12% 38% 51% 45% 27% 6% 10% 14% 28% 6%

LICENSE UPDATES & SUPPORTLicense / Updates & Support 4,154 4,914 5,041 6,602 4,761 5,485 5,606 7,244 19,119 20,711 23,096 25,341 % of revenue 82.0% 83.7% 77.9% 68.5% 62.7% 65.0% 68.3% 70.1% 81.4% 76.6% 66.8% 68.6%% growth in revenue y-o-y -2.6% 7.9% 12.4% 13.5% 14.6% 11.6% 11.2% 9.7% 6.1% 8.3% 11.5% 9.7%% growth in revenue seq -28.6% 18.3% 2.6% 31.0% -27.9% 15.2% 2.2% 29.2%

License 1,028 1,653 1,718 3,135 1,286 1,905 1,962 3,528 7,123 7,534 8,681 9,577 % of revenue 20.3% 28.2% 26.6% 32.6% 16.9% 22.6% 23.9% 34.1% 30.3% 27.9% 25.1% 25.9%% of license / updates & support 24.7% 33.6% 34.1% 47.5% 27.0% 34.7% 35.0% 48.7% 37.3% 36.4% 37.6% 37.8%% growth in revenue y-o-y -16.9% 1.7% 13.3% 14.2% 25.1% 15.3% 14.2% 12.5% -5.2% 5.8% 15.2% 10.3%% growth in revenue seq -62.5% 60.8% 3.9% 82.5% -59.0% 48.2% 3.0% 79.8%

Updates & Support 3,126 3,261 3,323 3,467 3,475 3,580 3,644 3,716 11,996 13,177 14,415 15,764 % of revenue 61.7% 55.5% 51.4% 36.0% 45.8% 42.4% 44.4% 36.0% 51.1% 48.7% 41.7% 42.7%% of license / updates & support 75.3% 66.4% 65.9% 52.5% 73.0% 65.3% 65.0% 51.3% 62.7% 63.6% 62.4% 62.2%% growth in revenue y-o-y 3.3% 11.3% 12.0% 12.9% 11.2% 9.8% 9.6% 7.2% 14.2% 9.8% 9.4% 9.4%% growth in revenue seq 1.8% 4.3% 1.9% 4.3% 0.2% 3.0% 1.8% 2.0%

CONSTANT CURRENCYLicense / Updates & Support 4% 4% 8% 13% 16% 13% 12% 9% 12% 8% 12% 9%License -14% -5% 8% 15% 25% 16% 15% 11% 1% 4% 15% 10%Updates & Support 11% 9% 8% 11% 12% 11% 10% 6% 19% 10% 10% 9%

HARDWARE SYSTEMSHardware Systems Products / Support 497 1,921 1,759 1,865 1,522 1,909 - 2,418 7,055 6,804 % of revenue 7.7% 19.9% 23.2% 22.1% 18.5% 18.5% 0.0% 8.9% 20.4% 18.4%% growth in revenue y-o-y NA NA NA NA 206.2% -0.6% NA NA 191.8% -3.6%% growth in revenue seq NA 286.5% -8.4% 6.0% -18.4% 25.5%

Hardware systems products 273 1,233 1,079 1,190 857 1,240 # - 1,506 4,366 4,152 % of revenue 4.2% 12.8% 14.2% 14.1% 10.4% 12.0% 0.0% 5.6% 12.6% 11.2%% of hardware systems 54.9% 64.2% 61.3% 63.8% 56.3% 64.9% NA 62.3% 61.9% 61.0%% growth in revenue y-o-y NA NA NA NA 214.0% 0.5% NA NA 189.9% -4.9%% growth in revenue seq NA 351.6% -12.5% 10.3% -28.0% 44.6%

Hardware systems support 224 688 680 675 664 669 # - 912 2,689 2,652 % of revenue 3.5% 7.1% 9.0% 8.0% 8.1% 6.5% 0.0% 3.4% 7.8% 7.2%% of hardware systems 45.1% 35.8% 38.7% 36.2% 43.7% 35.1% NA 37.7% 38.1% 39.0%% of hardware systems products 82.1% 55.8% 63.0% 56.7% 77.5% 54.0% NA 60.6% 61.6% 63.9%% growth in revenue y-o-y NA NA NA NA 196.6% -2.7% NA NA 194.8% -1.4%% growth in revenue seq NA 207.1% -1.2% -0.7% -1.6% 0.8%

CONSTANT CURRENCYProducts / SupportProductsSupport

SERVICESServices 909 958 931 1,108 1,068 1,093 1,083 1,183 4,375 3,906 4,427 4,813 % of revenue 18.0% 16.3% 14.4% 11.5% 14.1% 12.9% 13.2% 11.4% 18.6% 14.4% 12.8% 13.0%% growth in revenue y-o-y -21.6% -15.3% -8.7% 4.0% 17.5% 14.1% 16.3% 6.8% -4.6% -10.7% 13.3% 8.7%% growth in revenue seq -14.6% 5.4% -2.8% 19.0% -3.6% 2.3% -0.9% 9.2%

Consulting 663 692 651 713 666 697 679 747 3,247 2,719 2,788 2,913 % of revenue 13.1% 11.8% 10.1% 7.4% 8.8% 8.3% 8.3% 7.2% 13.8% 10.1% 8.1% 7.9%% of license revenue 64.5% 41.9% 37.9% 22.7% 51.8% 36.6% 34.6% 21.2% 45.6% 36.1% 32.1% 30.4%% of services 72.9% 72.2% 69.9% 64.4% 62.4% 63.8% 62.7% 63.1% 74.2% 69.6% 63.0% 60.5%% growth in revenue y-o-y -23.4% -17.8% -14.1% -8.8% 0.5% 0.7% 4.3% 4.7% -6.6% -16.3% 2.5% 4.5%% growth in revenue seq -15.2% 4.4% -5.9% 9.5% -6.6% 4.6% -2.6% 10.0%

On Demand / Other 180 188 211 295 321 310 317 339 779 874 1,287 1,469 % of revenue 3.6% 3.2% 3.3% 3.1% 4.2% 3.7% 3.9% 3.3% 3.3% 3.2% 3.7% 4.0%% of license revenue 17.5% 11.4% 12.3% 9.4% 25.0% 16.3% 16.1% 9.6% 10.9% 11.6% 14.8% 15.3%% of services 19.8% 19.6% 22.7% 26.6% 30.1% 28.4% 29.2% 28.7% 17.8% 22.4% 29.1% 30.5%% growth in revenue y-o-y -7.7% -0.5% 10.5% 44.6% 78.3% 65.0% 50.0% 15.0% 12.4% 12.2% 47.2% 14.1%% growth in revenue seq -11.8% 4.4% 12.2% 39.8% 8.8% -3.4% 2.0% 7.2%

Education 66 78 69 100 81 86 88 97 349 313 352 431 % of revenue 1.3% 1.3% 1.1% 1.0% 1.1% 1.0% 1.1% 0.9% 1.5% 1.2% 1.0% 1.2%% of license revenue 6.4% 4.7% 4.0% 3.2% 6.3% 4.5% 4.5% 2.8% 4.9% 4.2% 4.1% 4.5%% of services 7.3% 8.1% 7.4% 9.0% 7.6% 7.8% 8.1% 7.7% 8.0% 8.0% 8.0% 9.0%% growth in revenue y-o-y -33.3% -22.0% -2.8% 26.6% 22.7% 9.9% 27.4% -2.7% -16.1% -10.3% 12.4% 22.5%% growth in revenue seq -16.5% 18.2% -11.5% 44.9% -19.0% 5.8% 2.5% 10.7%

Advanced Product Support Services - - - - - - - - - - - - % of revenue 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%% of services 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%% growth in revenue y-o-y NA NA NA NA NA NA NA NA NA NA NA NA% growth in revenue seq NA NA NA NA NA NA NA NA

CONSTANT CURRENCYServices -18% -19% -13% 3% 18% 15% 17% 6% 1% -12% 13% 8%Consulting -19% -22% -18% -10% 1% 2% 5% 4% -1% -17% 3% 4%On Demand / Other -3% -4% 6% 44% 80% 66% 50% 14% 18% 11% 48% 13%Education -30% -26% -8% 24% 24% 11% 28% -4% -12% -12% 13% 22%Advanced Product Support Services 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%



12 October 2010

Dr. Exalove 38

Exhibit 50: Oracle: Historical & Projected Cash Flow Statement US$ in millions, unless otherwise stated


CASH FLOWS FROM OPERATING ACTIVITIES:Net income (loss) 1,124 1,458 1,190 2,363 1,352 1,217 1,689 2,665 5,593 6,135 6,922 8,837

Depreciation 61 62 73 102 99 91 106 100 263 298 396 394 Amortization of intangibles 431 436 502 604 603 603 603 603 1,713 1,973 2,412 1,988 Deferred taxes (75) (141) (146) (149) (15) 21 (23) 167 (395) (511) 150 (53) Minority interest and other - 56 (56) - - - (14) (4) 84 - (18) (22) Stock-based compensation 84 104 122 126 130 150 142 130 355 436 552 588 Provisions for trade receivable allowances - - - - - - - - - - - - Excess tax benefits from stock-based compensation (30) (12) (29) (39) (10) (12) (29) (39) (97) (110) (90) (90) Excess tax benefits from stock-based compensation 21 8 (29) - 24 - - - 155 - 24 - In-process research and development - - - - - - - - 10 - - - Net investment gains 40 (40) 79 (66) 26 - - - (6) 13 26 - Changes to assets and liabilities 2,052 (1,292) - (516) 1,608 (274) 308 (2,194) 483 244 (553) 695

Net cash provided by operating activities 3,708 639 1,706 2,425 3,817 1,795 2,781 1,428 8,158 8,478 9,821 12,337

CASH FLOWS FROM INVESTING ACTIVITIES:Purchase of marketable securities (2,760) (3,425) (4,977) (4,541) (7,650) - - - (9,315) (15,703) (7,650) - Proceeds from sale and maturity of marketable sec. 1,947 2,141 3,033 4,099 4,684 - - - 8,404 11,220 4,684 - Acquisitions, net of cash (79) (313) (5,175) (39) (832) (1,159) (5,606) (832) - Capital expenditures (55) (45) (61) (69) (118) (91) (86) (100) (529) (230) (395) (382) Other - - - - - - - - - - - -

Net cash used in investing activities (947) (1,642) (7,180) (550) (3,916) (91) (86) (100) (2,599) (10,319) (4,193) (382)

Net Free Cash Flow 3,653 594 1,645 2,356 3,699 1,704 2,695 1,328 7,629 8,248 9,426 11,955

CASH FLOWS FROM FINANCING ACTIVITIES:Repurchase of common stock (244) (252) (242) (254) (249) (249) (249) (249) (3,972) (992) (996) (1,096) Payment of dividend (251) (250) (252) (251) (251) (251) (252) (252) (250) (1,004) (1,006) (1,008) Proceeds from issuance of common stock 247 124 231 272 169 - - - 760 874 169 - Proceeds from debt 4,461 - 1,959 800 3,204 - - - - 7,220 3,204 - Payment of debt - - (1,708) (1,874) (885) - (2,246) - (1,004) (3,582) (3,131) - Excess tax benefits from stock comp 30 12 75 86 - - - - 97 203 - - Excess tax benefits from stock comp 30 12 29 39 10 12 29 39 97 110 90 90 Distributions to minority interest and other (34) - (25) - (38) - - - (53) (59) (38) - Other - - - 97 - - - - - 97 - -

Net cash provided by financing activities 4,239 (354) 67 (1,085) 1,960 (488) (2,718) (462) (4,325) 2,867 (1,708) (2,014)

Effect of exchange rate changes 103 178 (181) (207) 243 - - - (501) (107) 243 -

Net change in cash and cash equivalents 7,103 (1,179) (5,588) 583 2,104 1,216 (22) 867 733 919 4,164 9,941

Beginning balance cash and cash equivalents 8,950 16,053 14,874 9,286 9,869 11,973 13,189 13,166 8,217 8,950 9,869 14,033

Ending balance cash and cash equivalents 16,053 14,874 9,286 9,869 11,973 13,189 13,166 14,033 8,950 9,869 14,033 23,974



12 October 2010

Dr. Exalove 39

Sources & References 1. TDWI—”Exadata v2 Raises Questions about Data Warehouse Market”

2. Dell—“Determining the Availability and Reliability of Storage Configurations”

3. Oracle—”Oracle Database 11g for Data Warehousing and Business Intelligence”

4. www.oracle.com

5. Oracle—”Building a Better Database Machine”

6. Oracle—”Exadata Hybrid Columnar Compression”

7. Oracle—”Exadata FAQ”

8. Oracle—”A Technical Overview of the Sun Oracle Exadata Storage Server and Database Machine”

9. Oracle—”Exadata Smart Flash Cache and the Sun Oracle Database Machine”

10. Oracle—”Sun Oracle Exadata and Database Machine Overview”

11. Gartner—”Magic Quadrant for Data Warehouse Database Management Systems”

12. IT Market Strategy—“Oracle Exadata: a Data Management Tipping Point”

13. IDC—”Oracle Exadata V2: Scale-Out Computing Optimized for Data Warehouse and OLTP”

14. IDC—”Oracle Exadata V2 Breaks the High Wall of Technology’s Limitation”

15. TDWI—”Why Oracle’s Exadata May Attract CXOs”

16. Sun Microsystems—”Exadata Version 2: Oracle Exadata Database Machine Integrated Computing Infrastructure”

17. Oracle—”Oracle Exadata Database Machine Data Sheet”


Equity Research

ORCL_10_12_2010_DrExalove.doc

Companies Mentioned (Price as of 08 Oct 10) Brocade Communications (BRCD, $5.57) Cisco Systems Inc. (CSCO, $22.48, OUTPERFORM [V], TP $32.00) Dell Inc. (DELL, $13.69) EMC Corp. (EMC, $19.87) Fujitsu (6702, ¥569, OUTPERFORM, TP ¥710, MARKET WEIGHT) Hewlett-Packard (HPQ, $41.15) Hitachi (6501, ¥352, NEUTRAL [V], TP ¥330, MARKET WEIGHT) International Business Machines (IBM, $138.85) Microsoft Corp. (MSFT, $24.57, OUTPERFORM, TP $40.00) NetApp Inc. (NTAP, $48.76) Netezza Corp. (NZ, $26.95) Oracle Corporation (ORCL, $28.00, OUTPERFORM, TP $32.00) SAP (SAPG.F, Eu37.00, OUTPERFORM, TP Eu43.00) Teradata (TDC)

Disclosure Appendix Important Global Disclosures I, Philip Winslow, CFA, certify that (1) the views expressed in this report accurately reflect my personal views about all of the subject companies and securities and (2) no part of my compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report.

See the Companies Mentioned section for full company names. 3-Year Price, Target Price and Rating Change History Chart for ORCL ORCL Closing

Price Target

Price

Initiation/ Date (US$) (US$) Rating Assumption 2/15/08 19.09 NC 7/10/08 21.29 24 N X 9/9/08 19.17 22 12/15/08 16.45 15.5 3/19/09 17.37 16.25 4/20/09 18.82 R 2/1/10 23.22 30 O 3/26/10 25.69 31 6/14/10 22.7 30 9/17/10 27.46 32

24

22

16 16

3031

30

32

10-Jul-08

O

R

N

NC

13

15

17

19

21

23

25

27

29

31

33

10/12/0

7

12/12

/07

2/12/08

4/12/0

8

6/12/08

8/12/08

10/12/0

8

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2/12/0

9

4/12/09

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8/12/09

10/12/0

9

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9

2/12/10

4/12/1

0

6/12/10

8/12/10

Closing Price Target Price Initiation/Assumption Rating

US$

O=Outperform; N=Neutral; U=Underperform; R=Restricted; NR=Not Rated; NC=Not Covered

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Indeed, in the case of some investments the potential losses may exceed the amount of initial investment, in such circumstances you may be required to pay more money to support those losses. Income yields from investments may fluctuate and, in consequence, initial capital paid to make the investment may be used as part of that income yield. Some investments may not be readily realisable and it may be difficult to sell or realise those investments, similarly it may prove difficult for you to obtain reliable information about the value, or risks, to which such an investment is exposed. This report may provide the addresses of, or contain hyperlinks to, websites. Except to the extent to which the report refers to website material of CS, CS has not reviewed the linked site and takes no responsibility for the content contained therein. Such address or hyperlink (including addresses or hyperlinks to CS’s own website material) is provided solely for your convenience and information and the content of the linked site does not in any way form part of this document. Accessing such website or following such link through this report or CS’s website shall be at your own risk. This report is issued and distributed in Europe (except Switzerland) by Credit Suisse Securities (Europe) Limited, One Cabot Square, London E14 4QJ, England, which is regulated in the United Kingdom by The Financial Services Authority (“FSA”). This report is being distributed in Germany by Credit Suisse Securities (Europe) Limited Niederlassung Frankfurt am Main regulated by the Bundesanstalt fuer Finanzdienstleistungsaufsicht ("BaFin"). This report is being distributed in the United States by Credit Suisse Securities (USA) LLC ; in Switzerland by Credit Suisse AG; in Canada by Credit Suisse Securities (Canada), Inc..; in Brazil by Banco de Investimentos Credit Suisse (Brasil) S.A.; in Mexico by Banco Credit Suisse (México), S.A. 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Research on Taiwanese securities produced by Credit Suisse AG, Taipei Securities Branch has been prepared by a registered Senior Business Person. Research provided to residents of Malaysia is authorised by the Head of Research for Credit Suisse Securities (Malaysia) Sdn. Bhd., to whom they should direct any queries on +603 2723 2020. In jurisdictions where CS is not already registered or licensed to trade in securities, transactions will only be effected in accordance with applicable securities legislation, which will vary from jurisdiction to jurisdiction and may require that the trade be made in accordance with applicable exemptions from registration or licensing requirements. Non-U.S. customers wishing to effect a transaction should contact a CS entity in their local jurisdiction unless governing law permits otherwise. U.S. customers wishing to effect a transaction should do so only by contacting a representative at Credit Suisse Securities (USA) LLC in the U.S. Please note that this report was originally prepared and issued by CS for distribution to their market professional and institutional investor customers. Recipients who are not market professional or institutional investor customers of CS should seek the advice of their independent financial advisor prior to taking any investment decision based on this report or for any necessary explanation of its contents. This research may relate to investments or services of a person outside of the UK or to other matters which are not regulated by the FSA or in respect of which the protections of the FSA for private customers and/or the UK compensation scheme may not be available, and further details as to where this may be the case are available upon request in respect of this report. Any Nielsen Media Research material contained in this report represents Nielsen Media Research's estimates and does not represent facts. NMR has neither reviewed nor approved this report and/or any of the statements made herein. If this report is being distributed by a financial institution other than Credit Suisse AG, or its affiliates, that financial institution is solely responsible for distribution. Clients of that institution should contact that institution to effect a transaction in the securities mentioned in this report or require further information. This report does not constitute investment advice by Credit Suisse to the clients of the distributing financial institution, and neither Credit Suisse AG, its affiliates, and their respective officers, directors and employees accept any liability whatsoever for any direct or consequential loss arising from their use of this report or its content. Copyright 2010 CREDIT SUISSE AG and/or its affiliates. All rights reserved.

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