New license and SAP unit sale knackers Software AG's numbers

It’s only going to get worse before it gets better. As we discussed, the move to open systems caused by legacy software companies auditing their customers to make their numbers, is slowing the legacy software industry down. This provides opportunity to those that add value and take away pain. Aivars Lode avantce

New license and SAP unit sale knackers Software AG's numbers

Q2 revenues down by double digits, profits halved, CEO surprised

By | Gavin Clarke 24th July 2014 09:45

Delayed IT projects and offloading the SAP business have dealt Software AG’s business a double blow for its latest quarter.

Germany’s other major software maker today reported a second-quarter revenue drop of 18 per cent to €196m ($263.9m) and net income halved to €14.2m ($19.1m).

Earnings per share was also almost halved to €0.18 ($0.24).

In line with the company's on-prem peers, sales of new software slumped: new licences for the Business Process Excellence (BPE) portfolio was down 24 per cent to €32.7m ($44m) and ETS database licences fell 47 per cent to €17.4m ($19m).

Maintenance of its software was up – again, just like Software AG’s rivals: BPE climbed seven per cent to €51.9m ($61.8m) and ETS rose 11 per cent to €38.3 ($51.5m).

Consulting took a hit, falling six per cent to €47.2m.

The company blamed delays to big ticket project sign-offs for the fall in customers' spending on new Software AG licenses.

Chief executive Karl-Heinz Streibich is reported here to have called the drop in BPE a "surprise."

As for consulting, Software AG's trailing off of money that would have normally come from the company’s SAP consulting unit.

Software AG in June sold the final, European-chunk of its global SAP practices to Scheer Group having flogged the North American and Eastern European units last year. Software AG’s plan is to focus on development, sale and support of its own software instead. 

Google Attempts to Map Human Body

Western players IBM, Oracle, and HP are being rejected by China following Snowden revelations that the CIA funded. These companies are at the start up with back doors. Aivars Lode avantce

Google Attempts to Map Human Body

http://live.wsj.com/video/google-attempts-to-map-human-body/157ACEE3-0165-4B9D-B1C6-BE7BCBCDDC4C.html?mod=trending_now_video_5#!157ACEE3-0165-4B9D-B1C6-BE7BCBCDDC4C

Can Rice Sorters and Car-Assembly Lines Inspire Mining Firms?

Miners look to the food industry and others to drive efficiency. Aivars Lode avantce

Can Rice Sorters and Car-Assembly Lines Inspire Mining Firms?

Rio Tinto, BHP Billiton Are Among Those Looking to Other Industries for Cost-Cutting Ideas

By

Rhiannon Hoyle in Sydney And

Alex MacDonald in London

July 28, 2014 2:04 p.m. ET

BHP Billiton and Mitsubishi joint venture BMA's Goonyella Riverside coking coal mine in Queensland, Australia. Rhiannon Hoyle/The Wall Street Journal

PERTH, Australia—Global mining companies have scoured deserts, mountains and jungles for resources to rev up their profits. More recently, the search has taken them to a different environment: the factory floor.

Car-production lines and machinery that sorts rice could help companies such as Rio Tinto PLC and BHP BillitonLtd. BLT.LN -0.29% wring greater profits from mining. Whereas miners spent a decade spending billions on acquisitions and new projects, they are now taking an opposite approach—conserving cash while waiting for commodity prices to recover.

The hills around Kennecott, Utah, are home to one of the world's biggest copper mines. Recently, Kennecott has also become the location of a machine the size of four London double-decker buses that Rio Tinto RIO.LN +0.10% hopes will cut down on the quantity of rocks that need to be crushed in search of copper.

The equipment is supplied by food processor Tomra Systems AS A, using technology it developed to sift everything from rice grains to scallops.

"What the food guys did 30 years ago, I see [us applying] successfully into the mining business," said John McGagh, head of innovation at Rio Tinto, one of the world's top five copper miners by output. "Rice sorters can color-sort up to a million objects a second."

When commodity prices started falling in late 2011, global miners responded by shutting pits, selling assets and laying off staff. Rio Tinto last year announced or completed sales of mines worth US$3.5 billion, and is using the proceeds to repay debts.

With the obvious cutbacks already implemented, companies are looking further afield for technology and ideas—to the military, aerospace and automotive industries.

For Lucas Dow, president of the BMA coal alliance in Australia run by BHP Billiton BHP.AU +0.26% andMitsubishi Corp. 8058.TO +0.37% , this shift took him to a Toyota Motor Corp. 7203.TO +0.43% plant just outside Nagoya, Japan. Iron ore is vital to make steel, a key raw material for Toyota's cars. But Mr. Dow was there on other business: to find ways of making mines thousands of miles away more efficient.

"We're certainly looking outside of our own industry, and shamelessly stealing and implementing ideas where it is possible," said Mr. Dow, who is based in Brisbane, Australia.

He said he's taking on many ideas from Toyota, the company that rewrote the book on lean manufacturing with techniques like just-in-time inventory, designed to wring out efficiencies. He wants to run BMA's mines using simple, repeatable processes that can flow without hitting bottlenecks, like a car assembly line.

At Goonyella Riverside, BMA's largest mine, which produces steelmaking coal, an employee recently suggested setting up several Formula One-style pit stops around the more than 12-mile-long mine site to improve refueling of dump trucks, which haul some 300 tons of raw material at a time.

That change came after Mr. Dow, praising the open communication between workers and management at Toyota, asked staff to provide feedback at the end of every shift.

BMA has also held discussions with supplier KomatsuLtd. 6301.TO +1.38% , a major Japanese equipment company, about using data analytics to keep its machinery running longer.

BHP Billiton and Rio Tinto are using so-called big data to fine-tune maintenance schedules so that the engines in their US$5 million trucks can be replaced just in time, rather than as prescribed by the manufacturers.

BMA has been looking at technology that enables mine managers to monitor truck engines remotely for problems—an idea borrowed from jet-engine makers Rolls-Royce Holdings RR.LN +0.09% PLC and Boeing Co. BA -0.11%

At Fortescue Metals Group Ltd. FMG.AU +3.71% —which hopes to lift output from its Pilbara mines in northwest Australia by as much as 13% through improving productivity—managers say a modular building style traditionally used in the oil-and-gas sector saved time and money in the construction of the company's latest processing plant.

Suppliers are also having to be more creative. Joe Mastrangelo, chief executive of General Electric Co. GE -0.78% 's power conversion unit, said miners have typically placed orders for new equipment with little dialogue. "But what we have seen in the past 12 months are a lot more discussions with clients who ask: 'What can you do to make me more efficient?'" said Mr. Mastrangelo. "Our job is to look for these solutions in other industries as mining recovers from its current capital expenditure downturn," he said.

At its Kennecott, Utah, mine, Rio Tinto crushes rocks the size of cars into fine powder to determine what should be kept. The process is costly, requiring lots of energy and water. Much of the crushed rock is simply tossed away.

Rio Tinto says food-processing technology could be a big help. Tomra's equipment uses color sensors to sort rice into white and nonwhite grains, before pressurized air is fired at unwanted grains to get rid of them. Adapting the technology to sort rocks containing iron or copper from barren material could lower costs.

According to Tomra, the technology could reject between 15% to 50% of rock before it is fully processed. It could also lower the mining industry's energy consumption by 15% and reduce the amount of water used by up to 1,050 gallons per ton of ore.

"We wouldn't do it unless the numbers look big and they do," said Rio Tinto innovation chief Mr. McGagh. He declined to estimate the potential savings, or how much has been invested till now.

So far, though, Rio Tinto hasn't been able to use Tomra's rice-sorting technology on a large enough scale. A machine in the Pilbara region was only able to process up to 150 tons of ore an hour, well short of volumes above 1,000 tons needed to make it viable. The Anglo-Australian miner hopes new trials at Kennecott will lead to a breakthrough.

 It's fun to be a public company with investors ripping on you. Aivars Lode avantce

Activist Investor Pushes EMC to Break Up

Elliott Management Says Spin-Off of VMware Would Boost Stock Price

By Dana Cimilluca and Shira Ovide

Elliott Management Corp. has taken a stake of more than $1 billion in EMC Corp.and plans to push the data-storage giant to break itself apart, according to people familiar with the matter.

The investment, which hasn't been previously disclosed, amounts to about 2% of the Hopkinton, Mass., company's $55 billion equity value, and would make the hedge fund its fifth-largest shareholder, according to the most recent data available from FactSet. It is one of the largest positions Elliott, a 37-year-old firm with $25 billion under management, has ever taken.

Elliott is expected to argue that the company's present structure has hampered the performance of EMC's stock.Elliott will seek to convince EMC that the company's lagging stock would receive a substantial boost if it were to spin offVMware Inc., a pioneer in computer-server software, these people said. EMC owns a roughly 80% stake in VMware, which is publicly traded.

"We're always happy to meet with our shareholders," an EMC spokesman said. He declined to comment further.

With $23.2 billion in revenue last year, EMC is made up of three businesses strung together in what the company refers to as its "federation strategy." They are: EMC Information Infrastructure—its traditional center of gravity, which dominates the data-storage-systems business—as well as VMware and software-development company Pivotal, which are both faster-growing. VMware trades publicly and has a market value of $41 billion, or 75% of EMC's market capitalization.

Should EMC move to split off VMware, potential buyers of part or all of the company could emerge, according to people who could ultimately be involved in such deals. Industry players who could be interested in part or all of EMC include Oracle Corp., Cisco Systems Inc. and Hewlett-Packard Co., analysts have said.

Oracle and H-P declined to comment on the possibility of their companies' interest in purchasing all or parts of EMC. A spokesman for Cisco didn't immediately respond to a request for comment.

If Elliott is successful, a breakup or sale could cause ripples through the roughly $2 trillion annual market for hardware, software, and technology services sold to companies, given what a significant player EMC is in server and storage systems. Elliott's investment in EMC also spotlights how size is increasingly not a barrier for activist investors, who have lately set their sights on some of the world's largest companies.

EMC is facing a number of headwinds. An emerging technology for saving digital data, known as "flash" storage, is giving upstarts a chance to dislodge EMC, which for years has been the dominant seller of hardware companies use to save data troves. Some companies, rather than buying gear from EMC, are storing data outside their computing centers with "cloud" services from providers such as Amazon.com Inc.

In the first quarter, EMC's sales rose by less than 2% from the same period a year earlier, while its net income dropped by roughly 30%. The company is set to report second-quarter results Wednesday.

EMC shares, which more than a decade ago soared above $100, now change hands for less than $27. They have risen 163% in the past 10 years, compared with a more than 309% gain for the Dow Jones U.S. Computer Hardware Index, even as VMware's value has soared. The Nasdaq is up 135% over the past 10 years.

Some analysts have argued that EMC's stock price doesn't reflect the full value of its traditional storage business and a separation of VMware could address that.

Elliott is expected to argue that VMware and the storage business are held back by the present structure, in which in some cases they compete with each other.

Elliott in the past week called EMC to inform it of the investment, and fund officials plan to meet with EMC Chairman and Chief Executive Joe Tucci, the people said.EMC said in a recent filing that its federation strategy "allows each of the three businesses to individually build products … they need to succeed in their respective markets while sharing the same ultimate goal of helping customers manage information."

Elliott has owned EMC shares on-and-off for a decade. Its current investment comes as Mr. Tucci, who has been CEO since 2001, is expected to retire around February 2015. The 66-year-old Mr. Tucci has put off previous retirement dates, however.

Shareholder activists like Elliott have become an increasingly potent force in corporate America in recent years, often successfully pushing companies to spin off divisions or sell themselves in whole or part.

Technology companies used to be seen as too large and complex to find themselves in activists' crosshairs, but that is changing too.

ValueAct Capital recently secured a seat on Microsoft Corp.'s board, and Carl Icahnpushed eBay Inc. to spin off its PayPal unit, before making peace with the company when it agreed to appoint a director he favored.

Elliott has made a slew of technology investments over the years, in many cases successfully pushing the companies to make changes. It has for example taken stakes in BMC Software Inc., Juniper Networks Inc. and NetApp Inc., an EMC competitor.

It's getting tougher for the legacy guys. Aivars Lode avantce

Computer Sciences Profit Falls, Warns of Uncertain Federal Spending

Company Gets About One-Third of Revenue from Government

By Maria Armental

Computer Sciences Corp. said Thursday that its profit fell in the fiscal first quarter and warned of continued uncertainty over federal spending.

The Falls Church, Va., company gets about a third of its revenue from the government.

Shares fell 2% to $60 in recent after-hours trading.

For the most-recent period, through July 4, the company reported a profit of $151 million, or 98 cents a share, down from $177 million, or $1.14 a share, a year earlier.

Revenue slipped to $2.24 billion.

Analysts had forecast a profit of 94 cents a share on revenue of $3.19 billion.

Operating margin narrowed to 9.4% from 10.2% a year earlier.

The company reported income from continuing operations of $159 million, down from $161 million a year earlier. On a per-share basis, it was unchanged at $1.03.

By segment, the company reported a 3% increase in global business-services revenue to $1.09 billion, as industry software and solutions' sales offset declines in the company's consulting business. Global infrastructure services slipped 1% to $1.13 billion, which the company attributed to price-downs, contract conclusions and restructured contracts. Revenue at its North American public sector fell 3% to $1.02 billion, which the company attributed to continued uncertainty on federal spending.

The company maintained its fiscal 2015 target range for adjusted per-share profit from continuing operations.

Separately, Computer Sciences said it was expanding its alliance with International Business Machines Corp. in a move intended to accelerate customers' transition to the cloud.

Not surprising all the legacy providers are taking hits as corporations don't like the audits that are being handed out. Aivars Lode avantce

Microsoft's Profit Takes Hit on Nokia

Software Giant's Revenue Increases, Beating Estimates

An initial report card came in for Microsoft Corp.'s purchase of NokiaCorp.'s mobile phone business. As feared, the marks were poor.

Nokia's former handset operation, which Microsoft bought for more than $7 billion in April, drained nearly $700 million from operating profit in the quarter, the company said on Tuesday.

Cost-cutting to offset Nokia losses also represented the lion's share of 18,000 job cuts ordered last week by new Chief Executive Satya Nadella, the biggest workforce reduction in its history.

The Nokia purchase could look smart in the long run if Microsoft is able to sell more of its smartphones and use them to lure customers to its software, Internet services and mobile apps. Initially, at least, that appears more hope than reality.

The company has been changing how it sells software to companies to pitch more of its Web-friendly software such as Office 365, an online version of its ubiquitous workplace document-and-spreadsheet software.Microsoft's other businesses are doing well, with total revenue up 18% in its fourth quarter. Sales of Windows, Office, database and other products to companies rose 10.5%, a faster clip than in prior quarters. Microsoft also generated more profit out of those sales than it had in earlier periods.

"We're feeling quite proud of the aggressive move we've made here," Amy Hood, Microsoft's chief financial officer, said in an interview.

Microsoft stock rose 1% in after-hours trading to $45.33 following the earnings report.

Mr. Nadella has touted his vision for Microsoft as a "mobile-first, cloud-first" company. So far, the company has had much more success on the second part of that mission statement.

Even with the Nokia purchase, Microsoft sells fewer than 5% of all new smartphones purchased world-wide. The company said Thursday that it sold about 5.8 million Nokia smartphones since it acquired Nokia's handset business in April. By comparison, rival AppleInc. sold 35.2 million iPhones in the three months ended June 28.

The cloud-related businesses are faring much better. Microsoft said Office 365 sales more than doubled in the quarter. Total cloud revenue, which includes its Azure computing service, is on pace to generate $4.4 billion in annual revenue.

Microsoft also is posting heady growth in older products like its database software, called SQL Server, and the Windows operating software for computer servers. Microsoft's revenue from server-software licenses rose 14% in the fourth quarter.

Mr. Nadella, on a conference call with analysts, sketched out how he expected to invest money in the "core" areas like the Windows operating system and its software to help businesses and consumers live and work more efficiently.The company also highlighted strong sales of the software to small-and-medium-sized businesses. Those smaller companies aren't historically Microsoft's best customers.

He pledged to keep a lid on costs, in part by stopping work on duplicative projects. As an example, Mr. Nadella said Microsoft would merge three versions of its Windows software for smartphones, tablets and PCs into a single operating system. Mr. Nadella also said Microsoft will "run all businesses in an economically sound way."

Net income for its fiscal fourth quarter ended June 30 fell 7.1% to $4.6 billion, or 55 cents a share, from $5 billion, or 59 cents a share, a year earlier. Revenues rose to $23.4 billion from $19.9 billion.Those words should please investors, many of whom have said Microsoft spends money too freely on too many things. Microsoft also said Nokia will continue to be a drain on profits, before job cuts and other cost-cutting efforts make Nokia break even by Microsoft year ending June 2016.

HP's Machine and IBM's $3bn R&D splash – aka how to survive Google

Tough roads ahead for IBM and HP. Aivars Lode avantce

HP's Machine and IBM's $3bn R&D splash – aka how to survive Google

Failure to crack next-gen semiconductors threatens to set back humanity

By | Jack Clark 23rd July 2014 11:02

IBM and HP are trying to invent their way out of severe problems that lurk in their future.

Both companies face slowing sales in some of their traditional high-margin areas, like enterprise servers and other on-premises hardware. And both are having a tough time converting existing business divisions over to selling the high-margin "as-a-service" style IT products that many companies are demanding.

Meanwhile, the rise of remote computing and storage from companies like Amazon and Google, and remotely maintained software from companies like Salesforce and Box and even Oracle, stand to reduce the need for the types of on-premises gear and lucrative service contracts they specialize in.

Both companies suffer from problems partly of their own making. IBM's previous chief Sam Palmisano pledged in 2010 that per-share earnings for the company would reach $20 by 2015. This has forced today's chief Virginia Rometty to fire people, sell businesses – like the server division to Lenovo – and contort the company to trim costs where possible.

HP, similarly, is grappling with problems from previous chiefs, whether that be Mark Hurd's cost-cutting to its R&D division and buy of EDS for $13.9bn (in 2012, HP wrote down the value of that purchase by $8bn), or Hurd's successor Leo Apotheker whose public dithering over HP's PC plans sapped the company's share price, and whose acquisition of Autonomy for $10.7bn in 2011 (which was subsequently written down by $8.8bn) drove shares even lower. This period of poor management has led to a spate of severe layoffs at the company, amid slowing growth of the overall PC market and greater competition from servers.

And unlike smaller rival Dell, neither company can easily take itself private to perform the necessary surgery to convert itself to a firm fit for a modern IT era.

To try to offset their declines, both IBM and HP have tried to build cloud businesses using open-source technologies like OpenStack and a multitude of data centers around the world. IBM also bought SoftLayer for about $2bn to bolster its cloud.

But cloud is unlikely to create significant growth to offset the declines in traditional businesses – Amazon Web Services is acknowledged to be the leader in cloud services and is projected to bring in revenue of between $4bn and $5bn this year for the company. That's good money, but nothing compared to the annual revenues of HP (2013: $112bn) and IBM (2013: $99bn).

What both IBM and HP need is a new set of products that are desirable, pricey, engender customer loyalty, and difficult to replicate by hungry Asian-based hardware competitors, and – ideally – things that have better profit margins than traditional commodity hardware.

So both companies have pressed their significant research organizations into developing some tech to give them some hardware with these characteristics – an ambitious, eye-brow raising strategy at a time when the rest of the industry is focusing on software.

The two schemes are HP's memristor-dependent R&D scheme, which was codenamed "The Machine" and announced at HP Discover in June, and IBM's unnamed $3bn-over-five-years scheme which was revealed in July.

Though subtly different in emphasis and implementation, both projects serve the same purpose and speak to the same problems bedeviling the companies.

The Machine will give HP a set of products and services built around a proprietary hardware platform made up of low-power storage based on memristors; custom processors packaged up in novel ways; speedy data transfer via the clever use of photonic comms tech and custom interconnects; and a new operating system designed to handle the properties of memristors.

If successful, The Machine will give HP a high-margin way to make money and take a lead on its competitors. However, it's based on some difficult technologies, like the memristor that was meant to come out in 2013but is now not forecast to be ready for sale till 2016. It also uses other long-running HP projects, like a plan to mush processors and storage together into a "nanostore". Like the memristor, this tech has been around for a while – an early paper on it was published in 2011 – and its eventual due date is unknown.

IBM's cash splash, by comparison, will fund the shrinking of chips beyond the 7nm process scale, and will also bankroll the design of chips that feature unusual architectures. These could include "neuromorphic" processors that try to implement brain-like arrangements of semiconductor logic to create chips that are good at pattern and object recognition. Like HP, IBM plans to use photonics to let it "connect processors and memory in a more integrated way."

If the schemes work, then HP and IBM will be able to survive and prosper. If they fail, then both companies will have to divest themselves of multiple business units, layoff many of their employees and, perhaps, cede much of their business to new IT firms like Amazon or Google.

Worse, neither Amazon or Google or even Microsoft appear to do much fundamental hardware and materials science research, so for IBM or HP to stumble would likely set the wider technology industry back by decades. Their plans may be mad, but they're the best hope they – and by extension we, the wider tech community – have for ongoing gains in performance of the basic components of our digital lives. 

HP storage revenue downturn? It's just a 'kink', says exec

HP's storage is down, they say it's just a blip, let's see. Aivars Lode avantce

HP storage revenue downturn? It's just a 'kink', says exec

A blip on the radar

By | Chris Mellor 1st August 2014 16:26

HP's first calendar 2014 quarter storage revenue downturn was a blip, according to the global head of its enterprise group – though analysts at IDC may not agree.

Bill Veghte, exec veep and GM of HP's Enterprise Group, was speaking about the calendar Q1 numbers that co-incide with HP's second fiscal quarter.

He told us the worst three months for juicy high-end storage for some years "was nothing more than a kink", before adding "we took share in storage".

Why did this blip happen? "[Our specialists] that follow the storage market say this happens periodically, this is not the first time, and they would generally attribute it to a set of inflection points - flash, some disk drive changes, and then of course cloud."

IDC in its Storage Tracker thought that the first calendar quarter of 2014 saw a virtual buyers' strike for high-end storage, which would chime in with Veghte's statement.

The beanie said the market as a whole declined 6.9 per cent year-on-year in revenue terms.

IDC said HP's revenue share for total storage products (internal and externally attached storage) declined by 8.8 per cent – more than the market. Only NetApp gained share in the quarter, according to IDC's number crunchers.

Bill Veghte

What can we deduce from a chart showing HP's quarterly storage revenues?

Since a revenue peak in the fourth fiscal 2011 quarter of $1.1bn, they have decreased - and a trend line demonstrates this. Fiscal 2013's fourth quarter stands out - $960m, better than the $950m in the earlier year. But otherwise the annual quarter storage revenue compares show what looks like a downward trend.

This chart refers to all of HP's storage revenues and not just the high end where HP's 3AR systems could well have taken share, as Veghte claimed. They and other HP storage products will have to take quite a lot of share though, to counter the overall trend in HP's storage revenues. 

Oracle cold bath shrinks Larry Ellison's pay package

Larry's salary options have been cut in half after Oracle missed 3 quarters. Aivars lode avantce

Oracle cold bath shrinks Larry Ellison's pay package

Size is a relative thing

By | Gavin Clarke 5th August 2014 11:39

Oracle's Larry Ellison, one of the world’s richest men and best-paid CEOs in the US, is getting his pay cut by more than half.

The database giant's chief executive has been awarded just 3 million stock options by its compensation committee in its annual review process.

That’s down from 7 million the year before and every year since 2010. Details of the new award were revealed in Oracle SEC filings at the end of July.

Ellison depends on options since he cut his official salary to $1 a year in 2010 – the year his options pumped up to 7 million from the previous year’s 1.7 million.

Oracle’s chief executive made $151.43m from options exercised in 2013.

Ellison is calculated to have earned $960m in compensation thanks to his stock allocations over the past five years.

The good news for Ellison is he isn’t the only one taking a bath – Oracle president Safra Catz has also seen her Oracle stock allocation sliced.

Oracle’s compensation committee has awarded Catz 2.25 million in standard options, down from 5 million the year before.

Catz’s allocation is more volatile, though, and – unlike that of Ellison – fluctuates from year to year.

There was no word from Oracle on the reason for the change, but the shake-up comes hard on the heels of a difficult year for Ellison’s company.

Oracle has missed Wall St’s earnings expectations in three of the four quarters. Revenue from sales of new products and overall net income has slowed down.

The company has suffered from slow corporate IT spending and the rise of new rivals while it has tried to spin up the hardware business it bought from Sun Microsystems as well as pushing its cloud offerings.

Against this backdrop, Oracle’s shareholders have been increasingly resistant to Ellison’s award, which had made him the best-paid CEO in the US.

Ellison is Oracle’s single largest shareholder.

The rank and file have been revolting against size of their leader's package since 2008. A “say on pay” was proposed at company’s annual meetings in 2008 and in 2012, to no avail.

Shareholders last year rejected the pay packages of Ellison and other top Oracle executives at the annual shareholder meeting in October, saying their compensation was out of sync with the company’s performance.

Oracle was forced to defend Ellison’s allocation in a letter.

As the company’s fortunes and performance have fluctuated, though, it seems either the compensation committee or Ellison decided change was unavoidable.

Ellison is one of the world’s richest people – third behind Bill Gates and Warren Buffett, according toForbes, on $49.6bn. He has used his wealth to take a stake in NetSuite, buy estates, take ownership of an Hawaiian island – Lanai – to fund the US official America’s Cup racing team and help fund the hosting of the Americas’ Cup in San Francisco, California. 

Large Corporations Push Suppliers to Develop New Networking Technology

Customers are looking to get the costs of their tech driven down further. Aivars Lode avantce

Large Corporations Push Suppliers to Develop New Networking Technology

By Rachael King

The head of an industry group comprising big companies from finance to logistics said that many group members will hold off buying new networking equipment until suppliers offer certain technology improvements. The companies want lower prices, interoperable gear and faster innovation, benefits of a new approach that favors commodity hardware and more sophisticated software.

Many of the companies in the Open Networking User Group have indicated they plan to start deploying the new networking technology next year, moving beyond trials now under way. “These companies are saying that they’re going to hold procurement [of new networking technology] until there are demonstrations that the equipment is interoperable,” said Nick Lippis, co-founder and co-chairman of the Open Networking User Group.

IT executives from companies including Credit Suisse Group AG, FedEx Corp., Gap Inc., Fidelity Investments, JP Morgan Chase & Co. and Symantec Corp. collaborated on a white paper which laid out their concerns. The paper said the group was committed to using “the collective strength” of member procurement to influence changes. It did not, however, go as far as to say companies would hold procurement until demands were met. These companies, when contacted, declined further comment.

The group said it wants lower operating and capital costs and compatible products. The paper included the names of executives at the six previously named firms along with executives at Pfizer Inc., UBS AG, Bank of America Corp. and Cigna Corp. Most of the executives are part of the group’s board and many are participants in working groups that are developing guidelines for suppliers. Pfizer and UBS did not respond to a request for comment. Bank of America and Cigna said that the executives were mentioned because they are members of the Board of Directors of the organization but that their role doesn’t reflect the view of the companies.

At issue is a shift to new networking technology that favors less expensive commodity hardware, paired with software that is used to create virtual switches and routers. That substitution of hardware with software, known as software-defined networking, is an alternative to traditional, physical switches, routers and other equipment. Many IT executives are impatient for this new technology to mature as many would like to move from trials and start larger-scale deployments next year. The global software-defined networking market is estimated to grow to $3.7 billion in 2019 from $290 million in 2014, according to an April report by Research and Markets.

The paper asks networking suppliers such as Cisco Systems Inc.,Hewlett-Packard Co., VMware Inc. and Juniper Networks to create SDN products that reduce current annual network operating costs by 15% to 30% and reduce capital costs by as much as 25% to 75%. Members also want to eliminate so-called vendor lock-in, in which networking technology from one supplier does not work with that of another, discouraging customers from seeking alternatives, according to the paper the group released earlier this month.

Suppliers are at various stages of embracing–or at least acknowledging–this approach. For some, the open, software-driven direction represents a threat to their core business.

Some suppliers say that while user requirements are helpful, it may be too soon to create industry standards for software-defined networking. VMware’s network virtualization platform is just starting to be adopted, said Martin Casado, chief technology officer of networking at VMware. “Normally when you standardize, you standardize a well-known problem or technology, but it’s too early here,” said Mr. Casado. The risk is that the industry will stifle innovation, he added.

Both H-P and Juniper said their goal is to create open interoperability and choice in these new networking products. H-P said it wants to “drive out closed proprietary systems that foster lock-in.” Juniper has taken a different approach, making the source code for its SDN controller freely available in an open source project called OpenContrail. “Closed complex technology systems are deadly to business growth,” said Mike Marcellin, senior vice president of strategy and marketing at Juniper Networks in an e-mailed statement.

Cisco Systems, the largest networking supplier, did not respond to a request for comment.

Companies are starting to wake up to how important networking is to their businesses, said Andre Kindness, principal analyst covering IT infrastructure atForrester Research . As such, they’re exploring technologies from new suppliers. “In the past, it was always easy for companies to default to Cisco,” he said.

Rosabeth Moss Kanter on How Corporations of the Future Will Behave

If you are not collaborating in the future, you will be in trouble from WSJ corporations of the future and you will recognise some concepts. Aivars Lode avantce

Rosabeth Moss Kanter on How Corporations of the Future Will Behave

The Harvard Business School Professor Says Companies Will Converge on a Few Universal Standards and Norms

By Rosabeth Moss Kanter

July 7, 2014 3:57 p.m. ET

Be prepared for a future in which the concept of a corporation—how it's structured, how it's governed—will vary widely. But the conduct of corporations will converge on a few universal standards and norms.

Consider this example. For a recent Harvard program about business leadership in China, I convened a panel of chief executives from four very different companies: China Mobile, a state-owned enterprise and the largest mobile-telephone operator in the world; Esquel Group, a family apparel company that had left China for Hong Kong, then returned; IBM Greater China, the multinational IBM business unit on the ground in China; and a software startup that at the time was operating in Shanghai, incorporated in Delaware, had investors in Asia and the U.S., and used a bank in Silicon Valley.

The types of ownership and governance of the companies ranged over a wide spectrum. But as the panel discussion progressed, it became clear that each business was strikingly similar in its imperatives and aspirations. Each CEO talked about competing for talent from a new generation whose members value meaningful work in addition to a good salary, creating a culture for constant innovation, striving for more open communication, considering longer time horizons and serving local communities.

Next Year's Models

The fact that this conversation took place in China is itself a harbinger of the future. Nearly 100 Chinese companies are now among the world's 500 largest, ranked by revenue, closing in on the number of U.S.-based giants. Emerging-country powerhouses have been acquiring Western icons (India's Mittal has bought France's Arcelor, Tata Motors bought Jaguar and Land Rover, and Brazil's AmBev acquired Anheuser-Busch and Belgium's InBev). This promises further proliferation of corporate forms, especially when U.S. concepts are no longer held up as the dominant models.

New forms of ownership and governance will include Asian-style state-owned or government-linked enterprises, such as Singapore's Temasek; German-style dual supervisory and management boards; customer or employee-owned financial, retail and producer cooperatives, such as France's Crédit Agricole or Canada's Desjardins; "B" corporations established for profits plus social benefit; alliances and consortia such as Visa and MasterCard; charities that run businesses, like Germany's Robert Bosch Foundation; family-owned, private-equity-held or venture-capital-funded enterprises; and the X Factor of partnerships still to be invented.

Yet, corporations of all types will have some things in common wherever they originate or operate. They will be globally connected, technologically enabled, humanly diverse and socially accountable. They will have to be. Customers, the media and the public will increasingly demand it.

Quiet Revolution

While inevitable battles will rage, for example, over which government sets food-safety standards, or agrees to a global environmental-protection treaty, many large companies will engineer a quiet convergence of standards that will gradually affect every business. Cemex, for example, the global cement company with headquarters in Mexico, decided after its first entry into Spain to be "one Cemex" and to operate by a single set of standards everywhere, enabling dramatic growth through acquisitions in the U.S., Egypt, Europe and Australia. When Shinhan Financial Group in South Korea sought listing on the New York Stock Exchange soon after a merger, it was seeking legitimacy, not just capital, by showing compliance with Sarbanes-Oxley, which it considered the world's highest standard. Internet governance will be globalized, as will continuing efforts at interoperability among mobile-telecom operators.

Convergence will increase because companies compare themselves with one another across wide territories, and so will their smartphone-using, Web-empowered customers. Being determinedly local will be a choice, not an unconscious default position. A neighborhood grocer serving local produce must compete with nearby international chain supermarkets offering goods flown in from the opposite ends of the Earth. At the same time, large corporations must watch disruptive startups and small businesses with innovative products; Coca-Cola bought Honest Tea, making the upstart beverage brewer its entree into healthy-bottled-drinks markets of the future. As technology evolves and cloud computing hovers everywhere, small businesses will have access to the same inputs as large ones.

If companies didn't begin with a culture of purpose and principles, an internationally, ethnically diverse membership will demand it, as universal values and ethical codes facilitate communication, coordination and cooperation. More companies will be shape-shifting bundles of activities, designed for flexibility rather than stability and predictability.

To deal with a rapidly changing environment and the fluid boundaries of business units that come and go, more work will be done by crosscutting project teams, and there will be more bottom-up self-organizing—a matrix on steroids. Companies will embrace the always-on, always-accessible, democratizing communication of social media, or fall behind.

They will be less headquarters-centric, because all wisdom no longer emanates from Armonk, Cincinnati, Bangalore or Beijing. Like Google and Facebook, their power will come not from their number of employees but from the size of their partnership network. A small core with a wide set of loosely affiliated partners is itself a new organizational form.

Harvard Business School

Dark Side

There is a dark side. Being globally integrated can slide into being globally manipulative. "Corporate greed" won't disappear by itself. Large companies can play one country off against another, looking for tax shelters or tax breaks, ready to move and leave scorched earth behind. But the spotlight of transparency will shine, like it or not. Media activism is likely to grow along with "triple bottom lines." In addition to financial statements, requirements for environmental and social reporting are emerging in theEuropean Union, Brazil and Australia, among other places.

Thus, corporations of the future will have to forge a new social contract with society. Their conduct will matter more than their legal form. Stakeholders, including financial shareholders, are watching. To gain trust and legitimacy, companies must be responsible citizens wherever they operate. That includes more than employee volunteerism in community-service projects; it means paying their taxes and paying their way, including the price of "externalities" such as carbon emissions.

And they must figure out, maybe before nations do, how to find universal values that help them work cooperatively across borders. After all, world peace and prosperity is also good for business.

Web Weapon: No-Frills Servers

Server costs just keep on collapsing. Aivars Lode avantce

Web Weapon: No-Frills Servers

Companies Like Quanta Computer Make Inroad Against IBM, Dell, Cisco

By Shira Ovide

June 9, 2014 8:02 p.m. ET

Barry Lam, CEO of Quanta Computer, in a file photo from 2010. Bloomberg News

Quanta Computer Inc. 2382.TW -0.50% of Taiwan got its start in 1988 building laptops, and later, computer servers sold under brand names like that of Hewlett-Packard Co.HPQ +0.18% As that business slowed, Quanta Chairman Barry Lam, known for his fashion-forward suits and frank statements, started to cut out his customers and sell servers directly to corporations.

These days, Google Inc., Facebook Inc., FB +0.61%Amazon.com Inc. AMZN -0.66% and other Web giants order directly from Quanta's factories. Wall Street banks and other companies are experimenting with servers and other equipment from Quanta or other low-frills hardware makers, technology executives and analysts say.

The hardware industry's new breed is sparking faster and less-expensive tech services and disrupting businesses of giants such as International Business Machines Corp.IBM -0.08%

Quanta's selling points are lower prices and a willingness to tailor gear to a company's needs. Facebook, for example, discovered that the plastic logos emblazoned on most computer servers impeded air flow and raised cooling costs. Quanta stripped off its logos, saving Facebook about 25 watts of electricity per server.

Facebook says it saved US$1.2 billion on energy and computer-management costs over three years by redesigning its software and hardware. Facebook executives say Quanta was a contributor.

Facebook also is testing Quanta switches, which help direct Web traffic. Cisco Systems Inc. CSCO -0.12% and Juniper Networks Inc. long have dominated that market.

Original-design manufacturers, as companies such as Quanta are called, "are definitely an important part of the disruption," Frank Frankovsky, former vice president of Facebook's hardware design and supply-chain operations, said earlier this year.

Quanta's Mr. Lam used to sell pocket calculators, and now is known for his extensive personal art collection. He also isn't afraid to court controversy. He once compared netbooks, or stripped-down laptops, to a "malnourished child."

Mike Yang, who runs Quanta's two-year-old U.S. subsidiary, said Mr. Lam recognized the need to shift the company to meet Web companies' need for customized computing equipment. Mr. Yang said he wasn't so sure.

Mr. Yang initially passed on bidding for a Facebook contract several years ago because of worries of competing with Quanta's own customers, such as Dell Inc. The choice was awkward, Mr. Yang said. Quanta reconsidered, and won a deal to supply Facebook with self-designed servers for a Prineville, Ore., computing hub.

A Quanta complex in Fremont, Calif., houses about 2,000 workers in a nondescript office park, where they assemble the thousands of components inside computing equipment. Signs in English, Chinese and Spanish reflect the diverse workforce.

The fallout from low-cost, generic hardware is becoming evident. IBM earlier this year agreed to sell its mass-market server business to China's Lenovo Group Ltd., and analysts cited low-cost competitors such as Quanta as a big reason. H-P's revenue from the most popular computer servers is down 12% from three years ago.

"We consider hardware a commodity," said Wesley Jess, vice president of business operations for Rackspace Hosting Inc., which buys Quanta gear to run computing hubs for more than 200,000 businesses. "A lot of the hardware guys hate that."

IBM has said the server sale is part of a plan to exit lower-margin businesses. An H-P spokesman said it offers "support, services, scale and innovation" that the low-cost manufacturers can't match.

Dell executives concede that the company has lost some sales to Quanta and its peers. But Forrest Norrod, a vice president in Dell's server business, said the rivals "are procuring a very small segment of the value chain at a very low margin."

Thin profit margins are something Quanta knows. Its gross margin—the portion of revenue left after the cost of building a product—is about 4%. Analysts estimate that most of Quanta's revenue comes from the fading personal-computer market. Quanta's first-quarter revenue rose 9% to 216 billion New Taiwan dollars (US$7.19 billion).

Quanta and other low-frills producers accounted for 13.4% of the most common type of computer servers sold world-wide last year, up from 3% in 2008, according to market researcher IDC. The combined share of H-P and Dell fell to 52% from 60%.

Quanta hardware isn't for everyone. EBay Inc. says it is more cost-effective to stick with traditional suppliers and tap their technical expertise.

Some smaller companies don't want the hassle of dealing with equipment bought directly from the factory, and they are not willing to skip the service or warranties that come with brand-name gear.

"For us, having the standard vendors and support is better than screwing around," Steve Tarr, who leads information technology for Emeritus Corp., which operates more than 500 retirement communities.

Quanta's big customers are finicky—and not necessarily loyal. Facebook hires another company to test and assemble gear it buys from Quanta. Facebook says it is a sensible check on a supplier but that it also means less revenue for Quanta.

Still, some of Quanta's customers say they can't imagine buying computing hardware the old-fashioned way.

Matthew Prince, chief executive of CloudFlare Inc., which runs websites and protects them from digital attacks, last year switched from H-P servers to a Quanta model that initially was about $1,000 less expensive. Quanta also let him select the computer chips, flash drives and software tailored to CloudFlare's needs. Skipping H-P's proprietary system shaved several minutes off the time needed to restart a server.

"Quanta was willing to do the engineering work to build a version that met our specs," Mr. Prince said. "This is a conversation you just can't start to have with a Dell or an H-P."

Just more bad news for the incumbents. Aivars Lode avantce

Cost-Cutting Aids IBM's Profit, but Revenue Remains Soft

Computing Giant Continues to Struggle With Shifts in Market

International Business Machines Corp. failed for a ninth straight quarter to boost revenue, but the technology giant's bottom line benefited from recent cost-cutting.

On Thursday, it posted a 28% second-quarter net gain, partly reflecting a restructuring charge that held down its year-earlier results. Revenue declined 2.2%.

The company's flagship mainframe-computer business performed better than analysts expected. But revenue from another key line of server systems continued to slump, while IBM's software and services businesses didn't show the growth that some analysts had projected.

IBM shares were up nearly 3% since the beginning of the year. Following the after-hours earnings release, they fell about 2%.

Like many big hardware makers, IBM is struggling to respond to shifts in the market for business technology such as cloud computing. Getty Images

Like many big hardware makers, IBM is struggling to respond to shifts in the market, including the rise of low-priced commodity servers. Many customers also are outsourcing operations to so-called cloud services, reducing spending on both computers and software.

Chief Executive Virginia Rometty has ramped up IBM's investments in cloud computing and areas such as analytics software. To expand among business users of smartphones and tablets, IBM and Apple Inc. Tuesday agreed to team up in order to create simple-to-use business apps and sell iPhones and iPads to Big Blue's corporate customers.

IBM on Thursday highlighted gains in some of those areas, including a 50% increase in cloud computing revenue. But those businesses aren't yet large enough to offset struggles in the company's legacy business.

IBM, for example, said revenue from services—its largest business—declined 1%, though including the effect of a recent divestiture revenue was up 1%.

Toni Sacconaghi, an analyst at Bernstein Research, noted during a conference call that new signings of services deals were off substantially and that IBM has had nine straight quarters with revenue declines in services.

He also said IBM fell short of its executives' optimistic projections this spring about software revenue, which grew just 1%, while its operating-system revenue declined 13%. "They were very emphatic that software would improve this quarter," Mr. Sacconaghi said.

Martin Schroeter, IBM's chief financial officer, responded that he remains optimistic that both software and services will perform better in the second half of 2014.

Overall, IBM reported a profit of $4.14 billion, or $4.12 a share, up from $3.23 billion, or $2.91 a share, in a year-earlier quarter that included a restructuring charge of about $1 billion.

Revenue decreased to $24.36 billion from $24.9 billion.

IBM said its earnings excluding certain one-time costs came to $4.32 a share. Analysts polled by Thomson Reuters expected earnings on that basis of $4.29 a share on revenue of $24.13 billion.

Gross margin rose to 49.1% from 48.7%.

Revenue in IBM's systems-and-technology unit, which includes its hardware business, slid 9.8% to $3.52 billion, the 11th straight period of year-over-year declines. But the result marked an improvement from declines of more than 20% in the two preceding quarters.

Revenue for mainframe computers, which had fallen 40% in the first quarter, declined 1% in the second period. But the other key server line, IBM's Power systems, experienced a 28% revenue decline.

Mr. Schroeter noted that IBM has so far only delivered a low-end version of new Power hardware based on its latest microprocessor chip, with mid-range and high-end machines expected to aid revenue later this year.

IBM has announced plans to sell a line of systems that uses standard x86 chip technology, largely associated with Intel Corp., to Lenovo Group Ltd.That deal is still awaiting regulatory approval.