March 30, 2010 EXECUTIVE TECHNOLOGY STRATEGIES Experture / RFG Weekly IT News Snapshots …experts on demand Cal Braunstein, Chief Research Officer ETS 10-03-12 Week in Review This week, Experture/RFG highlights the following topics Mixed Financials Accenture PLC (HP) reported weak second quarter financials while Oracle Corp. posted mixed results for its third quarter. Oracle's numbers include about one month of Sun revenue contributions. In other financial news, Red Hat Inc. reported strong fourth quarter revenues and earnings while Novell Inc. rejected a buyout bid. RFG believes 2010 is proving to be another tough year for IT vendors as corporations remain cost-conscious and focused on the near-term. The consulting and outsourcing businesses continue to be very competitive as users seek short-term results and pricing bargains. On the applications software side, Oracle ate further into SAP AG's market share, as the German firm had previously reported declining revenues. The Red Hat gains reflect the moves by IT executives to cut software expenses by find lower cost, open source solutions. IT executives should take advantage of the current competitive and economic environments to gain greater contract, price and service level concessions from all of their IT vendors. Akamai Improves Internet, Dell Powers Clouds and IBM Cancels Cell Akamai Technologies Inc. announced new electronic software delivery solutions and an upgrade to its delivery platform while Dell Inc. unveiled new cloud servers and services to its catalog of offerings. On the withdrawal front, IBM Corp. announced the end of its cell blade server line. RFG believes Dell is playing catch up and may struggle to acquire market share in the cloud computing arena, even though its hardware powers Microsoft's Azure platform. Conversely, IBM pulled out of the co-processor market in which it was performing well. IT executives should evaluate the positioning shifts and roadmaps of these IT vendors and determine if and how these solution moves should be incorporated into their IT strategies. Windows Phone 7 Starts to Win Over Developers Microsoft has been putting concerted effort into promoting its forthcoming Windows Phone 7 operating system and its key device partners, HTC and LG, promise phones in time for the holiday season with the new OS. Unusually for Microsoft in the mobile world, it seems to be winning over developers too. There is also a sense of relief that Microsoft is going for a completely new platform, rather than clinging to old Windows norms, and a new confidence from the progress its search engine, Bing, has made in catching up with Google. "There's a sense it is capable of coming from behind after all," said one. Kartik Hosanagar, a professor at Wharton management school, said: "The move to Windows Phone 7 makes sense to me. There's a strong correlation between the iPhone's success and the failure of Windows Mobile. You can see where Microsoft is coming from. Microsoft had to make a clean break from the previous operating system. The company was at risk of being shut out of a category that's growing." Copyright © 2004-2010 Experture and Robert Frances Group, all rights reserved 20 Crooked Mile Road, Westport, CT. 06880; (203) 557-0856; http://www.experture.com/; Contact: inquiry@experture.com March 30, 2010 EXECUTIVE TECHNOLOGY STRATEGIES ETS 10-03-12 FCC's Spectrum Proposals Under Fire On All Sides The spectrum proposals included in the FCC's National Broadband Plan are coming under fire from all sides. The two major telcos, Verizon and AT&T, are fighting against the rules governing the mobile satellite (MSS) network planned by private equity group Harbinger Capital. And the MSS spectrum was supposed to be the easy target in the FCC's aim of freeing up as much as 500MHz for mobile broadband. Another area where it sees potential is in the broadcasters' spectrum, but they were always expected to be hostile. Editor’s Note: With the explosion in wireless services and service/market expansion of all telecom carriers, it is probable that the issues being raised are more likely being raised on behalf of potential/proposed/future service market share. Copyright © 2004-2010 Experture and Robert Frances Group, all rights reserved 20 Crooked Mile Road, Westport, CT. 06880; (203) 557-0856; http://www.experture.com/; Contact: inquiry@experture.com March 30, 2010 EXECUTIVE TECHNOLOGY STRATEGIES ETS 10-03-12 Mixed Financials Lead Analyst: Cal Braunstein Accenture PLC (HP) reported weak second quarter financials while Oracle Corp. posted mixed results for its third quarter. Oracle's numbers include about one month of Sun revenue contributions. In other financial news, Red Hat Inc. reported strong fourth quarter revenues and earnings while Novell Inc. rejected a buyout bid. Focal Points: Accenture released its financial results for its second quarter of fiscal 2010. Net revenues for the quarter were $5.18 billion, compared with $5.27 billion for the second quarter of fiscal 2009, a decrease of two percent. Net income for the quarter fell eight percent from last year's quarter of $502 million to $462 million. Net consulting revenues for the period were $2.93 billion, compared with $3.03 billion for the same period last year, a decrease of three percent. The contraction reflects lower demand for consulting services and a very competitive pricing environment, executives stated. Moreover, some clients continue to focus on initiatives designed to deliver near- and medium-term cost savings and performance improvement, while others remain cautious, seeking flexibility by shifting to a more phased approach to contracting work. In its outsourcing business, net revenues for the second quarter were $2.24 billion, which is flat compared with the second quarter of fiscal 2009. Outsourcing revenues continued to be affected by clients' needs to reduce overall costs through shifting to lower-cost resources at reduced price levels; fewer scope expansions on existing contracts; and contracts operating at lower volume levels, according to the company. A higher volume of contract terminations and restructuring also affected the business. Oracle posted its financial results for its third quarter of fiscal 2010. Net revenues for the quarter were $6.40 billion, an increase of 17 percent from the same period in the previous year when it had revenues of $5.45 billion. On a GAAP basis, net income for the quarter shrank 10 percent from last year's quarter of $1.33 billion to $1.19 billion. Excluding the impact of the Sun Microsystems revenues, Oracle's revenues grew seven percent. New software license revenues expanded 13 percent as did software license update and product support revenues. While both the applications and database/middleware revenues overall grew at 13 percent apiece, the new software license revenues for the applications software expanded by 21 percent to $477 million while the new license revenues for database/middleware software grew by 11 percent to $1.24 billion. Total hardware system revenues for the month Sun was part of Oracle came to $458 million. Red Hat posted its fourth quarter and fiscal year 2009 results. Net revenues for the quarter were $196 million, an increase of 18 percent from the year-ago quarter of $166 million. On a GAAP basis, net income for the quarter was $23 million, an increase of 44 percent from the previous year's quarter of $16 million. Subscription revenue for the quarter was $169 million, up 21 percent year-over-year from $139 million. For the full year, total revenue was $748 million, an increase of 15 percent over the prior year's revenues of $653 million, and subscription revenue was $639 million, up 18 percent year-over-year from $541 million. Net income for the fiscal Copyright © 2004-2010 Experture and Robert Frances Group, all rights reserved 20 Crooked Mile Road, Westport, CT. 06880; (203) 557-0856; http://www.experture.com/; Contact: inquiry@experture.com March 30, 2010 EXECUTIVE TECHNOLOGY STRATEGIES ETS 10-03-12 year was $87 million, an 11 percent gain from the prior year's income of $82 million. In other news, Novell rejected a buyout from private equity firm Elliott Associates. The value of the deal was approximately $2 billion. RFG believes 2010 is proving to be another tough year for IT vendors as corporations remain cost-conscious and focused on the near-term. The consulting and outsourcing businesses continue to be very competitive as users seek short-term results and pricing bargains. On the applications software side, Oracle ate further into SAP AG's market share, as the German firm had previously reported declining revenues. The Red Hat gains reflect the moves by IT executives to cut software expenses by find lower cost, open source solutions. IT executives should take advantage of the current competitive and economic environments to gain greater contract, price and service level concessions from all of their IT vendors. Copyright © 2004-2010 Experture and Robert Frances Group, all rights reserved 20 Crooked Mile Road, Westport, CT. 06880; (203) 557-0856; http://www.experture.com/; Contact: inquiry@experture.com March 30, 2010 EXECUTIVE TECHNOLOGY STRATEGIES ETS 10-03-12 Akamai Improves Internet, Dell Powers Clouds and IBM Cancels Cell Lead Analyst: Cal Braunstein Akamai Technologies Inc. announced new electronic software delivery solutions and an upgrade to its delivery platform while Dell Inc. unveiled new cloud servers and services to its catalog of offerings. On the withdrawal front, IBM Corp. announced the end of its cell blade server line. Focal Points: Akamai announced a new solution, Akamai Download Analytics, as well as upgrades to its existing solution, Akamai Download Manager. These solutions are also part of the enhanced Akamai Electronic Software Delivery (ESD) 2.0 solution. With ESD 2.0 customers can create a customized and branded download experience, increase user engagement during the download process, improve conversion rates and garner business-critical download analytics reporting and data, according to the company. Akamai's Download Manager is a desktop application designed to enable users to download content quickly, easily and reliably. It offers a simplified, multi-file workflow designed to enable software publishers to enhance the user experience while managing complex workflows for entitled software. The Download Analytics software offers users analysis by geography, network, and connection speed, new engagement metrics, user behavioral data, content usage metrics, and custom reporting filters and tools. Dell rolled out three new servers optimized for cloud computing. The C1100 is targeted for clustered computing environment while the C2100 is designed for data analytics, cloud computing and cloud storage. The C6100 is a four-node cloud and cluster system that offers a shared infrastructure. The C6100 uses half-width, twosocket motherboards and puts four of them in a 2U rack unit, two side-by-side and stacked two high in the box. All four server nodes slide in and out of the chassis independently and are hot pluggable into the power supplies and shared storage. All three PowerEdge C machines support Novell Inc.'s SUSE Linux Enterprise Server 11 or Red Hat Inc.'s Enterprise Linux 5.3 operating system, as well as the VMware Inc.'s ESXi 4.0 Update 1 and Citrix Systems Inc.'s XenServer 5.5 hypervisors. The PowerEdge C boxes do not do Microsoft Corp.'s Windows. Dell is also offering turnkey cloud solutions, which include pre-tested and pre-assembled hardware, software and services packages that businesses can use to quickly deploy and run their cloud infrastructures. IBM has announced it is closing down its QS21 two-socket Cell blade server line. The QS21 is a second generation of IBM Cell blades, which were first announced in August 2007. The move comes several weeks after IBM stated it would no longer develop a future Cell-based blade server, which had been dubbed the QSZ2. IBM told customers that are using its QS21 blades (mostly in supercomputer clusters) that they have until June 25, 2010 to order more parts. The QS22 blade, which was announced in May 2008, is still available. IBM has not announced a withdrawal date for the QS22 blade server, which based on the PowerXCell 8i chips. RFG believes Dell is playing catch up and may struggle to acquire market share in the cloud computing arena, even though its hardware powers Microsoft's Azure platform. Copyright © 2004-2010 Experture and Robert Frances Group, all rights reserved 20 Crooked Mile Road, Westport, CT. 06880; (203) 557-0856; http://www.experture.com/; Contact: inquiry@experture.com March 30, 2010 EXECUTIVE TECHNOLOGY STRATEGIES ETS 10-03-12 Conversely, IBM pulled out of the co-processor market in which it was performing well. IT executives should evaluate the positioning shifts and roadmaps of these IT vendors and determine if and how these solution moves should be incorporated into their IT strategies. Copyright © 2004-2010 Experture and Robert Frances Group, all rights reserved 20 Crooked Mile Road, Westport, CT. 06880; (203) 557-0856; http://www.experture.com/; Contact: inquiry@experture.com March 30, 2010 EXECUTIVE TECHNOLOGY STRATEGIES ETS 10-03-12 Windows Phone 7 Starts to Win Over Developers Lead Analyst: Caroline Gabriel, Rethink Wireless Microsoft has been putting concerted effort into promoting its forthcoming Windows Phone 7 operating system and its key device partners, HTC and LG, promise phones in time for the holiday season with the new OS. Unusually for Microsoft in the mobile world, it seems to be winning over developers too. Focal Points: In a new survey by Appcelerator, quoted by GigaOm, 34% of US developers said they were "very interested" in creating apps for Windows Phone 7, up from just 13% in January, before it was officially unveiled. The actual launch, at Mobile World Congress, may not have been brilliantly handled, but since then, many commentators say that Microsoft is building up a head of steam behind its product, and convincing programmers that this really will be its breakthrough OS. However, US developer interest remains low compared to the Apple systems, with a huge 87% of the same 1,000 respondents saying they were "very interested" in creating apps for iPhone, and 53% for iPad (though those are supposed to be interchangeable). Android also scored highly, on 81%, reinforcing other recent surveys that find the bulk of the iPhone developer community porting to the Google OS too. Among Microsoft's stronger tactics have been the emphasis on the Silverlight rich media technology and the release of free tools to spark interest. There is also a sense of relief that Microsoft is going for a completely new platform, rather than clinging to old Windows norms, and a new confidence from the progress its search engine, Bing, has made in catching up with Google. "There's a sense it is capable of coming from behind after all," said one. Kartik Hosanagar, a professor at Wharton management school, said: "The move to Windows Phone 7 makes sense to me. There's a strong correlation between the iPhone's success and the failure of Windows Mobile. You can see where Microsoft is coming from. Microsoft had to make a clean break from the previous operating system. The company was at risk of being shut out of a category that's growing." Copyright © 2004-2010 Experture and Robert Frances Group, all rights reserved 20 Crooked Mile Road, Westport, CT. 06880; (203) 557-0856; http://www.experture.com/; Contact: inquiry@experture.com March 30, 2010 EXECUTIVE TECHNOLOGY STRATEGIES ETS 10-03-12 FCC's Spectrum Proposals Under Fire On All Sides By Caroline Gabriel, Rethink Wireless The spectrum proposals included in the FCC's National Broadband Plan are coming under fire from all sides. The two major telcos, Verizon and AT&T, are fighting against the rules governing the mobile satellite (MSS) network planned by private equity group Harbinger Capital. And the MSS spectrum was supposed to be the easy target in the FCC's aim of freeing up as much as 500MHz for mobile broadband. Another area where it sees potential is in the broadcasters' spectrum, but they were always expected to be hostile. Focal Points: On the satellite front, Verizon and AT&T could face another competitor, to add to Sprint/Clearwire, with a major spectrum swathe. The two telcos are already angry at the restrictions placed by the FCC on the Harbinger spectrum. As a condition of its acquisition of MSS operator SkyTerra, the private equity firm must pledge to allow no more than 25% of the traffic on its wholesale network to come from the big two. AT&T said the 25% limit will give unfair advantage to competitors, such as Sprint Nextel and T-Mobile USA, which will not have to get approval from the FCC to access the spectrum. "The Commission is setting a very disturbing precedent when it implies that it may use allocation of spectrum to manipulate the wireless market," Jim Cicconi, AT&T's senior EVP for external and legislative affairs, said in a statement. "This action is manifestly unwise and potentially unlawful." Paul de Sa, chief of the FCC's Office of Strategic Planning and Policy Analysis, wrote in a blog post that the rules "provide some reassurance that the approval will ignite new broadband competition while protecting the public from any potential harms." Meanwhile, broadcasters have kicked off a ferocious lobbying battle over the FCC's call for them to give up spectrum for wireless broadband use. The agency wants to auction off up to 120MHz of spectrum from TV broadcasters, giving them a share of the proceeds in return, but this requires the cooperation of the TV players to proceed. The FCC's aim is to start the sell-offs in 2012 or 2013 and clear the band by 2015. "I haven't heard one broadcaster say 'I'm interested in giving back my spectrum'," Dennis Wharton, a spokesman for the National Association of Broadcasters, told Bloomberg. The FCC claims the plan would not disrupt local TV services. If it does not get voluntary participation from sufficient broadcasters it says it will examine other options, such as "transition to a cellular architecture on a voluntary or involuntary basis", increased spectrum fees or a shared usage model. Editor’s Note: With the explosion in wireless services and service/market expansion of all telecom carriers, it is probable that the issues being raised are more likely being raised on behalf of potential/proposed/future service market share. Copyright © 2004-2010 Experture and Robert Frances Group, all rights reserved 20 Crooked Mile Road, Westport, CT. 06880; (203) 557-0856; http://www.experture.com/; Contact: inquiry@experture.com