(This story was corrected to show Oracle's benchmark calculated on a per-minute, rather than per-second, basis. It was also corrected to reflect the type of chips used in the computers Oracle announced in September.)

As he tried to persuade investors and customers to get behind his planned purchase of Sun Microsystems, Oracle Chief Executive Larry Ellison said Sun would perform better on his watch than it had under predecessors. He took a step toward making good on the promises on Dec. 2, when he said Sun's servers set a new record for database performance.

Oracle (ORCL) said a group of 27 computers equipped with Sun's Sparc chips was able to run a database performance benchmark at a speed of 30.2 million transactions per minute, 3 times as fast as a test result IBM (IBM) announced in August and also higher than a previous benchmark announced by Hewlett-Packard (HPQ). "We're engineering the hardware and engineering the software to work together," Ellison said, speaking at an event for customers and media in Santa Clara, Calif.

Database benchmarks show businesses the capability of a supplier's computers and the price of using them to run their daily operations, says Nathan Brookwood, an analyst at market researcher Insight 64. "IBM was saying they're leaving everyone else in the dust," he says. Oracle "is shattering the previous benchmarks. They're getting higher performance and doing it at a lower price."

Oracle completed its $7.3 billion acquisition of server manufacturer Sun in January, putting itself in competition with computer hardware makers, including HP and IBM. "We think the HP machines are slow and vulnerable in the market place, and we're going to go after them,"

IBM spokesman Rick Bause says Oracle's "transparent attempt to attain benchmark bragging rights backfires by exposing just how underpowered and inefficient Sun systems are since they're telling customers they'll need 27 Sun servers to beat the performance of three IBM machines." HP spokesman Michael Thacker says the company is the No. 1 server supplier: "The combination of our technology leadership, product performance, and pricing continues meet the needs" of business customers.

Oracle's R&D Spending Up $1.5 Billion

When Oracle closed the Sun deal on Jan. 27, it said it would increase research and development spending by $1.5 billion in the 2011 fiscal year, which began in June, reflecting increased investment in Sun technologies. Oracle has forecast an additional $1.5 billion in fiscal 2011 profit as a result of buying Sun.

By owning Sun, Oracle can sell customers more high-end systems that contain computing power, storage, network connectivity, and software designed to work together. In September, Oracle introduced two such systems: Exalogic for running business applications and a new version of its Exadata computer for running Oracle's database software.

Oracle has spent more than $42 billion in acquiring more than 65 companies since the beginning of 2005 to expand into areas that include business applications, hardware, and the middleware that makes various programs work together. Ellison used the spending spree to move beyond Oracle's bread-and-butter database products.

The company announced two new computers and a new version of Sun's Solaris operating system and said all would arrive next year. A family of Sparc Supercluster computers—the kind that set the benchmark result—will be general-purpose computers for running database software, middleware, and customers' business applications. A computer called the Exalogic Elastic Cloud is designed for running Oracle's middleware.

Loyalty to Hardware Brands: Fading

Server suppliers, including Oracle, HP, IBM, and Dell (DELL), are finding it harder to foster customer loyalty because differences among chip designs are becoming less-defined and products are sharing more attributes, says Jim Shepherd, an analyst at market researcher Gartner (IT). "The problem for all these guys—and Oracle in particular with Sun—is there's less and less hardware loyalty," he says. "In order to support openness, they've all become more and more similar."

Oracle holds 6.2 percent of the $12.3 billion global server market, down from Sun's 7.4 percent share a year ago, according to Gartner. Companies have been switching from Sun servers to less-expensive computers that use chips from Intel (INTC), according to analysts.

Ellison's ability to raise money, zest to expand, and willingness to make bold acquisitions makes Oracle a formidable rival, says Tom Georgens, CEO of Sunnyvale (Calif.)-based storage manufacturer NetApp (NTAP). "It's not easy to understand all the things they might do," he said. "They're an unconventional competitor."

During its first-quarter earnings call on Sept. 16, Ellison said Oracle could "double the size" of its hardware business over time. The company may realize $7.5 billion in hardware sales this fiscal year, Brent Thill, an analyst at UBS in San Francisco, said in a Dec. 1 research note. Thill has a "buy" rating on Oracle shares.

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