I just stepped out of Larry Ellison’s keynote speech at OpenWorld to let you in on the latest news. Oracle has teamed up with Hewlett-Packard to jointly develop the HP Oracle Database Machine. The new device marks the first time that Oracle has ever sold a hardware device.

The HP Oracle Database Machine combines a super-fast storage array with database servers (all based on Intel processors) in a single rack. What distinguishes the DB Machine is the intelligence that Oracle puts into the storage servers. Unlike other storage servers, Oracle’s servers can return query results to the database servers instead of entire data blocks. This increases query performance by 10 to 100 times compared to conventional storage arrays.

That said, there are some limits to what you can do with Oracle’s new toy. Most importantly, you can only run Oracle Database on the device. You also have to use Oracle Enterprise Linux for now, though other operating systems will be supported in the near future.

While the HP Oracle Database Machine will undoubtedly gain a lot of positive attention, it could also put a strain on Oracle’s relationships with other server and storage vendors such as IBM, EMC, and Teradata. It will be interesting to see how these and other vendors respond to Oracle’s entry into the hardware business over the coming days.