Oracle’s Ellison says market returning from ‘madness’

Oracle Corp. chairman and CEO Larry Ellison on Wednesday said the software marketplace was returning to normal after a period of “market madness” in 1999 and 2000.

“We had a ludicrous bubble. We had market madness and now we’re returning to reality and I don’t think that’s gloom and doom,” Ellison said during the company’s Analyst Day event here.

But Jeff Henley, Oracle executive vice president and chief financial officer, said market spending is less than normal currently. “I think we’re in a little bit of under-spending right now,” Henley said.

“We’re actually below normal because of this period of absorbing excess capacity,” Henley said. “Hopefully, we’re getting toward the end,” of the tough economic cycle, but no one knows for sure, he said.

Not as many large deals are being done, Henley said. “We are clearly trying to rein in some of the heavy discounting,” he added.

Oracle for the recently completed fiscal year 2002 had revenues of US$9.6 billion, down 12 percent from the year before, and net income of $2.3 billion, down nine per cent. Database and application license revenues were down 23 per cent and 31 per cent, respectively. For the first quarter of fiscal year 2003, which concludes at the end of August, the company is projecting a 15 per cent to 25 per cent decrease in license revenues.

IT spending will not return to the 1999-2000 levels and it should not, Ellison said. “The spending will be consolidated among fewer [software] companies. Most of the companies will go away,” he said.

Oracle’s business model, Ellison said, is the same as Microsoft’s: mass production of software with aggressive pricing, and make up for it on volume.

Oracle’s George Roberts, executive vice president of North America Sales, said Y2K, b-to-c (business to commerce,) and b-to-b (business to business) prompted an overinvestment in technology late in the 1990s. The market has now returned to the way it was in 1996.

On the positive side, Roberts said Oracle is taking away Informix customers from IBM Corp., which has acquired Informix.

“I think IBM has an eroding asset” Roberts said.

Ellison disputed the notion that Oracle has lost all its good managers lately. Oracle’s managers leave to become CEO of other companies, such as Gary Bloom leaving to become CEO of Veritas Software Corp., said Ellison.

“I think it’s proof that we’ve got pretty good talent over here,” Ellison said.

Ellison also commented on the management issues that emerged when Ray Lane was president of the company. A company cannot have two people running it or factions develop, Oracle said.

Lane, Ellison said, was a “superb salesman.”

“In terms of management, that’s not what he did. He was a dealmaker,” said Ellison.

Ellison said he is pleased with the current management model at the company.

Another Oracle official, Kevin Fitzgerald, senior vice-president of service industry sales, attempted to minimize the effects of the recent controversy regarding Oracle sales to the state of California.

“The only state where it’s actually put us in the penalty box is here in California,” Fitzgerald said. The matter is expected to be cleared up in a week and the company anticipates new revenues from the state, he said.

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