Oracle Paints Picture Of Subdued Fourth Quarter

Oracle

Oracle CFO Jeff Henley painted a gloomy picture for the current fourth fiscal quarter, ending in May. "We will assume things aren't getting any better. We feel license growth will be very similar [to this quarter: negative 25 to negative 30 percent. And, based on that, earnings [may be down 1 to 2 cents from last year," Henley told analysts on Oracle's third-quarter earnings call Thursday afternoon.

For its third quarter ended Feb. 28, Oracle said software license sales fell 30 percent, continuing their slide. Overall the company logged $2.2 billion in revenue, down 17 percent from $2.6 billion for the year-ago quarter. It earned 9 cents per share, down from 10 cents per share for last year's quarter as operating income fell from $583 million to $508 million. Operating margins were up 2 percent to 35 percent from the year-ago quarter.

"Despite economic data, it appears to us that improvement in tech spending will lag. ... [Companies are slow to add back head count and spend capital," Henley said.

The result is that corporate customers continue to sit on their wallets, he said. Many are still "digesting projects started in last few years. ... Large forward buying is almost nonexistent," he said.

And Oracle, which soared on dot-com spending and on sales into telcos and high-tech manufacturers in the past, has now been disproportionately hurt by the ills plaguing those industries, he noted.

Many observers said the company is seeing its high-end Oracle9i database under siege from lower-priced offerings from IBM and Microsoft, a contention hotly refuted by Henley and Oracle Chairman Larry Ellison.

"IBM claims big gains in its database revenue, but they won't tell you what they are. They say we're losing share. I don't believe we're losing share by any measure except IBM's," Ellison said.

But in a down economy, the company is clearly feeling pain in sales of its high-end-and pricey database. It also said sales of its less-costly Oracle9i Standard Edition rose 14 percent for the quarter and hopes to upgrade some "significant number" of those buyers to the enterprise edition as the economy improves. The standard edition also helps Oracle compete against Microsoft SQL Server in departmental accounts, Henley said.

In enterprise deals, integrators said Oracle9i is roughly twice as expensive as IBM's DB2. In roughly equivalent configurations--on an eight-CPU server running Windows 2000,--Oracle9i can cost $640,000 compared with $343,000 for DB2 and $160,000 for Microsoft SQL Server, according to a price analysis by Software Spectrum, a Garland, Texas-based software reseller.

But, others contend that when the extras that ship with Oracle are factored in, that company fares better.

"DB2 [price is substantially higher when you add in all of the extra products that are included in Oracle9i. ... DB2 is two to four times higher the last time I looked if you factor all that in," said Richard Niemec, president of TUSC, a large Chicago-area Oracle integrator. Niemec acknowledged that not everyone "uses all the business intelligence and application server products. ... But as you get a larger business that requires all these pieces, Oracle is more attractive at the middle tier and substantially more attractive when you use clustering."