Gates At Lunch: Kinder, Gentler On Oracle?

Microsoft Oracle

During a midday face-to-face with a handful of analysts and industry observers, Gates was gentle in his treatment of database rival Oracle, whose leader once vowed to unseat Gates as the richest man in the world. "Oracle is subject to the same ugly economics as any software company. It's just the nature of this business," said Gates, relaxed, light and playful in his demeanor and mood, noting how difficult it is for all software companies to continue integrating features in product upgrades that customers deem essential. Both Microsoft and Oracle managed to report profits during their last fiscal quarters, yet Microsoft increased profit and revenue while Oracle's revenue was down.

Gates can afford to be sympathetic: Oracle revenue was down 16 percent during its last fiscal quarter while Microsoft's SQL Server revenue was up 22 percent.

Acknowledging some innovations in Oracle's database, Gates quipped that there are three types of innovations: important innovations owned by one company, innovations owned by a few companies and innovations that no one wants. Oracle's innovations, Gates claimed, "is a mix of the latter two."

But he readily admitted that feature glut is a challenge for all software companies, including Microsoft. "Software companies have this durability problem," said Gates, who quickly became encircled by curious onlookers during the hourlong luncheon at the Microsoft Conference Center. "It's kind of a pain. ... We have to stun them [with new features, so they say, 'Oh ... I personally have to have that.' "

This year, Microsoft executives ranging from Gates to Microsoft CEO Steve Ballmer to Senior Vice President of .Net Enterprise Servers Paul Flessner seemed to hone in on IBM and Linux as Microsoft's key competition for fiscal year 2003, minimizing the presence of traditional rivals such as Oracle and Sun Microsystems.

But that's not to say Microsoft isn't paying close attention.

Just before lunch, Flessner reported the Windows and Unix database markets are now within $500 million of each other, a significant jump on the Windows side that is likely to benefit Microsoft.

In a jab at Sun, Flessner also noted that Intel and other x-86-based servers were down less than 1 percent while Unix servers were down significantly. "Solaris has had a tough year," Flessner said, noting that revenue is down 20 percent to 30 percent while Windows revenue is up 10 percent.