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Oracle Corporation

Oracle Corporation

500 Oracle Parkway
Redwood Shores, California 94065
U.S.A.

Telephone: (650) 506-7000
Fax: (650) 506-7200
Web site: http://www.oracle.com

Public Company
Incorporated:
1977 as System Development Laboratories
Employees: 41,650
Sales: $10.2 billion (2004)
Stock Exchanges: NASDAQ
Ticker Symbol: ORCL
NAIC: 511210 Software Publishers; 514210 Data Processing Services

Oracle Corporation is the number one supplier of information management software, and the second largest independent software firm in the world. Government agencies and corporations, large and small, use Oracle's database management software for an ever increasing range of business applications. Oracle also provides an array of services, from product support to consulting and educational tools in its quest to provide innovative global business solutions. Oracle continually updates its proprietary software, researches and develops new applications, and even publishes two magazinesthe aptly named Oracle and Profit to supply its customers with the latest and best data collection and management systems possible.


Databases for the CIA: 197781

Oracle Corporation traces its roots to 1977 when two computer programmers, Lawrence J. Ellison and Robert N. Miner, teamed up to start a new software firm. Ellison had been a vice-president of systems development at Omex Corporation and a member of a pioneering team at Amdahl Corporation, which developed the first IBM-compatible mainframe computer. Miner had served as Ellison's former supervisor at another computer company, Ampex Corporation. Both men had significant experience designing customized database programs for government agencies, and the pair persuaded the Central Intelligence Agency (CIA) to let them pick up a lapsed $50,000 contract to build a special database program. Ellison and Miner then pooled $1,500 in savings to rent office space in Belmont, California, and start Oracle for the purpose of developing and marketing database management systems (DBMS) software. Ellison became president and chief executive and took charge of sales and marketing for the new company, while Miner supervised software development. The pair of entrepreneurs sought out well known private venture capitalist Donald L. Lucas to become chairman of the board.

While working on the CIA project, Ellison continued monitoring technical documents published by IBM, a practice he had established while working as a programmer at Amdahl. Ellison noticed the computer giant was interested in new types of speedy, efficient, and versatile database programs, called relational databases, that were projected to one day allow computer users to retrieve corporate data from almost any form. What was expected to make this possible was an IBM innovation called the Structured Query Language (SQL), a computer language that would tell a relational database what to retrieve and how to display it.

Banking on what later proved to be a correct hunchthat IBM would incorporate the new relational database and SQL into future computersEllison and Miner set out to provide a similar program for digital minicomputers and other types of machines. In 1978 Miner developed the Oracle RDBMS (relational database management system), the world's first relational database using SQL, which would allow organizations to use different-sized computers from different manufacturers but use standardized software. A year after its pioneering development, Oracle became the first company to commercially offer a relational database management system, two years before IBM debuted its own RDBMS system.

After its initial innovation, Oracle quickly became profitable and by 1982 the company, then with 24 employees and a mainframe and minicomputer customer base of 75, reported annual revenues of nearly $2.5 million. In the same year, the company expanded internationally with the creation of Oracle Denmark. About one-fourth of 1982 revenues were poured back into research and development, leading to a 1983 Oracle innovation, the first commercially available portable RDBMS. The portable RDBMS enabled companies to run their DBMS on a range of hardware and operating systemsincluding mainframes, minicomputers, workstations, and personal computersand helped Oracle double revenues to over $5 million in 1983.


Expansion, Competition, Going Public: 198486

By the early 1980s Oracle began jousting with new entrants in the DBMS market. However, the company's reputation for innovations and its aggressive advertising style, which mentioned competitors' products by name, helped to push Oracle's sales upward. By 1985 the company brought in more than $23 million in revenues. The following year annual sales more than doubled to a record $55.4 million.


The year 1986 proved to be transitional and historic for Oracle in a number of respects. In March, Oracle made its first public offering of stock, selling one million common shares, then lauded itself as the fastest-growing software company in the world, having recorded 100 percent-or-better growth in revenues in eight of its first nine years. Much of this growth came from Oracle's targeted end usersmultinational companies with a variety of what had previously been incompatible computer systems. By 1986 Oracle's customer base had grown to include 2,000 mainframe and minicomputer users represented by major international firms operating in such fields as the aerospace, automotive, pharmaceutical, and computer manufacturing industries, as well as a variety of government organizations.

To serve these customers, by 1986 Oracle had established 17 international marketing subsidiaries based in Australia, Canada, China, Europe, and the United Kingdom to market its products in a total of 39 countries. By the same time Oracle had also expanded the scope of its business operations to include related customer support, education, and consulting services. One of the principal reasons for Oracle's success was the 1986 emergence of SQL as the industry's standard language for relational database management systems, which in turn led to increased market acceptance of Oracle's SQL-compatible RDBMS.

In 1986 Oracle expanded its RDBMS product line and debuted another industry first, a distributed DBMS based on the company's SQL*Star software. Under the distributed system, computer users could access data stored on a network of computers in the same way and with the same ease as if all a network's information were stored on one computer. Although initially limited to operating principally on IBM and IBM-compatible computers, the Oracle SQL*Star software was the first commercially available software of its kind and was soon expanded to include dozens of additional computer brands and models.


Setting the Standard: 198790

By 1987 Oracle had emerged as the relational DBMS choice of most major computer manufacturers, allowing the company to expand the scope of hardware brands on which its products could operate. Largely as a result of such acceptance, Oracle achieved two major milestones in 1987 by topping $100 million in sales and becoming the world's largest database management software company with more than 4,500 end users in 55 countries.

During the late 1980s Oracle expanded its development, sales, and support partnerships with computer hardware manufacturers. Its partnerships with software manufacturers also began to blossom, and in 1987 the number of software companies using Oracle products grew fivefold. In order to maximize the benefits of these partnerships, Oracle established its VAR (Value-Added Reseller) Alliance Program, aimed at building cooperative selling and product-planning alliances with other software manufacturers.

Oracle continued its tradition of innovation and firsts in 1988 when it introduced a line of accounting programs for corporate bookkeeping, including a database for personal computers to work in conjunction with the Lotus Development Corporation's top-selling Lotus

1-2-3 spreadsheet program. The company also introduced its Oracle Transaction Process Subsystem (TPS), a software package designed to speed processing of financial transactions. Oracle's TPS opened a new market niche for the company, targeting customers such as banks needing to process large numbers of financial transactions in a short period of time.

In 1988 Oracle unveiled its initial family of computer-aided systems engineering (CASE) application development tools, including its CASE Dictionary, a multiuser shared repository for items pertaining to a computer application development project; and CASE Designer products, a graphical "workbench" of computer tools that enabled computer application analysts and designers to develop diagrams directly on a computer screen and automatically update the CASE Dictionary.

Company Perspectives:

For nearly 30 years, Oracle has been building and refining a technology platform that delivers the highest-quality information while reducing your cost of doing business. Because if your information systems can create and manage high-quality data, your employees can improve their efficiency, make better decisions, and measure their success. We operate our business on four key principlesSimplify: Speed information delivery with integrated systems and a single database; Standardize: Reduce cost and maintenance cycles with open, easily available components; Automate: Improve operational efficiency with technology and best practices; Innovate: Drive your business forward in new ways with Oracle architecture. By adhering to these principles, Oracle has saved more than US$1 billionso far. And customers are saving, too, by improving their ability to use information and IT as strategic assets.

During Oracle's first decade of operations its relational database system was expanded for use on about 80 different hardware systems. Extending its alliances with hardware manufacturers, Oracle introduced its first version of a database management system program to run on Macintosh personal computers in 1988. The company also formed a new subsidiary, Oracle Complex Systems Corporation (OCSC), adding systems-integration services to its line of customer services. Shortly after the subsidiary was formed, OCSC purchased Falcon Systems, Inc., a systems integrator company.


In 1989 Oracle's emergence as a major player in the software industry was recognized by Standard & Poor Corporation, which added Oracle to its index of 500 stocks. Additionally, Oracle relocated from Belmont to a new, larger office complex in nearby Redwood Shores, California. Seeking to break into new markets, Oracle formed a wholly owned subsidiary, Oracle Data Publishing, in December 1989 to develop and sell reference material and other information in electronic form. Oracle closed its books on the 1980s posting annual revenues of $584 million, netting $82 million in profit.


Oracle Stumbles: 199092

Oracle entered the 1990s anticipating continued high growth and in January 1990 the company decided to seek $100 million in public financing to support its expansion. But the company's expectations were misplaced and its image as a darling of Wall Street soon began to tarnish. In March 1990 Oracle announced a record 54 percent jump in quarterly revenues but a paltry 1 percent rise in net earnings. The company's first flat earnings quarter, attributed to an accounting glitch, shook Wall Street out of its long love affair with Oracle; the day after the earnings announcement the company's stock plummeted $7.88 to $17.50 in record one-day volume with nearly 21 million of the company's 129 million shares changing hands.

In April 1990 a dozen shareholders brought suit against Oracle, charging the company had made false and misleading earnings forecasts. On the heels of this lawsuit, Oracle announced it would conduct an internal audit and immediately restructure its management team with Lawrence Ellison assuming the additional post of chairman, while Lucas remained a director. Oracle also formed a separate domestic operating subsidiary, Oracle USA, aimed at addressing its domestic management and financial problems, which the company attributed to poor earnings. Gary D. Kennedy was named president of the new subsidiary.


For the fiscal year ending May 31, 1990, Oracle initially posted record sales of $970.8 million and profits of $117.4 million; but these results were below Oracle's own estimates. The company's stock price fell to $19.88 then plunged to $11.62 in August after an internal audit forced the company to restate earnings for three of its four fiscal quarters. As a result, Oracle negotiated a $250 million revolving line of credit from a bank syndicate. A few weeks later the company reported its first-ever quarterly loss of nearly $36 million with expenses outpacing revenues by 20 percent; the stock tumbled once again, having lost more than $2.7 billion in market value in six months.


In response to widespread criticism concerning overzealous sales techniques, accounting methods, poor management controls, and miscalculations of market strength, Oracle underwent another management shakeup. After less than four months on the job, Kennedy was replaced as president of Oracle USA by Michael S. Fields, a company vice-president. Oracle also moved to reduce its annual growth rate goals from 50 to 25 percent; laid off 10 percent of its domestic workforce of 4,000; consolidated Oracle USA's financial and administrative operations; and folded various international units into a single division.


Despite Oracle's most turbulent year in its history, 1990 was not without its firstswith communism bowing out in Eastern Europe, Oracle formed an Eastern European subsidiary to serve its first customer sites in Bulgaria, Czechoslovakia, Hungary, Poland, Romania, and what was then the Soviet Union. Chief Executive Ellison was also lauded for his accomplishments, being named Entrepreneur of the Year for 1990 by the Harvard School of Business. Oracle began 1991, however, on a sour notereporting quarterly losses of $6.7 million in early January despite a 29 percent increase in revenue. The report again sent shock waves rippling through Wall Street, and Oracle's stock fell to $6.62. By the middle of January 1991 Oracle's bankers had cut the company's line of credit from $170 million to $80 million while granting the company much-relaxed loan covenants.

Oracle announced in March 1991 it would restate prior financial results because of accounting errors and named a new chief financial officer, Jeffrey Henley. As part of its restatement, Oracle adopted a change in accounting methods requiring sales be booked when software was delivered, not when a contract was signed as previously allowed. Oracle's restatement of 1990 figures lowered annual revenue more than $50 million to $916 million and decreased earnings to $80 million. The increased need to use reserve funds for accounts receivable put Oracle in violation of its loan agreements and for the second time in as many fiscal quarters the company sought a waiver of loan requirements.

Key Dates:

1977:

System Development Laboratories, the precursor to Oracle, is founded.

1978:

The Oracle Relational Database Manager Program is developed.

1982:

Oracle forms its first international subsidiary, Oracle Denmark.

1983:

The company becomes Oracle Corporation.

1986:

Oracle goes public on NASDAQ and debuts its SQL*Star software.

1987:

Oracle ranks as the world's largest database management software company.

1991:

The company experiences its first fiscal loss.

1992:

Nippon Steel Corporation buys a stake in Oracle Japan; Oracle7 makes its debut.

1997:

Network Computer Inc. is established.

1999:

Oracle Japan goes public.

2000:

Oracle E-Business Suite 11i and Technology Network (OTN) Xchange are introduced.

2001:

Oracle's database system is the first to pass nine industry standard security evaluations.

2003:

Oracle attempts a hostile takeover of rival PeopleSoft.

2004:

Department of Justice files multiple antitrust lawsuits to prevent Oracle's takeover of PeopleSoft.

Oracle's sales growth continued to decline from previous years and the company finally admitted it had expanded too rapidly. For 1991 Oracle topped the $1 billion sales plateau for the first time in history and at the same time posted its first annual loss of $12.4 million. In October the company secured a new $100 million revolving line of credit from another bank syndicate. Two months later Oracle negotiated an agreement for $80 million in financing from Nippon Steel Corporation, which also agreed to sell Oracle products in Japan. In return, Nippon was given rights to purchase as much as 25 percent of Oracle's marketing subsidiary in Japan, duly named Oracle Japan.


By the end of its 1992 fiscal year, Oracle's balance sheet had improved as sales inched modestly upward and earnings rebounded, with the company reaching $1.18 billion in sales and $61.5 million in profits. Oracle entered 1993 with no bank debt, solid long-term financing in place, and in an improved financial position controlled by a revamped management team. Ellison told Forbes magazine in 1991: "You pay a price for growing too rapidly."


Oracle 7 and the Promise of Interactive TV: 199395

The release of Oracle 7 in the early 1990s seemed to signal the end of Oracle's brief taste of corporate mortality. The program supported a larger number of users than previous versions, handled more transactions, allowed data to be shared between multiple computers across a network, and improved application development features. It won industry praise, and in 1993 Ellison began talking up Oracle's role in a new technology to expand the role of databases even further. In a partnership with British Telecom and Apple Computer, Oracle used its software to deliver video on demand to a test group of interactive TV users in Great Britain.

By early 1994 Ellison's new push to develop a consumer market for Oracle's databases had evolved into the "media server alliance," in which the company's Oracle Media Server would be the database engine supplying interactive TV viewers with, for example, movies ordered through a library of digital multimedia. The hardware motor for this future super media service would be massive parallel computers made by nCube, a company in which Ellison was the principal shareholder. With his typical ebullience, Ellison declared, "I believe the sheer impact of the interactive network into the home will rival that of the electric light, the telephone, and the television."

By mid-1994 Oracle's sales had reached $2 billion, its consulting services accounted for a healthy 20 percent of sales, and it fueled corporate America's switch from the mainframe to the client/server computing model. The year also saw the release of Oracle 7's version 7.1, an improved program that supported slow or unreliable network environments; the copying of data between different locations; and the processing of data on multiple processorsan application increasingly favored in the so-called "data warehouses" used by large corporations. To serve the data warehouse market better, in 1995 Oracle acquired the product line of Information Resources, Inc. (IRI), whose online analytical processing (or OLAP) software enabled users to perform sophisticated business analyses in data warehouses. IRI's products also allowed users to incorporate video into their data warehouses, and when Oracle released version 3 of Oracle 7 in late 1995, these new video and data-crunching capabilities enhanced its claim of having the most powerful and most multimedia-ready database product on the market.

With its share of the data management market now at 40 percent, Oracle unveiled Oracle Workgroup/2000, a forerunner of Oracle 8 to enable users to run and access databases on laptops as well as larger computers. By retooling its products to work with smaller computers, Oracle hoped to exploit the transition underway to more localized client/server computing environments: because these client and server computers were by definition more numerous than the huge and expensive mainframe computers, Oracle stood ready to enjoy a potentially vast increase in sales. Oracle's traditional rivals, Sybase and Informix, were dropping back in market share, and Microsoftwhose enormous resources enabled it to absorb the cost of pricing its own database programs below its competitorswas positioning its SQL Server database to eventually compete head on with Oracle.


The Network Computer and Oracle 8: 199697

As Oracle readied Oracle 8 for release, it introduced its WebSystem software in late 1995 to take advantage of the growing popularity of the Internet and its small-scale in-house cousins, the corporate intranet. WebSystem promised to enable corporations to organize and distribute their data over the Internet. With Oracle's revenues topping $4 billion, in May 1996 Ellison took on the "Wintel" (Microsoft Windows software plus Intel's processing hardware) monolith by unveiling the "Network Computer" (NC). Joining with such partners as Sun Microsystems and Netscape, Ellison offered to free corporations from the costly upgrades Intel and Microsoft forced on them with every new release of Windows and the x86 family of processors. Using Ellison's $500 NCa kind of stripped-down PC with no hard drive and therefore no applicationsdata and applications could be stored and accessed as needed via the World Wide Web or remote server computers, equipped, naturally, with Oracle's databases. Since corporations would no longer have to buy storage and applications for each computer, they could save millions with no loss in functionality, and Oracle would have a vast new market for its database products. By late 1996 this strategy had evolved into the "Network Computing Architecture," a complicated new three-tier world for corporate computing consisting of a client computer (the computer accessed by the user), an applications (such as word processing software) server, and a database server.

In June 1997 Oracle 8 was launched with much fanfare, and combined Oracle's longtime relational database features and bundled with new technology related to the Network Computer project. With annual sales of $5.7 billion, a ten-year annual growth rate of 30 percent, and 50 percent of the world's relational database market, Oracle seemed to be in a position to confidently believe Oracle 8 and the NC heralded "nothing less than a new era in computing." Since Ellison's announcement of the inexpensive NC a year before, however, rivals Microsoft and Intel had reacted quickly to the Oracle/Sun/Netscape threat. Microsoft had purchased WebTV, a manufacturer of an NC-like computer-television hybrid that had actually come to market, and Intel had slashed processor prices to bring powerful full-featured personal computers below the $1,000 price mark. Since Oracle's NC computers were not scheduled to reach users until late 1997 at the earliest, Ellison's multimillion-dollar NC marketing campaign seemed premature.


Because the Asian and Pacific Rim countries accounted for 15 percent of Oracle's sales and were its fastest-growing market, when their economies began to collapse in late 1997 Oracle felt the brunt. In December 1997 Ellison announced Oracle's earnings, though still expanding at a 35 percent annual rate, would be lower than projected. A record 172 million Oracle shares changed hands on the news, sending Oracle's stock price down 30 percent and wiping out more than $9 billion in equity.


Speaking Softer: 19982001

Ellison took a conciliatory tone in a press conference in early 1998 when he admitted Oracle had erred in talking up the NC before the product had been realized. "We just could not deliver network computing," he admitted. Oracle's public statements began to focus less on the NC and more on other products such as its first database with Java support and its updated database management software, Oracle 8. While Oracle 8 experienced increasing competition from Microsoft's SQL Server database product, it nevertheless won several IT awards. In mid-1998 Oracle released an updated Oracle 8 to meet the Microsoft challenge head on. At the close of its 1998 fiscal year in May, Oracle could take solace in quarterly sales of $2.4 billiona 26 percent increase over the previous year.


In 1999 Oracle teamed up with Hewlett-Packard Company to integrate the computer giant's e-business applications with its database management software, and partnered with Ford Motor Company to form AutoXchange, an Internet-based purchasing program. AutoXchange's design connected Ford and its numerous suppliers, who would pay fees based on the size and volume of their transactions. Oracle and Ford projected these fees could top $1 billion in less than two years; the two firms intended to split any earnings.

In early 2000 Oracle established multiple joint ventures, including one with Texas-based Entrust Technologies, Inc. for a new database program called Oracle Advanced Security. The program included the latest technological advances in online encryption and authentication. Other partnerships involved Novistar, which teamed up with Oracle to provide broad-based e-business software to the energy industry, and Sears Roebuck & Company and Carrefour S.A. signed with Oracle to produce a worldwide business-to-business e-commerce marketplace for retailers. Called GlobalNet-Exchange, the Internet system was intended to replace the electronic data interchange (EDI) used by retailers. Sears CEO and Chairman Arthur Martinez commented to Women's Wear Daily (February 29, 2000), "This is a revolution in retail. It will forever redefine supply-chain processes, increase collaboration with suppliers and reduce supply-chain costs." Sears and Carrefour owned majority stakes in GlobalNet-Exchange, Oracle held only a minority share of the startup.

Oracle finished fiscal 2000 with revenues of $10.2 billion and earnings at an all-time high of $6.3 billion due to an extra $4 billion from selling shares in Oracle Japan. By the following year, Oracle prospered like its former self of the 1980s with soaring sales, new product releases, and a myriad of new ventures both in the United States and abroad. The company finished the year with sales close to $11 billion and $2.6 billion in earnings.

Courting Controversy: 2002 and Beyond

For the early 2000s Oracle concentrated on doing what it did best: creating new software management systems for the world's businesses. In 2001 the company's Oracle Small Business Suite was considered "Best of the Web" by Forbes magazine; while Pipeline magazine declared Oracle the "Best International IT Company" of the year. Ellison received an award himself in 2002 from the Executive Club of Chicago, which deemed him International Executive of the Year. Honors and awards aside, Oracle was determined to stay at the top of its game; to this end, the company increased its research and development spending from 11 percent in 2002 (just under $1.1 billion on revenues of $9.7 billion) to 13 percent in 2004 (almost $1.3 billion), which it considered "essential to maintaining our competitive position."


Another facet of Oracle's competitive edge was its consulting and educational businesses, which were not faring as well as hoped. Oracle, however, could afford to give these segments time to develop further, since its software division (both new product licensing and updates) continued to bring in the lion's share of revenues at 73 percent for 2002 ($7.1 billion), 76 percent for 2003 ($7.2 billion), and 79 percent ($8.1 billion) for 2004.


In mid-2003 Oracle initiated a hostile takeover of PeopleSoft Inc. for $5.1 billion. The Pleasanton, California-based PeopleSoft, was in the process of acquiring J.D. Edwards & Company and was not amused by Oracle's takeover bid, no matter how attractive the offer. For its part, Oracle raised its offer several times in the succeeding months, to as high as $9.4 billion, only to be met by a storm of controversy. Few, it seemed, save Ellison were in favor of the takeovershareholders of both firms were unhappy and the Department of Justice got involved over antitrust issues. By the end of 2003, Ellison appeared determined to win the battle whatever the cost. This single-mindedness echoed the hubris of the last decade when Oracle went from being the darling of Wall Street to a pariah. Stock prices fluctuated from a low of $10.53 in the third quarter to a high of $13.26 in the fourth, and year-end revenues fell for the second year in a row to $9.5 billion.

In 2004 most mentions of Oracle were followed by comments over its bid to buy PeopleSoft. Despite the imbroglio, however, it was business as usual. Other innovations included the latest version of its database management software, Oracle 10g, which was released with built-in self-diagnostics and fine-tuning measures. Oracle 10g, like its predecessors, won awards from a number of IT magazines and organizations. Oracle Customer DataHub was also making news as the first program capable of providing a single customer view from several different data-banks. In addition, Oracle partnered with Dell Inc. to have its database software bundled with Dell's PowerEdge servers for small and midsized companies, and with bitter rival Microsoft for limited integration between Oracle 10g and Windows.

In late 2004 Oracle was still hoping to bring PeopleSoft into its fold. Not only were there injunctions and suits in the way, but PeopleSoft had poison pill measures in place. While awaiting a resolution, Oracle shuffled its top management by separating the roles of CEO and chairman. Ellison remained chief executive and a director, while Executive Vice-President and CFO Jeff Henley, who had been with the company since 1991, moved up to chairmanship. Further, after three years of falling revenues, Oracle rebounded in fiscal 2004 with sales of $10.2 billion and earnings of $2.7 billion, with stock prices reaching a high of $14.89 in the third quarter to a low of $11.23 in the fourth quarter.

Oracle was in flux in late 2004 and early 2005; acquiring PeopleSoft would add dramatically to its software capabilities but at a very steep price. Oracle already had 55 marketing and sales offices throughout the United States and 70 international locations; if combined with PeopleSoft the assets of the two companies would indeed control a significantly larger portion of the database management and related software markets.


Principal Subsidiaries

Datalogix International, Inc.; Oracle Credit Corporation; Oracle China, Inc.; Oracle Corporation Canada, Inc.; Oracle Corporation Ireland Ltd.; Oracle Corporation Japan; Oracle Corporation United Kingdom Limited (U.K.); Oracle Danmark ApS; Oracle Deutschland GmbH (Germany); Oracle do Brasil (Brazil); Oracle France S.A.; Oracle Corporation South Africa Proprietary Ltd.; Oracle Iberica S.R.L.; Oracle Kft; Oracle Mexico S.A. de C.V.; Oracle Nederland B.V. (Netherlands); Oracle Norge A.S. (Norway); Oracle Portugal Sistemas de Informacao Lda.; Oracle Publishing; Oracle Svenska AB (Sweden); Oracle Systems China (Hong Kong) Limited.


Principal Competitors

IBM Corporation; Microsoft Corporation; Borland Software Corporation; Business Objects S.A.; Cognos Incorporated; Hyperion Solutions Corporation; NCR Corporation; PeopleSoft, Inc.

Further Reading

Brandt, Richard, and Evan I. Schwartz, "The Selling Frenzy That Nearly Undid Oracle," Business Week, December 3, 1990.

Cook, William J., "Shifting into the Fast Lane," U.S. News & World Report, January 23, 1995, p. 52.

Couretas, John, and Aaron Robinson, "GM, Ford to Do More Purchasing on Web," Crain's Detroit Business, November 8, 1999, p. 7.

Hatlestad, Luc, "The Greatest Show on Earth," Red Herring, August 1997.

Maloney, Janice, "Larry Ellison Is Captain Ahab and Bill Gates Is Moby Dick," Fortune, October 28, 1996.

Markoff, John, "Silicon Duo to Take on Microsoft," International Herald Tribune, December 14, 1998.

"Microsoft, Oracle Work on Integration Issues," May 24, 2004, p. 95.

O'Brien, Jennifer M., "HP e-Speaks, Resellers Listen," Computer Dealer News, September 3, 1999, p. 1.

"Oracle, Dell Bundle in Search of SMB Market," eWeek, April 6, 2004.

"Oracle in Overdrive," Business Week, June 28, 2004, p. 57.

"Oracle Profit Rises As Margin Grows," Wall Street Journal, June 16, 2004, p. A3.

"Oracle's Net Gained 16% in Quarter," Wall Street Journal, September 15, 2004, p. A3.

Perkins, Anthony, "Oracle CEO Larry Ellison on Building the Multimedia Library," Red Herring, May 1994.

Pita, Julia, "The Arrogance Was Unnecessary," Forbes, September 2, 1991.

"Return of the Prophet," Economist, June 28, 1997, p. 66.

Ryan, Thomas J., "Sears, Carrefour Join in Venture with Oracle," Women's Wear Daily, February 29, 2000, p. 2.

Schlender, Brenton R., "Software Tiger: Oracle Spurs Its Fast Growth with Aggressive Style," Wall Street Journal, May 31, 1989.


Roger W. Rouland
updates: Paul S. Bodine, Nelson Rhodes

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Oracle Corporation

Oracle Corporation

500 Oracle Parkway
Redwood Shores, California 94065
U.S.A.
(650) 506-7000
Fax: (650) 506-7200
Web site: http://www.oracle.com

Public Company
Incorporated: 1977
Employees: 34,000
Sales: $5.68 billion (1997)
Stock Exchanges: NASDAQ
Ticker Symbol: ORCL

SICs: 7372 Computer Software Manufacturers; 5731 Television & Radio Dealers; 5734 Computer Software; 7371 Computer Services

Oracle Corporation is the largest supplier of database management systems software and the second largest independent software and services company in the world. The companys principal business activities include the development and marketing of an integrated line of computer software products used for database management, computer-aided systems engineering, applications development, and decision support, as well as families of software products used for financial, human resource, and manufacturing applications (known as enterprise resource planningor ERPsoftware). Through its subsidiaries, Oracle markets its products along with related consulting, educational, support, and systems integration services in more than 140 countries.

Databases for the CIA: 1977-81

Oracle Corporation traces its roots to 1977 when two computer programmers, Lawrence J. Ellison and Robert N. Miner, teamed up to start a new software firm. Ellison had been a vice-president of systems development at Omex Corporation and a member of a pioneering team at Amdahl Corporation, which developed the first IBM-compatible mainframe computer, while Miner had served as Ellisons former supervisor at another computer company, Ampex Corporation. Both men had significant experience designing customized database programs for government agencies, and the pair persuaded the Central Intelligence Agency (CIA) to let them pick up a lapsed, $50,000 contract to build a special database program. Ellison and Miner then pooled $1,500 in savings to rent office space in Belmont, California, and start Oracle for the purpose of developing and marketing database management systems (DBMS) software. Ellison became president and chief executive and took charge of sales and marketing for the new company, while Miner supervised software development. The pair of entrepreneurs sought out well-known private venture capitalist Donald L. Lucas to become chairman of the board.

While working on the CIA project, Ellison continued monitoring technical documents published by IBM, a practice he had established while working as a programmer at Amdahl. Ellison noticed that the computer giant was interested in new types of speedy, efficient, and versatile database programs, called relational databases, that were projected to one day allow computer users to retrieve corporate data from almost any form. What was expected to make this possible was the IBM innovation called the Structured Query Language (SQL), a computer language that would tell a relational database what to retrieve and how to display it.

Banking on what later proved to be a correct hunchthat IBM would incorporate the new relational database and SQL into future computersEllison and Miner set out to provide a similar program for Digital minicomputers and other types of machines. In 1978 Miner developed the Oracle RDBMS (relational database management system), the worlds first relational database using SQL, which would allow organizations to use different-sized computers from different manufacturers but still standardize on software. A year after its pioneering development, Oracle became the first company to commercially offer a relational database management system, two years before IBM debuted its own RDBMS system.

After its initial innovation, Oracle quickly became profitable, and by 1982 the company, then with 24 employees and a mainframe and minicomputer customer base of 75, reported annual revenues of nearly $2.5 million. That same year the company began its international expansion with the creation of Oracle Denmark. About one-fourth of 1982 revenues were poured back into research and development, leading to a 1983 Oracle innovation, the first commercially available portable RDBMS. The portable RDBMS enabled companies to run their DBMS on a range of hardware and operating systemsincluding mainframes, minicomputers, workstations, and personal computersand helped Oracle to double revenues that year to over $5 million.

Expansion, Competition, Going Public: 1982-86

By the early 1980s Oracle began jousting with new entrants in the DBMS market. But the companys reputation for innovations and its aggressive style of advertising, which mentioned competitorsproducts by name, helped to push Oracles sales upward, and by 1985 the company logged better than $23 million in revenues. The following year annual sales more than doubled to a record $55.4 million.

The year 1986 proved to be transitional and historical for Oracle in a number of respects. In March, Oracle made its first public offering of stock, selling one million common shares. That same year Oracle lauded itself as the fastest-growing software company in the world, having recorded 100 percent-or-better growth in revenues in eight of its first nine years. Much of that growth came from Oracles targeted end usersmultinational companies with a variety of what had previously been incompatible computer systems. By 1986 Oracles customer base had grown to include 2,000 mainframe and minicomputer users represented by major international firms operating in such fields as the aerospace, automotive, pharmaceutical, and computer manufacturing industries, as well as a variety of government organizations.

To serve those customers, by 1986 Oracle had established 17 international marketing subsidiaries based in Australia, Canada, China, Europe, and the United Kingdom to market Oracle products in a total of 39 countries. By the same time, Oracle had also expanded the scope of its business operations to include related customer support, education, and consulting services.

One of the principal reasons for Oracles success during the mid-1980s was the 1986 emergence of SQL as the industry standard language for relational database management systems, which in turn led to increased market acceptance of Oracles SQL-compatible RDBMS. In 1986 Oracle expanded its RDBMS product line and debuted another industry first, a distributed DBMS based on the companys SQL*Star software. Under the distributed system, computer users could access data stored on a network of computers in the same way and with the same ease as if all a networks information were stored on one computer. Although initially limited to operating principally on IBM and IBM-compatible computers, the Oracle SQL*Star software was the first commercially available software of its kind and was soon expanded to include dozens of additional computer brands and models.

Setting the Standard: 1987-90

By 1987 Oracle had emerged as the relational DBMS choice of most major computer manufacturers, allowing the company to expand the scope of hardware brands on which Oracles products could operate. Largely as a result of such acceptance, in 1987 Oracle achieved two major milestones by topping $100 million in sales and becoming the worlds largest database management software company with more than 4,500 end users in 55 countries.

During the late 1980s Oracles growth had a spiraling and enticing effect within the computer industry, allowing the company to further expand its development, sales, and support partnerships with computer hardware manufacturers. Oracles partnerships with software manufacturers also began to blossom, and in 1987 the number of software companies using Oracle products as a foundation for their software applications grew fivefold. In order to maximize the benefits of these partnerships, in 1987 Oracle established its VAR (Value-Added Reseller) Alliance Program, aimed at building cooperative selling and product-planning alliances with other software manufacturers.

Oracle continued its tradition of innovation and firsts in 1988 when it introduced a line of accounting programs for corporate bookkeeping, including a version of a database for personal computers to work in conjunction with the Lotus Development Corporations top-selling Lotus 1-2-3 spreadsheet program. That same year the company introduced its Oracle Transaction Process Subsystem (TPS), a software package designed to speed processing of financial transactions. Oracles TPS opened a new market niche for the company, targeting customers such as banks that needed software to process large numbers of financial transactions in a short period of time.

Company Perspectives

Oracle Corporation is the largest supplier of database software and the second largest supplier of business applications in the world. Our products include the OracleS database, server-based development tools, and business applications for the front and back office.

The strategy for our database business is simple: decrease the total cost of ownership of mission-critical database applications while increasing the quality of service. How? Minimize the labor required to run your computer network. Moving database applications off user managed desktop PCs and onto professionally managed application servers is the key.

Our business applications do more than automate back office processes. They automate the front office too. And they provide the information that management needs: Our Applications Data Warehouse monitors key business metrics and delivers fast answers to hard questions.

In 1988 Oracle unveiled its initial family of computer-aided systems engineering (CASE) application development tools, including its CASE Dictionary, a multi-user, shared repository for items pertaining to a computer application development project; and CASE Designer products, a graphical workbench of computer tools that enabled computer application analysts and designers to develop diagrams directly on a computer screen and automatically update the CASE Dictionary.

During Oracles first decade of operations its relational database system was expanded to operate on about 80 different hardware systems. Extending its alliances with hardware manufacturers, in 1988 Oracle introduced its first version of a database management system program to run on Macintosh personal computers. Also in that year Oracle formed the subsidiary Oracle Complex Systems Corporation (OCSC), adding systems-integration services to its line of customer services. Shortly after the subsidiary was formed, OCSC purchased Falcon Systems, Inc., a systems integrator company.

In 1989 Oracles emergence as a major player in the software industry was recognized by Standard & Poor Corporation, which added Oracle to its index of 500 stocks. That same year the company relocated its corporate headquarters from Belmont to a new, larger office complex in nearby Redwood Shores, California. Seeking to break into new markets, Oracle formed the wholly owned subsidiary Oracle Data Publishing in December 1989 to develop and sell reference material and other information via electronic form. Oracle closed its books on the 1980s posting annual revenues of $584 million while netting $82 million.

Oracle Stumbles: 1990-92

Oracle entered the 1990s anticipating continued high growth, and in January 1990 the company decided to seek $100 million in public financing to support its expansion. But the companys expectations were misplaced and its image as a darling of Wall Street soon began to tarnish. In March 1990 Oracle announced a record 54 percent jump in quarterly revenues but only a one percent rise in net earnings. The companys first flat earnings quarter, attributed to an accounting glitch, shook Wall Street out of a long love affair with Oracle; the day after the earnings announcement the companys stock plummeted $7.88 to $17.50 in record one-day volume with nearly 21 million of the companys 129 million shares changing hands.

In April 1990 a dozen shareholders brought suit against Oracle, charging the company had made false and misleading forecasts of earnings. On the heels of that suit, Oracle announced in May that it would conduct an internal audit and immediately restructure its management team with Lawrence Ellison assuming the additional post of chairman, while Lucas remained a director. Oracle also formed a separate domestic operating subsidiary, Oracle USA, aimed at addressing management and financial control problems of domestic operations, which the company attributed to poor earnings. Gary D. Kennedy was named president of the new subsidiary.

For the fiscal year ending May 31, 1990, Oracle initially posted record sales of $970.8 million and a net of $117.4 million. But those results were below Oracles own estimates and the companys stock price responded by falling $2.50 to $19.88. Oracles stock plunged deeper in August to $11.62 after the results of an internal audit were released and Oracle restated earnings for three of its four fiscal 1990 quarters, although initially the restatement did not affect annual sales and earnings.

Late in August 1990 Oracle negotiated a $250 million revolving line of credit from a bank syndicate. A few weeks later Oracle reported the companys first-ever quarterly loss, posting a net loss of nearly $36 million with expenses outpacing revenues by 20 percent. Stockholders suffered a quarterly loss of 27 cents a share and Oracles stock tumbled to $6.25 a share on the announcement, with the stock having lost more than $2.7 billion in market value in six months.

In response to widespread criticism concerning overzealous sales techniques, revenue recognition methods, poor management controls, and miscalculations of market strength, another management shakeup followed. After less than four months on the job, Kennedy was replaced as president of Oracle USA by Michael S. Fields, a company vice-president. Oracle also moved to reduce its annual growth rate goals from 50 to 25 percent, then laid off 10 percent of its domestic workforce of 4,000, cut two levels of its five-tier sales hierarchy, consolidated Oracle USAs financial and administrative operations to come under corporate management control, and folded various international organizations into a single division.

With Oracles stock tumbling, the companys board approved an anti-takeover stockholder rights plan in December 1990, making any hostile attempt to acquire the firm more expensive and more difficult. Despite Oracles most turbulent year in its history, 1990 was not without its firsts. With communism bowing out in Eastern Europe, the subsidiary Oracle Eastern Europe was formed to serve Oracles first customer sites in Bulgaria, Czechoslovakia, Hungary, Poland, Romania, and what was then the Soviet Union.

Oracle began 1991 on a sour note, however, reporting in early January quarterly losses of $6.7 million despite a 29 percent increase in revenue. The report again sent shock waves rippling through Wall Street, and Oracles stock fell to $6.62. By the middle of January 1991 Oracles bankers had cut the companys line of credit from $170 million to $80 million while granting the company much-relaxed loan covenants.

Oracle announced in March 1991 that it would restate prior financial results because of accounting errors and name a new chief financial officer, Jeffrey Henley. As part of its restatement, Oracle adopted a change in accounting methods requiring that sales be booked when software was delivered, not when a contract was signed as previously allowed. Oracles restatement of 1990 figures lowered annual revenue more than $50 million to $916 million and decreased earnings about $25 million to $80 million. The increased need to use reserve funds for accounts receivable put Oracle in violation of its loan covenants and for the second time in as many fiscal quarters the company sought a waiver of loan requirements.

Oracles sales growth continued to decline from previous years and the company was forced to admit it had overexpanded. For fiscal 1991 Oracle topped the $1 billion sales plateau for the first time in history and at the same time posted its first annual loss in history, of $12.4 million. In October of that year Oracle secured a new $100 million revolving line of credit from another bank syndicate. Two months later Oracle negotiated an agreement for $80 million in financing from Nippon Steel Corporation, which also agreed to sell Oracle products in Japan. In return, Nippon was given rights to purchase as much as 25 percent of Oracle Japan, Oracles marketing subsidiary in Japan.

By the end of its 1992 fiscal year, Oracles balance sheet had improved as sales inched modestly upward and earnings rebounded, with the company logging $1.18 billion in sales while netting $61.5 million. Oracle entered 1993 with no bank debt, solid long-term financing in place, and in an improved financial position controlled by a revamped management team. As Oracles chief executive Ellison told Forbes magazine in 1991: You pay a price for growing too rapidly.

Oracle? and the Promise of Interactive TV: 1993-95

The release of Oracle? in 1992-93 seemed to signal the end of Oracles brief taste of corporate mortality. The program supported a larger number of users than previous versions, handled more transactions, allowed data to be shared between multiple computers across a network, and improved application development features. It won industry praise, and in 1993 Ellison began talking up Oracles role in a new technology that would expand the role of (Oracle) databases even further. In a partnership with British Telecom and Apple Computer, Oracle used its software to deliver video on demand to a test group of interactive TV users in Great Britain.

By early 1994 Ellisons new push to develop a consumer market for Oracles databases had evolved into the media server alliance, in which Oracles Oracle Media Server would be the database engine supplying interactive TV viewers with, for example, movies ordered through a digital multimedia library. The hardware motor for this future super media service would be massively parallel computers made by nCube, a company in which Ellison was the principal shareholder. With his typical ebullience, Ellison declared, I believe the sheer impact of the interactive network into the home will rival that of the electric light, the telephone and the television.

By mid-1994, Oracles sales had reached $2 billion, its consulting services were accounting for a healthy 20 percent of sales, and it continued its strategy of internationalizing its franchise and fueling corporate Americas switch from the mainframe to the client/server computing model. The year 1994 also saw the release of Oracle?, version 7.1, an improved release that supported slow, expensive, or unreliable network environments; the copying of data between different locations; and the processing of data on multiple processorsan application increasingly favored in the so-called data warehouses used by large corporations. To serve the data warehouse market better, in 1995 Oracle acquired a product line of Information Resources, Inc. (IRI), whose online analytical processing (or OLAP) software enabled users to perform sophisticated analyses of business data in data warehouses. IRIs products also enabled users to incorporate video into their data warehouses, and when Oracle released version 3 of Oracle? in late 1995, these new video and data-crunching capabilities enhanced its claim of having the most powerful and most multimedia-ready database product on the market.

With its share of the data management market now at 40 percent, Oracle unveiled Oracle Workgroup/2000, a forerunner of OracleS that would enable users to run and access databases on laptops as well as larger computers. By thus retooling its products to work with smaller computers, Oracle hoped to exploit the transition underway to more localized client/server computing environments: because these client and server computers were by definition more numerous than the huge and expensive mainframe computer, Oracle stood ready to enjoy a potentially vast increase in sales. Meanwhile, Oracles traditional rivals, Sybase and Informix, were dropping back in market share, and Microsoftwhose enormous resources enabled it to absorb the cost of pricing its own database programs below its competitorswas positioning its SQL Server database to eventually compete head on with Oracle.

The Network Computer and OracleS: 1996-97

As Oracle readied OracleS for release, it introduced its WebSystem software in late 1995 to take advantage of the growing popularity of the Internet and its small-scale in-house cousins, the corporate intranet. WebSystem promised to enable corporations to organize and distribute their data over the Internet. With Oracles revenues topping $4 billion, in May 1996 Ellison took on the Wintel (Microsoft Windows software plus Intels processing hardware) monolith by unveiling the Network Computer (NC). Joining with such partners as Sun Microsystems and Netscape, Ellison offered to free corporations from the costly upgrades Intel and Microsoft forced on them with every new release of Windows and the x86 family of processors. Using Ellisons $500 NCa kind of stripped-down PC with no hard drive and therefore no applicationsdata and applications could be stored and accessed as needed via the World Wide Web or remote server computers, equipped, naturally, with Oracles databases. Since corporations would no longer have to buy storage and applications for each computer, they could save millions with no loss in functionality, and Oracle would have a vast new market for its database products.

By late 1996, this strategy had evolved into the Network Computing Architecture, a new three-tier world for corporate computing that replaced the client computer-plus-server computer model with a client computer (the computer accessed by the user), an applications (such as word processing software) server, and a database server. Gone, Oracle hoped, was the expensive, fully loaded client computer, and in its place was a virtually hollow interface computer with enough power to access the servers that held its software and all its data. The virtue of this new open standard model, Ellison believed, was that it was independent of any proprietary program like Windows: the Network Computer would run any makers applications, which would be shuttled between the three tiersor across the Internetin self-contained objects using cross-platform programming languages like Java or ActiveX.

Launched with much fanfare in June 1997, OracleS combined Oracles longtime relational database features with the new object-based technology that Ellisons Network Computer was designed to promote. With annual sales of $5.7 billion, a ten-year annual growth rate of 30 percent, and fully 50 percent of the worlds relational database market, Ellison seemed to be in a position to confidently believe what he saidOracleS and the NC heralded nothing less than a new era in computing. Since Ellisons announcement of the inexpensive NC a year before, however, rivals Microsoft and Intel had reacted quickly and effectively to the Oracle/Sun/Netscape threat. Microsoft had purchased WebTV, a manufacturer of an NC-like computer-television hybrid that had actually come to market, and Intel had slashed processor prices to bring powerful full-featured personal computers below the $1,000 price mark. Since NC computers were not scheduled to reach users until late summer 1997 at the earliest, to some Ellisons multimillion-dollar NC marketing campaign seemed premature at best.

Because the Asian and Pacific Rim countries accounted for 15 percent of Oracles sales and were its fastest-growing market, when their economies began to collapse in late 1997 Oracle felt the brunt. In December 1997 Ellison announced that Oracles earnings, though still expanding at a 35 percent annual rate, would be lower than projected. A record 172 million Oracle shares changed hands on the news, sending Oracles stock price down 30 percent and wiping out more than $9 billion in equity.

Speaking Softer: 1998

Ellison took a conciliatory tone in a press conference in early 1998 when he admitted that Oracle had erred in talking up the Network Computer before the product had been realized. We just couldnt deliver network computing, he admitted. Oracles public statements began to focus less on the NC and more on OracleS, which was experiencing increasing competition from Microsofts SQL Server database product. In mid-1998 Oracle released an updated OracleS to meet the Microsoft challenge head on. At the close of its 1998 fiscal year in May, Oracle could take solace in quarterly sales of $2.4 billiona 26 percent increase over the previous year.

Principal Subsidiaries

Network Computer, Inc.; Datalogix International, Inc.; Intercom Global Corporation; Intercom Software Corporation; Intercom Network Corporation; Oracle Credit Corporation; Oracle China, Inc.; Oracle Complex Systems Corporation; Oracle Corporation Japan; Oracle Deutschland GmbH (Germany); Oracle Europe Manufacturing Limited (Ireland); Oracle Corporation United Kingdom Limited (U.K.); Oracle Corporation Canada, Inc.; Oracle Mexico S.A. de C.V.; Oracle Systems China (Hong Kong) Limited.

Further Reading

Brandt, Richard, and Evan I. Schwartz, The Selling Frenzy That Nearly Undid Oracle, Business Week, December 3, 1990.

Cook, William J., Shifting into the Fast Lane, U.S. News & World Report, January 23, 1995, p. 52.

Hatlestad, Luc, The Greatest Show on Earth, Red Herring, August 1997.

Maloney, Janice, Larry Ellison Is Captain Ahab and Bill Gates Is Moby Dick, Fortune, October 28, 1996.

Perkins, Anthony, Oracle CEO Larry Ellison on Building the Multimedia Library, Red Herring, May 1994.

Pita, Julia, The Arrogance Was Unnecessary, Forbes, September 2, 1991.

Return of the Prophet, Economist, June 28, 1997, p. 66.

Schlender, Brenton R., Software Tiger: Oracle Spurs Its Fast Growth with Aggressive Style, Wall Street Journal, May 31, 1989.

Roger W. Rouland
updated by Paul S. Bodine

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Oracle Corporation

Oracle Corporation

founded: 1977



Contact Information:

headquarters: 500 oracle pkwy redwood shores, ca 94065 phone: (650)506-7000 fax: (650)506-7200 toll free: (800)672-2531 email: [email protected] url: http://www.oracle.com

OVERVIEW

Founded in 1977 by computer programmers Lawrence J. Ellison and Robert N. Miner, Oracle Corporation is today the world's largest supplier of information management software and the second largest independent software company in the world, second only to Microsoft Corporation. With revenue of nearly $10.9 billion in fiscal 2001, the company has expanded beyond its original database products into a variety of business applications and online services, including human resource and supply chain management applications.

Headquartered in Redwood City, California, Oracle was established by founders Ellison and Miner to take commercialize the technology for a relational database, the company's core product. That technology, as well as new Oracle applications developed in the years since its founding, can be found in nearly every industry around the world today. Of the Fortune 100 companies, 98 use Oracle software in their everyday operations. The company was the first software company to develop and market 100 percent Internet-enabled enterprise software across its entire product line.

For aspiring computer technology entrepreneurs, colorful Oracle Chairman and CEO Ellison has few words of encouragement. In an interview with the Financial Times in mid-December 2001, he offered this advice: "Get out of the tech business. It's too late. There won't be any more big companies. Our business in on its way to being like the car business; it's going through a massive consolidation. There is this fantasy that the computer industry will always be young. I think that's ridiculous. Companies have been disappearing at a very high rate; there's a very high level of extinction. You may have a cool piece of technology like a new chip design or a cute little switch. But the days of building a giant new tech company are over. Try to build a giant new auto company. We're going into a much more mature industry. Every industry matures. Is the technology industry unique; will it ever mature? Sure, it will mature. The railroads were like this; the oil industry was like this."



COMPANY FINANCES

Fiscal 2001 (ended May 31, 2001) saw a significant slowdown in revenue growth for Oracle. Against a backdrop of worldwide economic recession, the company posted an increase in sales of 7.2 percent, up to almost $10.9 billion from just over $10.1 billion in fiscal 2001. Revenue in fiscal 2000 had jumped to $10.1 billion from $8.8 billion in fiscal 1999, an increase of about 14.8 percent. Even more alarmingly, Oracle's profit in fiscal 2001 dropped to about $2.6 billion, down sharply from almost $6.3 billion in fiscal 2001. Net income in fiscal 1999 was $1.3 billion. Despite their disappointment with fiscal 2001's performance, company executives expressed optimism that the worst was over. Jeff Henley, Oracle's chief financial officer, said: "Hopefully we hit the bottom in our fiscal fourth quarter." Chairman Ellison also expressed cautious optimism. "Barring any further decline in the economy, we think our sales will pick up. . . .We're cautiously optimistic that we might beat those numbers."

A recovery in sales and profit proved elusive, however. Oracle's revenue for the third quarter of fiscal 2002, ended February 28, 2002, slipped to $2.23 billion, down 17 percent from the $2.7 billion reported in the same quarter of fiscal 2001. The company's net income for the quarter was down to $507.9 million from $582.7 million the previous year. Perhaps the most alarming development from the quarter was a drop of 30 percent in the company's sales of software licenses, the sharpest decline during four consecutive quarters of falling software sales. Oracle's management blamed the slowdown almost exclusively on a worldwide recession that prompted businesses around to cut back their spending on software and other technology.



ANALYSTS' OPINIONS

Despite some misgivings about Oracle's financial rough patch in fiscal 2001 and 2002, most security analysts remained essentially bullish on the company. The consensus of analysts in early June 2002 was positive, with five of 35 analysts rating Oracle stock a Strong Buy, 15 rating it Buy, and another 15 advising investors to "hold" the stock. As to its more immediate problems, analysts did express concern about Oracle's precipitous decline in software licensing sales during the third quarter of fiscal 2002. Since it was in the same quarter of fiscal 2001 that the company's softening sales first became evident, the fiscal 2002 quarter should have been "a layup, and they missed the lay-up, so everyone is really surprised," said Mark Verback, an analyst with Think Equity Partners.

FAST FACTS: About Oracle Corporation


Ownership: Oracle Corporation is a publicly-owned company traded on the NASDAQ Stock Exchange.

Ticker Symbol: ORCL

Officers: Lawrence J. Ellison, Chmn. and CEO, 58; Jeffrey O. Henley, EVP and CFO, 57, 2001 base salary $825,000

Employees: 42,927

Principal Subsidiary Companies: Oracle operates a network of more than 60 foreign subsidiaries to market its products outside the United States. The subsidiaries license and support Oracle's products in their local countries as well as in neighboring countries in which the company has no direct sales subsidiary. The company's foreign subsidiaries are based in more than two dozen countries worldwide. In addition to its foreign sales subsidiaries, Oracle operates a number of U.S.-based subsidiaries. Three of the more prominent of these domestic subsidiaries include Liberate Technologies, New Internet Computer Company, and OracleMobile.com.

Chief Competitors: Competition for the consumer's computer software business is extremely intense. Oracle competes in a number of specific markets within the computer software business, including the database, business applications and services, and application development tools sectors. The company's principal competitors in the enterprise database management system (DBMS) market are IBM and Sybase Inc. In the work group and personal DBMS market, the company competes with a number of desktop software vendors, including Microsoft Corporation. In the ERP (enterprise resource planning) business applications software market, Oracle competes with J.D. Edwards, PeopleSoft Inc., and SAP Aktiengesellschaft.




Oracle executives have insisted that the company's slowdown in sales was almost entirely attributable to the worldwide economic recession. Most analysts agreed that the recession was a significant factor but suggested that the company had created some of its own problems. Particularly damning was this observation from analyst Robert Austrian of Bank of America Securities: "About 80 percent of Oracle's problems are from self-inflicted wounds, and 20 percent are from the economy."

The spring of 2002 brought persistent reports that Oracle had lost its lead in total database sales to IBM, which bought Infomix in 2001. According to reports from Dataquest, IBM's revenue from database sales grew to $3.06 billion in 2001, compared with sales of $2.83 billion for Oracle. Dataquest analyst Betsy Burton said she believed that IBM had edged ahead of Oracle on the strength of its purchase of Infomix. "They bought market share." Oracle CFO Jeff Henley cautioned analysts against jumping to conclusions on the basis of limited data. "You can't take a one-year snapshot and say Oracle is losing share," he said.



HISTORY

Oracle Corporation was born in 1977 when computer programmers Lawrence J. Ellison and Robert N. Miner pooled their $1,500 savings to rent office space in Belmont, California, and start a company dedicated to the development and marketing of database management systems (DBMS) software. The fledgling company's first big contract called for the development of a special database program for the Central Intelligence Agency. While researching the CIA project, Ellison began looking at some of IBM's work on relational databases, which in theory would allow computer users to retrieve corporate data from virtually any form. IBM had developed a computer language called Structured Query Language (SQL) that would tell a relational database what data to retrieve and how to display it. Ellison and Miner then set out to develop an SQL relational database software program for use on Digital minicomputers and other hardware. Oracle's first relational database management system (RDBMS) was first marketed in 1979, two years after IBM debuted its first RDBMS program. Oracle quickly became profitable. By 1984 the company posted annual sales of almost $2.5 million. Encouraged by its success domestically, the company began reaching out beyond to markets outside the United States. Its first foreign subsidiary, Oracle Denmark, was opened in 1982.

Competition in the market for DBMS software began intensifying in the early 1980s, but Oracle managed to keep its edge on the strength of its reputation for innovation and its aggressive advertising style. By 1985 the company's annual sales had climbed to more than $23 million. The following year saw an even more impressive upsurge in revenue, as sales climbed to $55.4 million. That same year, the company made its initial public offering of stock. Never one to shy away from self-promotion, Ellison later that year publicly touted Oracle as the fastest growing software company in the world, citing its record of revenue growth of 100 percent or more in eight of its first nine years. By the end of 1986, the company's customer base had swelled to some 2,000 mainframe and minicomputer users in a wide range of industries, including aerospace, automotive, pharmaceutical, and computer manufacturing, as well as a number of government agencies. Also, by the end of 1986 Oracle's network of foreign sales subsidiaries had grown to 17, marketing the company's products in 39 countries.

CHRONOLOGY: Key Dates for Oracle Corporation


1977:

Programmers Lawrence Ellison and Robert Miner found Oracle Corporation

1979:

Oracle markets first relational database management system

1982:

Oracle begins marketing its software abroad

1985:

Oracle's annual revenue tops $23 million

1987:

Oracle's sales top $100-million mark

1988:

Oracle introduces first family of CASE application development tools

1990:

12 stockholders sue Oracle, charging forecasts were false and misleading

1991:

Oracle's annual revenue tops $1-billion mark

1998:

Oracle launches Business Online

1999:

Oracle integrates Java and XML in an application development tool




Largely on the strength of Oracle's selection to supply the relational DBMS software for most major computer manufacturers, the company in 1987 topped the $100-million mark in revenue and officially became the world largest database management software company. As more and more software companies used Oracle products as a platform for their applications, the company in 1987 established its VAR (Value-Added Reseller) Alliance program, designed to build cooperative selling and product-planning alliances with other software producers. The following year Oracle introduced a line of accounting programs for corporate bookkeeping and its first family of computer-aided systems engineering (CASE) application development tools.

When Oracle announced a sharp jump in earnings but essentially flat net income for the third quarter of fiscal 1990, Wall Street analysts turned cool to its former darling. Shortly thereafter, a handful of Oracle's shareholders sued the company, charging that it had made false and misleading forecasts of its earnings. Matters were exacerbated a couple of months later when Oracle announced record revenue of $970.8 million but a profit of only $117.4 million, below the company's own estimates. Later that year Oracle reported its first-ever quarterly loss, and the company's stock plummeted to $6.25 a share, bringing the six-month loss in the stock's market value to more than $2.7 billion. By the end of fiscal 1992, Oracle's earnings had begun to rebound. Only two years later, the company's annual sales had topped the $2-billion mark. By 1997, annual sales had skyrocketed to $5.7 billion. Continuing its long record of innovation, Oracle in 1998 launched Business Online, the first hosting service for enterprise applications to be run over the Internet, and offered full Web deployment of all its applications. The following year Oracle became the first software company to integrate Java and XML (Extensible Markup Language) into an application development tool. For fiscal 1999, the company posted a profit of nearly $1.3 billion on revenue of $8.8 billion.

In fiscal 2000, ending May 31, 2000, Oracle's revenue soared 14.8 percent to more than $10.1 billion, and the company reported a profit of nearly $6.3 billion. The worldwide economic recession and other factors slowed the company's revenue growth in fiscal 2001, with sales reaching nearly $10.9 billion, but net income was down to $2.56 billion.



STRATEGY

Using Internet technology, Oracle is in the process of transforming itself into an e-business. Its corporate strategy calls for the company to (1) streamline and integrate its entire organization; (2) globalize its business systems; (3) simplify and standardize business practices; (4) implement a complete suite of fully integrated products; (5) base corporate decisions on information that flows continuously from the sell side to the inside to supply and back again; and (6) provide self-service applications to customers and employees.

The rationale for implementing a complete suite of fully integrated products is intended to bring to an end the custom of paying once to buy software, again to have expensive integration consultants to squeeze it into a unique information architecture, and still again to endlessly customize it to accommodate outdated business processes. As for supplying self-service applications to customers and employees, it is hoped that this will lower operating costs and improve accuracy.

Oracle believes the transformation into an e-business allows an organization to make the best possible use of its capital expenditures by permanently reducing operating costs and eliminating complexities from its business processes and infrastructure.

Already, the company's move into the new economy through its transformation to e-business has resulted in an improvement of greater than 10 points in its operating margin. According to an update on its Web site, "every improvement Oracle has made was a result of the same strategy. The company standardized its business processes and moved to the Internet, consolidated all separate databases into a single global database, and unified all separate computer systems using E-Business Suite. Shared information enabled people to communicate more clearly and work together more effectively. Since the organizations were interdependent, groups using those systems become dependent upon one another. Along with that interdependency came cooperation among groups, specialization, and economies of scale. When Oracle globalized its business, operational inefficiencies began to melt away."




INFLUENCES

In the wake of the terrorist attacks on the World Trade Center and Pentagon on September 11, 2001, software customers became increasingly concerned about security and reliability. In an interview with Richard Waters of the Financial Times in December 2001, Oracle Chairman Lawrence J. Ellison shared his thoughts about how the shift in consumer sentiment might affect Oracle. "Oracle's tag line used to be 'Oracle: Software powers the Internet.' Now it's 'Oracle: Unbreakable.' Our heritage is in military intelligence, building military systems. They're not allowed to break; they're not allowed to lose data. That's much more important now."

Asked by Waters what he saw beyond the Internet as a method of deploying e-business applications, Ellison said: "Nothing. Nothing. The basic architecture of the telephone network hasn't changed for 100 years. [The basic architecture of the Internet] won't change. We will have wireless connections to the Internet, it will be cheaper, but it will still be the Internet."




CURRENT TRENDS

Many software companies in recent years have marketed "best-of-breed" systems combining the leading software of each type into one system. Scott R. Smith, interviewing Oracle CEO Lawrence J. Ellison for American Way magazine, asked how Oracle's business software suites could compete effectively with "best of breed" since some of the individual applications integrated in the Oracle suites were not really the best available. Ellison replied: "People want you to engineer everything to work together. In fact, SAP was the first ERP company that had all the pieces of the back office put together. We're the first to have the back office, the middle office, and the front office put together effectively, automation extending from suppliers through the legal department and contracting to the customer. History has shown that the more complete the suite is, the more successful you become: It trumps 'bastard-breed.' The cycle always begins there, but ultimately the specialist companies die out. That's the way evolution works."



PRODUCTS

Oracle's product lineup is broken into a number of different segments, the core of which is its relational database management system (RDBMS), which in turn is the key component of the company's Internet platform. The RDBMS system enables the storage, manipulation, and retrieval of relational, object-relational, multidimensional, and other types of data. In the spring of 1999, the company introduced Oracle8i, a database specifically designed as the foundation for Internet development and deployment. The Oracle8i database extended Oracle's technology in the areas of data management, transaction processing, and data warehousing. In June 2001, Oracle introduced Oracle9i, which was designed to run any packaged application with unlimited scalability and reliability across multiple computers clustered together.

Another major segment of Oracle's product lineup is the Oracle International Application Server 8i, introduced in June 2000, which in October of that year was joined by Oracle9i Application Server, an open software platform that makes it easier for developers to build Internet Web sites and applications.

Other important products in the Oracle product mix include the Oracle Internet Developer Suite, a complete and integrated suite of development tools for rapidly developing Internet database applications and Web services. The company also offers Oracle E-Business Suite Release 11i, a fully integrated and Internet-enabled set of Customer Relationship Management (CRM) and Enterprise Resource Planning (ERP) software applications for the enterprise. The E-Business Suite is available in more than six platforms and approximately 30 languages.

In addition to its lineup of software applications, Oracle provides a broad range of related services, including consulting, support, education, and online services.



CORPORATE CITIZENSHIP

Oracle clearly recognizes its corporate responsibilities to the communities in which it operates. It seeks to fulfill those responsibilities through programs in the following areas: education, charitable contributions, volunteerism, community partnerships, and diversity and compliance. The company's educational initiatives include the Oracle Help Us Help Foundation, which provides computer equipment to schools and youth organizations that provide educational service in economically challenged communities, and Oracle Academic Initiative, supplying software, curriculum, training, and Oracle certification to colleges and universities. Other educational initiatives include Think.com, a collaborative learning environment provided free of charge to primary and secondary schools; Oracle Internet Academy, which provides technology skills training to high school students; and Oracle Workforce Development Program, which makes software, curriculum, training, and certification available to workforce development communities.

In the realm of charitable contributions, Oracle financially supports the efforts of nonprofit organizations working in the following fields: environmental protection; protection of endangered animals; K-12 math, science and technology education; and medical research. To stimulate volunteerism among its worldwide employees, the company in 1991 established Oracle Volunteers. Its purpose is the formalization of volunteer opportunities for company employees. Oracle Community Partners provides support to local and state agencies; energy, planning, and other commissions; and chambers of commerce. Oracle's Diversity and Compliance program is designed to ensure that the company complies with federal, state, and local regulations and promotes a work environment that values diversity and is inclusive of all employees.




GLOBAL PRESENCE

Oracle is a truly international operation with subsidiaries in some 60 other countries around the world. Most of those subsidiaries operate not only in their local country but also in neighboring countries where Oracle has no foreign marketing subsidiary. Foreign countries and U.S. territories in which Oracle operates include Argentina, Australia, Austria, Barbados, Belgium, Brazil, Canada, Cayman Islands, Chile, Colombia, Costa Rica, Croatia, Czech Republic, Denmark, Ecuador, Egypt, Finland, France, Germany, Greece, Hong Kong, Hungary, India, Indonesia, Ireland, Israel, Italy, Japan, Malaysia, Mexico, the Netherlands, Netherlands Antilles, New Zealand, Norway, Peru, Philippines, Poland, Portugal, Puerto Rico, Saudi Arabia, Singapore, Slovakia, Slovenia, South Africa, South Korea, Spain Sweden, Switzerland, Thailand, Turkey, United Arab Emirates, United Kingdom, U.S. Virgin Islands, Uruguay, Venezuela, and Vietnam.

ELLISON THINKS TOO MUCH SPENT ON IT

Business is spending entirely too much money on information technology, according to Larry Ellison, cofounder and CEO of Oracle Corporation. Interviewed by Richard Waters of the Financial Times, Ellison said: "The more money you spend, the worse it gets." He said companies are storing their information in too many different systems "so you've no idea what's going on. Every additional system fragments your data. We believe all of a company's information should be on one database." He added that when a company talks about "investing" in IT, "that's a code word for spending more money. Companies have spent far more money on IT than they should already. IT is way too expensive; it delivers far too little value." He said Oracle would be "happy to go to any of our largest customers and give them all of our software, give them all of our services, and install them for nothing. We will guarantee their IT budget will go down by 5 percent a year. But they have to become an Oracle customer."




EMPLOYMENT

As of May 31, 2001, the end of Oracle's 2001 fiscal year, the company employed a workforce of almost 43,000 people, including 29,422 in sales and services, 1,230 in marketing, 7,926 in research and development, and 4,349 in general and administrative positions. Of these employees, 22,008 were located in the United States, with the remaining 20,919 employed in some 60 other countries.




SOURCES OF INFORMATION

Bibliography

baertlein, lisa. "oracle edges past expectations, sees rebound." reuters business report, 19 june 2001.

"business summary: oracle corporation." multex investor, available at http://www.marketguide.com.

liedtke, michael. "oracle reports 13 percent drop in profit, 30 percent decline in software sales." ap worldstream, 14 march 2002.

"oracle corp.—history." gale business resources, available at http://galenet.galegroup.com/servlet/gbr.

"oracle corporation." hoover's online, 2002. available at http://www.hoovers.com.

oracle corporation 2001 annual report. redwood shores, ca: oracle corporation, 2001.

oracle corporation home page, 2002. available at http://www.oracle.com.

pain, steve. "e-business: oracle is trailing ibm, say figures." financial times, 14 december 2001.

smith, scott s. "the oracle speaks." american way, 1 may 2002.

waters, richard. "answers from oracle's larry ellison." birmingham post, 14 may 2002.


For an annual report:

on the internet at: http://www.oracle.comor write: investor relations, oracle corporation, 500 oracle parkway, redwood shores, ca 94065

For additional industry research:

investigate companies by their standard industrial classification codes, also known as sics. oracle corporation's primary sics are:

2731 book publishing

3571 electronic computers

3572 computer storage devices

7371 computer programming services

7372 prepackaged software

7379 computer related services, nec

also investigate companies by their north american industrial classification system codes. oracle corporation's primary naics code is:

511210 software publishers

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