By Per Bech Thomsen
COPENHAGEN, June 26 (Reuters) - The way out of a gloomy market for enterprise software is to grab business from your smaller, troubled rivals, Oracle Corp. (NasdaqNM:ORCL - News) said on Wednesday. ADVERTISEMENT
The Chief Executive of the world's no. 2 software company said the market had reached the bottom and prospects for Oracle were very good but many, smaller competitors would succumb.
"Why Oracle's future is so good is because of a concentration of spending on the few surviving suppliers: Microsoft (NasdaqNM:MSFT - News), Oracle, SAP (XETRA:SAPG.DE - News) and IBM (NYSE:IBM - News)," Larry Ellison told reporters on the sidelines of an Oracle conference here.
"It will be killing fields. We will grow and prosper. Customers will have fewer choices," he said.
Smaller and larger rivals he sees disappearing are online market places software company Ariba (NasdaqNM:ARBA - News), application server maker BEA Systems (NasdaqNM:BEAS - News) and Siebel (NasdaqNM:SEBL - News).
Oracle is still feeling the heat of the downturn. Last week it reported a 23 percent drop in fourth-quarter earnings on 12 percent lower revenues, but still better than market forecasts. Key sales of new software licences, a driver of future growth, fell 29 percent from a year ago.
Ellison insisted his company is in better shape than others and can grow just by winning business from rivals.
"We don't need a recovery in tech spend to grow," he said.
"If the spend that was spread across hundreds of small companies (a couple of years ago) concentrate on three or four, the survivors will do extremely well," he said.
Assuming modest recovery in corporate spending Ellison project a modest top line growth but much faster profit growth this fiscal 2003. The current fiscal year will compare with a very slow 2002.
IBM and Microsoft are turning up the heat in Oracle's key database market, which contributed about 80 percent of revenue in fiscal 2002. But Oracle is striking back with what Ellison said was a cheaper, better and more reliable products based on application clustering.
The idea of clustering is to take a group of small Linux machines together, that will allow low cost machines to run large enterprise applications, he said.
"Oracle are the only one with these clusters and the reason why we don't need a recovery in IT spending to grow," he said.
"This should allow us to take market shares from IBM and Microsoft in the database business," Ellison added.
Ellison dismissed the theory that the database market is mature. "We see tremendous growth in database business, we are just in a recession."
TAKEOVERS
Ellison said his company tended to make only small acquisitions and preferred to build its own software rather than buying it. Asked whether that would exclude taking over Hewlett-Packard's (NYSE:HPQ - News) enterprise software unit Bluestone, which markets have been speculating in, Ellison said:
"Even if we would buy HP's middleware business, it is also tiny. We are talking to them about it... but we talk to HP about lots of stuff, so don't draw any conclusions."
Oracle is aiming to grow in the customer relations management (CRM) and enterprise resource planning (ERP) market for small and mid-sized companies.
"Our strategy is to link CRM and ERP close together, and win the market," Ellison said.
Last month, Microsoft took over Danish enterprise software firm Navision for $1.3 billion following its acquisition of U.S.-based Great Plains in 2000 in a move to become leading provider of business planning softweare to mid-sized businesses, challenging SAP and Oracle coming down from the high end of the market.
But Ellision said it was not a major threat, instead saying his company "was way ahead".