Layoffs Looming at Oracle

 
 
By Matthew Hicks  |  Posted 2002-06-03
 
 
 
Oracle Corp. is facing the prospect of significant layoffs in the next few weeks, according to a Wall Street analyst, as the company steps up its battle over a controversial state of California contract.

Lehman Brothers Analyst Neil Herman in a research note issued today wrote that several sources are saying that Oracle "is likely to undertake significant employee reductions within the next several weeks." The note didnt specify numbers because of a lack of corroboration from sources on the numbers.

Oracle isnt alone. Sources told the analyst that SAP AG also is planning to cut a significant number of staff as well, most likely next week following its Sapphire users conference in Orlando, Fla., according to the research note.

Oracle, a Redwood Shores, Calif., software maker, did let go of 200 employees out of 10,000 in its application development group on Friday, spokeswoman Jennifer Glass said. That move was part of a plan from CEO Larry Ellison in March to streamline the development organization. The layoffs resulted from combining the ERP and CRM development groups into a single e-business development group, she said. Oracle has a worldwide work force of 42,000.

When asked about the analysts report projecting future layoffs, Glass said, "We cant comment on any rumor."

Meanwhile, the rhetoric is heating up between Oracle and the chairman of the California state committee holding hearings on the states enterprise license agreement for database software.

On Friday, Oracles Chief Financial Officer Jeffrey Henley, in a letter to the chairman of the California Joint Legislative Audit Committee that is overseeing the hearing, formally complained that Oracle hasnt been given the opportunity to defend itself before the committee.

Henley demanded that Kevin Fitzgerald, senior vice president of Oracle government, education and health care sales, be allowed to testify and wrote that committee Chairman Dean Florez has "unjustly accused Oracle of many things" while ignoring the companys defense.

"It is now very clear to Oracle that the merits of the [enterprise licensing agreement] do not matter to the JLAC," Henley wrote. "Oracle formally requests the right to be heard immediately, before the committee continues its punitive abuse of one of Californias most successful companies and employers."

Florez, in a letter today addressed to Ellison himself, disputed that his committee has treated Oracle unfairly and stated that the committee has yet to hear testimony from Oracle officials because the hearing so far has concentrated on the bureaucratic process that led to the signing of the contract rather than on its value.

"The problem has not been JLACs unwillingness to hear Oracles viewpoint," Florez wrote. "The problem has been Oracles attempt to dictate how JLAC conduct its hearings."

Testimony is slated to turn to the contracts value. On Wednesday, the committee is planning to hear testimony from a former California auditor, Kurt Sjoberg, who Oracle hired to conduct a separate audit of the California contract. Oracle has used that audit to stand by its claim that the $95 million database licensing agreement, signed in May 2001, would save the state at least $110 million over 10 years. The states own Bureau of State Audits criticized the contract and disputed the savings claims.

Next week, additional Oracle testimony is expected.

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