During Oracles semiannual Analyst Day event Wednesday in New York, company CEO Larry Ellison warned archrival SAP to step lightly when it comes to competitive techniques.
Oracle Corp., which acquired PeopleSoft Inc. on Dec. 12 to make it the second largest applications provider in the world behind SAP AG, is fighting hard to win over its 11,000-strong PeopleSoft customer base.
SAP, too, is fighting for that same customer base. The company purchased TomorrowNow Inc. earlier this month, a third-party applications maintenance provider for PeopleSoft applications.
The intent of the acquisition is to provide maintenance support for users of applications by PeopleSoft and J.D. Edwards & Co., which PeopleSoft acquired last year, while they migrate to SAP.
“SAP has every right to provide support for PeopleSoft applications as long as they dont violate our intellectual and contractual property rights,” Ellison said, in measured tones. “It might make it awkward for them. Thats our intellectual property, and they should be cautious.”
Oracle and SAP, based in Walldorf, Germany, traded gibes back and forth all day—Oracle at its Analyst Day event, and SAP during its fourth-quarter 2004 earnings call. Both companies are now going head to head in the “stack wars” that align applications more closely with integration and other capabilities in a single architecture.
Oracle, with its acquisition of PeopleSoft, has one goal: to become No. 1 in the infrastructure market.
“We are big. We have 3,000 application developers from PeopleSoft and 5,000 from Oracle,” Ellison said. “SAP said what is instrumental is their development team. Instrumental to our strategy is our database team and application server team. I like the size of our shovel versus theirs. As we get into the stack wars … we have more resources than anybody else.”
Oracle outlined a strategy going forward to beat out its competitors—IBM, Microsoft Corp. and SAP—which includes innovation, organic growth and additional acquisitions.
In terms of innovation, executives throughout the day pointed to grid computing, Oracles 10g database and application server, data hubs that extract information and provide a contextual format, and a new product category Oracle created around collaboration that combines content management, Web conferencing, e-mail scheduling and other capabilities.
Next Page: Expanding the subscriber base.
Ellison said Oracle will continue to grow organically through its subscriber base that keeps renewing software licenses year after year. “We dont know any way to keep it from expanding,” he said.
Based on Oracles subscriber base, newly enhanced by the PeopleSoft acquisition, and the assumption that it can maintain loyalty from most of those customers, the company said Wednesday that it expects 2005 earnings to grow 24 percent to 62 cents a share. And in fiscal year 2006, it expects earnings-per-share growth of 22 percent to 28 percent, or 76 cents to 80 cents per share.
Because Oracle “throws off huge amounts of cash,” its best way to utilize the surplus is through more acquisitions, according to Ellison.
“Someone said [to succeed in business] you have to get big, get niched or get out. Our strategy is to get big,” Ellison said. “Were already number one in database and number two in application server, and growing. The combination of organic growth and one strategic acquisition will put us in a good position.”
During Oracles trial last year against the U.S. Department of Justice that looked to block Oracles takeover of PeopleSoft, it was revealed that application server provider BEA Systems Inc. was a high priority acquisition target for Oracle. About a dozen other companies were researched as additional possibilities.
A big goal for Oracle coming into the merger with PeopleSoft was to retain 90 percent of PeopleSofts product development and support teams in order to provide continuity to PeopleSoft users. Oracle has committed to developing the next iterations of PeopleSofts and JDEs suites, and to supporting the applications until 2013. It also plans to develop a super suite, Project Fusion, available by 2008.
According to Safra Catz, co-president of Oracle, 96 percent of PeopleSoft developers to date have accepted Oracles employment offers, as has more than 90 percent of the support staff.
“Weve been getting a lot of culture questions,” Catz said. “Oracle is a developers organization at the core. At PeopleSoft, there is that same respect for developers. They felt that—thats why we think all our offers are being accepted.”
On the sales side, Catz said Oracle retained “the best of the best,” and the company plans to hold a combined sales force conference this weekend.
Overall, Oracle laid off about 5,000 PeopleSoft, and some Oracle, employees.
While the beginning integration work has been accomplished, according to Catz, there is still a lot of work to be done, including consolidating facilities and completing back-office integrations.
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