IBM Nudged Out Oracle in New Database Sales Last Year - TheStreet

Updated from 9:13 p.m. EDT

It's official:

Oracle

(ORCL) - Get Report

lost the top spot in new database software sales to

IBM

(IBM) - Get Report

.

As a result of its acquisition of Informix and solid growth in its database products, IBM took the top spot in 2001's $8.8 billion in database-software license sales, selling a total of $3.06 billion to Oracle's $2.83 billion, according to numbers released Monday by Gartner Dataquest.

"The addition of Informix products gave IBM the critical push it needed to take the market leadership position," said Colleen Graham, industry analyst for Gartner Dataquest's Software Industry Research group, referring to IBM's 2001 acquisition of Informix.

Microsoft was No. 1 in growth of database license sales, rising 18% in 2001 over 2000.

Oracle CFO Jeff Henley said he has long been concerned about the accuracy of such market share numbers, because Microsoft and IBM don't publicly break out database revenue. And other Oracle executives countered the Dataquest report with a blast of statistics suggesting its penetration in the database market is still far deeper than its competition.

But according to Dataquest, IBM's market share rose to 34.6% in 2001 from 33.7% in 2000. Oracle's share slipped to 32% in 2001 from 34.1% in 2000. Microsoft ranked third with 16.3% market share in 2001, up from 14% of the market in 2000.

"Without Informix, the contest would have been essentially tied between IBM and Oracle, which were separated by a mere $30 million in new license revenue," Graham said.

The new market share numbers are just the latest hit for Oracle, whose stock set a series of 52-week lows last week amid worries that the Redwood Shores, Calif.-based company would not be able to make financial numbers for its typically strong fourth quarter, which ends in May. Shares of Oracle fell 21 cents, or 2.5%, to close at $8.22 Tuesday.

"I think these are estimates at best," Henley said, asserting that the company doesn't believe customers are switching from it. Microsoft, he said, may be selling to the lower-end market, which may be less affected by the economic downturn and which isn't targeted by Oracle.

Oracle executives have long insisted that they aren't losing share in their core database market, which accounts for about 72% of the company's total revenue. Rather they have pointed to the weak economy, and accompanying tight tech spending, as an explanation for Oracle's decline in database revenue, which has dropped year over year in each of the past three quarters.

On Monday, Oracle cited a survey by research firm Fact Point that found Oracle boasts the largest database penetration in

Fortune

100 companies. Fact Point reported that 400 interviews of

Fortune

100 companies found that 51% use Oracle as their primary database while 19% use IBM on the mainframe, 15% use a combination of vendors and 8% use Microsoft.

Oracle also noted Morgan Stanley's March survey of 225 CIOs found that 50% of respondents said their primary database supplier was Oracle, 34% said it was IBM and 25% said it was Microsoft.

Jeff Jones, director of strategy for IBM data management, said IBM's DB2 database product has grown sufficiently for 20 quarters in a row now, in part because its lower cost is more attractive to IT executives in a tough economy. "We feel in most cases we're about half the price of Oracle," Jones said.

Jones declined to comment on why Informix numbers declined to 3% market share in 2001 from 3.3% in 2000.

Mister Softee Coming on Strong

Meanwhile, others believe Microsoft, the world's largest software maker, may be an even more formidable threat to Oracle than IBM. "I think Microsoft gives them more headaches than IBM because Windows is now becoming a fairly reliable or more compatible platform for running enterprise applications," said Rich Peterson, an analyst with W.R. Hambrecht, who has a neutral rating on Oracle. His firm hasn't done any banking business with Oracle.

Not surprisingly, Microsoft was the No. 1 seller of database software on the Windows platform, with 39.9% market share, compared with 35.4% in 2000. Oracle came in second with 34% market share in 2001, down from 38.1% in 2000. IBM followed with 20.7% of the Windows database market in 2001, up from 19.9% in 2000.

To be fair, the overall market share numbers don't tell the whole story, though. They include IBM's database sales in the mainframe sector and Microsoft's Access product -- neither of which competes against Oracle, according to Graham.

In the narrower relational database arena, which excludes mainframes and Microsoft Access but still accounts for 80% of the overall database industry, Oracle retained its No. 1 position. However, its market share did slip to 39.8% in 2001 from 42.5% in 2000. IBM's position improved to 34.1% in 2001 from 32.6% in 2000.

Overall, mainframe database sales accounted for about 20% of total IBM database revenue, according to Gartner.

Oracle also maintained its position as market leader on the UNIX platform, claiming 63.3% of new sales in 2001, a decline from 66.2% in 2000.

Sybase

(SY) - Get Report

came in a distant fourth with single-digit market share in all database categories.