SAN FRANCISCO -- No one can pick a playground fight quite like Larry Ellison.
CEO is fond of aggressive marketing
tactics that put the company's rivals on the spot. Now Oracle is pushing into the market for customer relationship management, or CRM, software with its customary panache.
This time, Ellison is targeting
, located a short drive down Highway 101 from Oracle headquarters. Siebel is used to ruling this corner of the software industry. The CRM software market is expected to grow about 50% this year, roughly twice as fast as the market for enterprise resource planning software that handles back-office tasks, so it's no wonder Oracle is moving in.
The flap concerns Oracle's marketing campaign, which Siebel alleges contains false and misleading statements, including Oracle's claim that its products are "100% Pure Internet," but Siebel's are not. Siebel's attorney at
Preston Gates & Ellis
sent Ellison a four-page letter, dated June 14 and made available Wednesday, demanding Oracle cease and desist with its anti-Siebel campaign or face legal action.
"It's not that we're
defensive," says a source at Siebel who asked not to be named. "But we're defending ourselves so the truth is told. We're afraid Oracle's advertising is confusing the market."
Oracle responded with a
letter of its own Thursday. "We must respectfully disagree, however, that Oracle's marketing is in any respect false or misleading and we deny that Oracle has engaged in unfair marketing practice targeted at Siebel," the letter reads. "Oracle's message is clear: only Oracle offers true thin-client Internet applications. An industry-standard Web browser alone is needed to run Oracle's CRM applications on the client-side. In contrast, Siebel has taken old client/server technology and tacked on Web-browsing capabilities. Siebel software must be installed on the client side -- a simple Web browser will not suffice."
Then Oracle's letter goes further, trying to turn the tables by encouraging Siebel to "measure its own marketing tactics against the standards it imposes on Oracle ... Siebel executives have made several blatantly false statements about Oracle over the past months."
Oracle notes, for example, that Siebel has said Oracle has not made a single nickel in revenue from its CRM products. In response, Oracle says it has publicly announced several deals and recently announced significant revenue growth in its CRM software business.
The round of corporate fisticuffs shows just how intense the competition is becoming in software. In a year when software sales are slumping because of Year 2000 worries, companies are trying to elbow their way into any market showing growth. Siebel just happens to be in one of the hottest areas of software. Market research firm
predicts the market for customer management software will grow to $11.6 billion in 2002, up from $2.9 billion this year.
Although analysts generally believe Siebel remains a strong company, they admit competition is intensifying. Just last week,
Adams Harkness & Hill
analyst Ben Rose went against the grain and lowered his rating on Siebel to sell, citing increased competition as a reason. (Adams Harkness & Hill has not underwritten for Siebel or Oracle).
"I think Siebel will continue to be the market leader, but I also think the competitive landscape will be tougher with more players," says Bob Austrian, an analyst at
Banc of America Securities
, which has underwritten for Siebel and Oracle. Austrian currently has a buy on Siebel, but notes that he will watch for any signs of erosion in Siebel's position in coming months, which Oracle believes will happen.
Oracle has its own warning: Siebel will hit a wall "particularly if it continues to react to trivial things like this in such extreme ways," says an Oracle spokesman who asked not to be identified.
The spokesman says the back and forth reminds him of the way database maker
grew so obsessed with defeating Oracle that its business fell to the wayside in 1996 and 1997. Informix shares closed on Thursday just above 9, far from its heyday high of nearly 37 in February 1996.
Spoken just like a playground bully.