REDWOOD SHORES, Calif. --
reiterated fiscal year first-quarter guidance Wednesday and set its sights on
terrain with the launch of a new product that manages email and other applications.
Wrapping up the company's semiannual analyst day, Oracle CFO Jeff Henley stuck by prior guidance, forecasting a 15% to 25% decline in license revenue in the first quarter, and earnings of 7 cents a share. Henley said Oracle does "stand a chance" of showing positive revenue growth in the second half of its fiscal year, which corresponds to the first half of 2003.
"It definitely feels like it's not getting worse," said Henley, who lamented that 2002 -- the company's first year ever of declining revenue -- was a "bad year." But he noted he said the same thing six months ago and was wrong. "I have lost any confidence in me predicting what is going to happen," he said.
Assuming tech spending picks up and Oracle's database and applications businesses do well, Oracle's goal is to get back to a 20% growth rate in the next year or two and reach 40% operating margins, Henley said.
One opportunity cited for growth by Oracle is its new product, called the collaboration suite, launched Wednesday and scheduled to begin shipping at the end of August.
The suite allows users to store and search for emails, voice mail, appointments, documents and PowerPoint presentations on a single database. The advantage over Microsoft, Oracle executives say, is more security, easier administration and universal search.
Analysts, for their part, greeted the product enthusiastically from a user perspective but said success will depend on Oracle's execution.
"I'd like to have it," quipped U.S. Bancorp Piper Jaffray analyst Jon Ekoniak, after watching a demo of the product. "It could be big, if they become the standard." Ekoniak has a market perform rating on Oracle, and his firm hasn't done any banking with the company.
The challenge will lie in how Oracle sells the product, said Lehman Brothers analyst Neil Herman, who noted that Oracle's attempt to sell a messaging product a couple of years ago flopped. Herman has a buy rating on Oracle and his firm hasn't done any banking with the company.
Joshua Greenbaum, a technology consultant and principal with Enterprise Applications Consulting, Daly City, Calif., said that in the short term the product could be more of a branding opportunity than a revenue driver, building on Oracle's latest "unbreakable" campaign. "Security is such a huge issue to everybody, with virus-driven spam out of control," he said.
But selling 1 million seat licenses, he noted, would generate only about $120 million in revenue for Oracle, based on the highest price charged for the product.
Oracle officials declined to say how much revenue the new product could generate, but estimated its cost would run about one-third the price of a comparable Microsoft suite. IDC estimates the market growing from just under $4 billion in 2001 to $7.5 billion in 2006, but that does not include voice mail.
"For us this is a low-price, high-volume play," said Charles Rozwat, executive vice president of server technologies for Oracle.
At past conferences, Ellison has bemoaned how large corporations had dozens of SQL server databases storing Microsoft Outlook emails, making them difficult to administer and search. With a single Oracle database at the back end, a user could, for example, do a companywide search for the word "Exxon" and find all emails, Word documents, spreadsheets, PowerPoint presentations and voicemails related to Exxon, Ellison said.
The database works with Microsoft Outlook and other email products, such as Lotus Notes and Internet-based systems such as Netscape.
If Microsoft changed Outlook so that it wouldn't work with Oracle's new product, Oracle would sue, CEO Larry Ellison said.
Ellison also was asked at the analyst day whether he had plans for hiring a second-in-command, a
question that has hounded him as a result of a string of top executive departures.
"You want me to leap around the stage? I can do that," he responded, poking fun at a widely circulated
video file of Microsoft CEO Steve Ballmer.
Ellison, who plans to spend four weeks both this year and next year sailing in the America's Cup, said he prefers to have eight strong No. 2 executives, because when Ray Lane was the only No. 2, he found that led to two visions and factions.
"I like the current model," he said. "I think our management team has never been stronger."
Shares of Oracle fell 42 cents Wednesday, or 4.5%, to close at $8.98. In after-hours trading, shares rose slightly to $9.06.