Oracle's Fusion Halfway Home

The company says its new software bandle is on track.
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SAN FRANCISCO -- Red carpets and champagne. Live music and appetizers. Must be the Golden Globes. Nope. It's a geeky

Oracle

(ORCL) - Get Report

event aimed at convincing customers that the database giant's plans to build a super suite of software products are well on track.

Charles Phillips, Oracle's co-president and the point man on the company's $19 billion acquisition binge, said that his developers are ahead of schedule and expect to roll out the Fusion application suite in 2008.

"Oracle is halfway to Fusion," Phillips said. "A year later, we're 50% done and that's the tough half. (We're) pretty proud of that," he told an audience Wednesday of about 1,800 at San Francisco's City Hall.

Fusion will take what Oracle calls the best features of applications originally developed by PeopleSoft, J.D. Edwards, Retek, soon-to-be-acquired

Siebel Systems

(SEBL)

, other acquisitions and Oracle itself and combine them into a unified set of applications. Pieces of the new architecture will be appearing in upgrades to three major suites as early as this year.

It's not surprising that Oracle literally rolled out the red carpet at Wednesday's evening's event. The company is challenging

SAP

(SAP) - Get Report

, the leader in business applications, as well as

IBM

(IBM) - Get Report

and

Microsoft

(MSFT) - Get Report

, at a time when large customers are cutting costs and paring down their list of software suppliers.

Phillips downplayed the difficulty of the task, saying the belief that Oracle is attempting to do something unprecedented and risky is a "myth. This is just a new product; we do it all the time," he said. "We've done this before."

Easy to say, of course, but giant programming projects often founder on unforeseen difficulties. Goldman Sachs analyst Rick Sherlund, seated in the very back of the audience, looked a bit skeptical and said, "They have a lot of work to do."

In a note published the next morning, Sherlund reiterated his concerns about finishing the project on time but said he was encouraged by the presentation. "Oracle will trail a year behind SAP's next generation apps, but the architecture will have the elegance of supporting industry standards and an integrated platform down to the database and middleware layers." Goldman Sachs has an investment banking relationship with Oracle.

Piper Jaffray analyst David Rudow, though, seemed impressed and said in a note also published Thursday: "Given the turnout and comments from customers we spoke with, we think Oracle is moving in the right direction with Fusion and, if it works as promised, we think Oracle will see increasing maintenance revenues and more customers committing to the Oracle stack over the coming years." His company does not have an investment banking relationship with Oracle.

Oracle's stock, recently trading at $12.48, has been stuck in the $12-to-$14-a-share range for several years, and despite major efforts, its applications business is still weak.

CEO Larry Ellison, who missed the event because of a cold or the flu, has said he wants his company to be the No. 1, or strong No. 2, player in every market segment in which it competes. Building the Fusion suite is a key to convincing Wall Street that he is right.

Phillips mentioned that shareholders will vote on the Siebel merger on Jan. 31; the deal will probably close soon after and the company is expected to give detailed guidance on the financial impact of the merger.