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Fri, Jul 16, 2004 - Page 12 News List

Ellison foresees industry shake-out


Oracle Corp chief executive officer Larry Ellison said his company continues to grow stronger as many rival software makers weaken, clearing the way for other takeover quests besides Oracle's current US$7.7 billion bid for PeopleSoft Inc.

"We are going into a world of haves and have nots," Ellison told about 125 analysts at the company's Redwood Shores, California headquarters on Wednesday.

"This is not an industry that will stay forever young. It will consolidate like the railroad industry," he said.

In Ellison's vision, the software industry will be dominated by Oracle, Microsoft Inc, IBM Corp and Germany-based SAP while other software makers either die or are taken over.

The remarks echoed a theme that Ellison has been emphasizing since Oracle launched its hostile bid for PeopleSoft 13 months ago. The idea has gained more resonance this month as a long list of software makers, including PeopleSoft, announced financial shortfalls for the quarter ended last month.

During an hour-long question-and-answer session, Ellison said industry analysts hoping for better times will be disappointed.

"This is the recovery. Enjoy it," Ellison said. "We are not going back to the lunacy" of the dot-com boom that propelled many software makers a few years ago.

He believes the phenomenon will work in Oracle's favor, allowing his cash-rich company to snap up some of its struggling Silicon Valley neighbors.

"I think we will have an opportunity to buy a lot of companies right next to us and some of them are being run by ex-Oracle employees," Ellison said.

He emphasized he wasn't referring to PeopleSoft, which is run by former Oracle executive Craig Conway.

The comments appeared be veiled references to two other Silicon Valley software makers, Siebel Systems and Veritas Software, that have disillusioned investors by missing their earnings targets. Siebel's chairman is former Oracle executive Tom Siebel and Veritas' chief executive officer is also a former Ellison lieutenant, Gary Bloom.

Another possibility is software maker Business Objects, a France-based company with a large Silicon Valley office and another former Oracle executive, Bernard Liautaud, at the helm.

Ellison said it's unlikely Oracle will launch another takeover attempt until its pursuit of PeopleSoft is resolved. The Justice Department is seeking to block the US$21-per-share offer in an antitrust trial that wrapped up more than 100 hours of testimony earlier this month.

Closing arguments are set for next Tuesday and a decision is expected to be issued by early September, Oracle co-president Safra Catz said on Wednesday.

More analysts and investors recently have been predicting Oracle has a good chance of winning a favorable decision, a reverse of the prevailing sentiment before the trial began in early last month.

That change in opinion has helped lift PeopleSoft's stock.

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