Facing stiff competition and a nasty economy, the company will introduce new software and an update to its flagship database-management application at a conference next week.
At Oracle Open World, company executives will preview an updated version of the Oracle 9i database software that's more fluent in Extensible Markup Language (XML), an important standard for data exchange. Oracle will also preview new business-applications software and announce a revised release of its application server software, which is used to run e-commerce and other Web site transactions.
"It's critical that there be new application sales to get the database business moving," said Melissa Eisenstat, a financial analyst with CIBC World Markets. The new business-applications software, called Oracle 11i eBusiness Suite, which works in conjunction with Oracle 9i, will be key to stimulating such sales.
Oracle is struggling to hold off rivals encroaching on its database turf. IBM, which recently strengthened its database lineup, and Microsoft, known for ease of use and low cost, have surfaced as the software maker's strongest foes.
And Oracle needs to convince technology buyers to start spending soon. A slumping economy is hitting the company--and other enterprise software makers--hard. Oracle recently "="">warned that it will miss analyst estimates for a fiscal second-quarter profit of 11 cents per share. Oracle now expects profits of 9 cents to 10 cents per share when it reports quarterly earnings Dec. 13.
In the database software field, valued at more than $8 billion last year, Oracle ranked first with 34 percent of the market, according to Gartner. IBM nipped at its heels with 30 percent, while Microsoft snagged 15 percent and Sybase placed a distant fourth with 3.2 percent.
Eisenstat said she predicts database software sales growth of about 10 percent to 15 percent over next two to three years. She added that customers will eventually open their wallets for the 9i release, "but it will take some time. Companies may be slow to adopt it," she said.
Oracle Chief Executive Larry Ellison, however, sees sales booming in future quarters and predicts that database and business applications sales will start growing again in the company's fiscal third or fourth quarter.
"Database sales will grow nicely and steadily, and the applications will grow very rapidly as soon as this calendar year finishes," Ellison said in an interview with CNET News.com this week. "We will be back to record profits and start showing some (revenue) growth, whether it's fiscal Q3 or fiscal Q4. What we are seeing is (that) our 11i eBusiness Suite, which you can install very quickly and inexpensively, is especially attractive in a down market."
While Oracle is the clear database market leader, it trails rivals in sales of application server software and business applications. In the application server market, Oracle currently owns 5 percent of the market, far behind market leaders BEA and IBM, which have captured 36 percent and 34 percent of the market, respectively, according to analyst firm Giga Information Group. And in business applications, Oracle is second to SAP and Siebel Systems in several key areas.
The new release of Oracle 9i database, which will be available early next year, will better handle XML (Extensible Markup Language) data, a Web standard for data exchange that lets companies construct e-commerce and new Web services applications, said Oracle executives.
Giga analyst Terilyn Palanca said Oracle's database rivals--IBM and Microsoft--are also working on similar technology. Microsoft, for example, will offer the technology in its next SQL Server database, which will be available in test versions next year.
"We expect this functionality everywhere. Microsoft and IBM are talking about it, but Oracle is claiming they are doing that faster," she said.
More important to Oracle and its competition against IBM and Microsoft in the database market, Palanca said, is that Oracle next week will announce that some of its customers are using the 9i's new "clustering" software. Clustering allows businesses to harness multiple servers to run a very large database, allowing servers to share work or take over from one another if one fails.
When the company released the first version of the Oracle 9i database this summer, Oracle executives claimed the clustering software would make the company's database perform faster and more reliably than rival clustering technology by IBM and Microsoft.
And because companies using Oracle's clustering technology can use multiple servers rather than one large server, they can also save money, Oracle claims. Jeremy Burton, Oracle's senior vice president of marketing, said the company next week will announce a handful of companies who are doing just that.
"It's about time, and it's very important because they emphasized clusters heavily at the database launch," Palanca said. "They needed to prove that it works as they claim."
On the application server front, analysts say Oracle's new software is faster and more reliable than previous versions and could steal market share away from market leader BEA Systems and number two IBM in a that analysts expect will reach $2.25 billion in revenue this year.
While BEA Systems and IBM currently control the application server market, "Oracle has a tremendous base of customers--the most valuable base in terms of who's buying the application servers," said Forrester Research analyst Chris Dial.
The updated 9i application server, available early next year, will support the latest Java and Web services standards and more tools and adapters for integrating with other software, such as competing manufacturing, financial and human resources applications from SAP and PeopleSoft, Burton said.
Next week, Oracle will try to stir buyer interest for the next version of its 11i eBusiness Suite business-application software, an Internet-based software package for managing a company's marketing efforts, sales force, manufacturing, financials and Internet business activities. One component of the new version, which will be available next year, lets customers deploy some data as Web services, said Burton.
Like Microsoft, Sun Microsystems and other software rivals, Oracle sees Web services playing a huge role in future software development. Web services link servers over the Internet to exchange data and combine information in new ways. These services run on Web-based servers instead of individual PCs, allowing people to use them through any device that has Internet access, including cellular phones and handheld computing gadgets, as well as desktop and notebook computers. XML, which erases issues of compatibility between different computer systems, is at the heart of the new technology.
Compaq Computer and Dell Computer also plan to be at the conference in full force next week. Though Dell declined to provide specifics on what it plans to announce, Compaq said it will announce a new database utility and the availability of the cluster version of Oracle working on Compaq Proliant servers running on the Windows 2000 operating system. Compaq has been working with Oracle on clustering software that would help the software to run on groups of smaller computers instead of one large, expensive machine.
Oracle Open World is expected to draw upwards of 40,000 attendees, the company claims, giving Oracle a prime venue for spreading its message.
News.com's Stephen Shankland contributed to this story.