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Lucent first in new Oracle niche

The database giant thinks there's a big untapped software market at telecom manufacturers.

Oracle thinks the deep-pocketed telecommunications hardware makers need its extra-special attention.

The company is planning an all-out assault on this as-yet untapped market for database software and applications, according to a top Oracle executive, and Lucent Technologies is its first big customer.

Oracle (ORCL) is in negotiations with Lucent to replace homegrown, proprietary software used in the company's telecom switches and other gear with Oracle's off-the-shelf database software and custom-tweaked applications, said Nimish Mehta, senior vice president of Oracle's industry applications division, in an interview this week with CNET's NEWS.COM. The company is also pursuing deals with other network hardware makers.

While Oracle's sales remain strong, and its customer list is strictly top-drawer, market analysts expect sales of its core database software to slow as the market nears saturation. Oracle boasts a 97 percent penetration rate among the Fortune 100.

Oracle agrees that it needs to find new revenue streams. Ray Lane, Oracle's president and COO, said Tuesday at a press briefing that Oracle's service revenue will soon outpace the company's product revenue for the first time. He also added that the overall database market's historically high growth rate is slowing down.

"The database market growth can't continue," Lane said. "In the next two or three years, growth will come at the expense of [competitors] Sybase and Informix." Clearly, to maintain its chubby profit margins, Oracle needs to find new customers.

That's where the telcos come in.

Breaking into potentially huge untapped areas, such as the telecom market, could give Oracle a ready supply of deep-pocketed new customers. So far, Mehta said, no database software makers have really penetrated the market.

Mehta said Oracle is working on applications that could help telecommunications hardware makers, such as Lucent, deliver consumer services that differentiate them from competitors. One potential application, for example, would let consumers use a single telephone number for dial-up Net access regardless of their location. Oracle is also promising telecom companies that its software can help them deliver services more quickly than the proprietary software they now use.

While the chief motivation to target this market is the need for more database sales, the telco market could also greatly increase application software sales for Oracle. The company's applications software sales have grown significantly in the past year and now represent a little more than 8 percent of Oracle's revenue, according to investment banking firm Alex. Brown.

Oracle is not the first application vendor, however, to notice the telco market. Applications software marketleader SAP, along with PeopleSoft and Baan, are also on the prowl for new business and are pitching their products to telecommunications, as well as oil and gas, and utility companies.