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ComputerWire: IT Industry Intelligence

Oracle Corp's chief financial officer Jeff Henley says that the database and e-business applications software company is in a good position to benefit from an upturn in economic conditions, despite continued concern about the likelihood of that recovery.

When he announced the Redwood Shores, California-based company's recent financial results, Henley predicted improvements in the next two quarters while admitting that he is a "little less optimistic" for the full year. Speaking to ComputerWire, Henley clarified that statement, and said his pessimism is due to the difficulty in predicting the impact of circumstances external to the technology industry.

"Business continues to be very sluggish," he said. "While we see the US hitting the bottom, Europe and Asia have been lagging behind. It's difficult to know. There's a lot of downside and it's difficult to make decisions when there's a lot of uncertainty." Henley added that general economic conditions, as well as the threat of a war against Iraq, make it difficult to predict how the next two quarters will pan out.

Oracle's first-quarter revenue of $2.03bn was down 10.5% compared to the same quarter last year. Henley said that as the year progresses, the company is expecting slow improvement, with revenue down between 4% and 7% in the second quarter year-on-year, and approaching flat growth in the third quarter.

Despite the negative revenue growth, Oracle remains in a stronger position than many technology vendors. Henley said he believes this will benefit the company if and when the market does pick up. "Relatively we've done okay," he said. "Profitability remains at good levels, but the revenues aren't growing, so it's still lousy. This is an unusual time that we're in, but it will pass, and I think our products are in the strongest position they've ever been in."

Henley believes the company's financial strength has enabled it to invest in factors that will enable it to grow as the markets improve. "We are continuing to invest in developers, which will be good for us as we come out of the downturn," he said. "We've been financially stronger, we've got much higher margins and we're much better financially controlled. Our competitive strength will improve and we should take share as we come out of this."

One factor in fueling potential growth for the company is generating interest through new products, particularly given the maturity of its core database and business software markets. Henley said that Oracle's key growth targets center on the application server business, its new collaboration suite and also its evolving application outsourcing initiatives.

Although he said there is still potential for growth in the database and application businesses, He is under no pretensions that the company may have to diversify if it is to achieve the sort of growth that it is used to. "The most serious issue for all of us is the demand problem," he said. "We have to sell around the database. We have to sell into the mid-market and we have to sell new products like the Collaboration Suite," he said. "You certainly every year need to keep working on new growth vehicles. We have looked at some other areas just outside what we do and we've looked carefully at some acquisitions."

While Henley ruled out the likelihood of acquisitions in the near term, he did say that Oracle is taking opportunity of low share prices and market weakness to evaluate potential targets. Henley added that he does not expect merger and acquisition activity to pick up until there are signs of recovery, but said that Oracle's stable position gives it the opportunity. "There's nothing stopping us. We have the focus and we have the financial position," he said.

© ComputerWire

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