Advertisment

Oracle drops database prices by 50%

author-image
CIOL Bureau
New Update

In a move designed to shield itself from new competition from IBM, Microsoft

and others, Oracle has slashed prices on its database software, some by nearly

50 per cent. Oracle's current pricing structure is based on a formula that

increases the monthly fee it charges customers as they enhance the performance

of their hardware systems by adding more processors in complex multi-node CPUs.

Customers who currently pay $325,000 a month will see their bill cut to just

$160,000.

Advertisment

Oracle has seen IBM and Microsoft compete more effectively by offering lower

prices for similar database services recently. Many companies with budget under

pressure from the economic downturn are looking for less costly alternatives.

"This is the right thing for Oracle to do. It moves Oracle into a better

position with its customers,'' said industry analyst Betsy Burton of the Gartner

Group's Dataquest unit. She added that Oracle holds a 33.8 per cent share of the

database market, followed by IBM at 30.8 per cent and Microsoft at 14.9 per

cent.

In justifying the price cuts, Oracle chief Larry Ellison said because Oracle

offered better technology, its databases would run more efficiently, and thus

less expensive than competing solution. "We think IBM and Microsoft will

cease to be important components in the marketplace.''

Advertisment

Ellison added that a typical IBM database would cost 65 per cent more than

Oracle's competing product under the new pricing formula. IBM quickly responded

saying Ellison's mathematics was incorrect. Instead Oracle's database was three

to five times more expensive than the IBM counterpart.

"This stuff about having lower prices is all wishful thinking on Larry's

part,'' said Jeff Jones, director of marketing for IBM's database division.

Oracle customers will pay $40,000 per processor to license the company's latest

"9i" database system, compared to $22,500 per processor for the IBM

product.

Industry analysts said that while Oracle probably didn't have much choice but

to cut prices, the move did present a new concern over the firm's future

revenues and earnings. Nearly 70 per cent of Oracle's sales are generated by

database software. Ellison countered that the lower prices would stimulate sales

and make up the difference.

The price cut comes as Oracle announced that fiscal fourth-quarter profits

fell 8 per cent along with a 3.2 per cent drop in sales to $3.26 billion from

$3.37 billion a year ago. But Oracle's CFO Jeff Henley said sales appeared to be

recovering after sluggish performance in the past six months. ''We hope that the

worst is over. We can't be certain yet. In the US people do feel like things are

going to be better.''

But a trouble spot in Oracle's most recent quarter is sales of application

software where Oracle competes directly with PeopleSoft, Siebel Systems and SAP.

The company continues to cut costs -- as it has in the past several quarters --

and has managed to put up flat per-share earnings, Ellison said he was

optimistic that the new 9i database and application server products and

e-business software suite would pick up steam this year. ''Our technical

accomplishments this year position us for accelerating sales next year,''

Ellison said.

tech-news