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Oracle's predictions
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March 13, 1998: 4:05 p.m. ET
Software firm CFO still wary of Asian markets, sees sunny networking future
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NEW YORK (CNNfn) - Oracle's unexpectedly high third-quarter profits suggest that the software giant is recovering from a difficult sales reorganization. Chief Financial Officer Jeffrey Henley discussed Oracle's plans for the future, including its relationship with Netscape Communications Corp. and the troubled Asian market, with CNNfn's Deborah Marchini and Steve Young on "In the Game."
Here is a partial transcript of his comments.
DEBORAH MARCHINI, CNNfn ANCHOR: Would you say you've engineered a full recovery from what was a pretty dismal fiscal second quarter?
JEFFREY HENLEY, ORACLE CFO: I would say it's not a full recovery because we can't control what's happening in Asia right now. I think the Americas came back very nicely and that really was the biggest change in our third quarter, but unfortunately Asia-Pacific continues to plague us and probably will for a few more quarters.
STEVE YOUNG, CNNfn CORRESPONDENT: Jeffrey, it's kind of a double whammy, isn't it? Not just business conditions but also the currency issue?
HENLEY: Yes, it's both. Absolutely. That's a good point. The demand is down and the devaluation that has occurred in some of the countries has caused us to report much lower numbers.
YOUNG: Debbie was asking whether you engineered a complete turnaround. In fact, some analysts, although pleased with the numbers late yesterday, were still saying that there appears to be a slowdown in your business. Do you agree or disagree with that?
HENLEY: Well, our database business has slowed down the last few years, so I think that's true. But, it's clearly not as slow as people maybe thought after the second quarter, as our services business continues to grow very strongly at more than 40 percent. But, our license business has slowed down a bit over the last couple years.
MARCHINI: What do you still have to work on?
HENLEY: Well, we still have to do some things to get our costs in line with, a little bit of slower growth and so that's going to take a few more quarters to keep bringing our expense growth down a little bit.
We would like to see our margins improve and we're still trying to work harder in our applications business. It's a huge opportunity market and we're continuing to invest and do a lot of things to try to really take full advantage of that market.
MARCHINI: Talk to me about the labor market. We hear anecdotally that there's a supply of qualified people to work in your industry. What has been your experience? And how much more have you had to pay to get people?
HENLEY: There's no question there's been so much growth in the industry that we always have a problem bringing in new people and growing the company. I think it's true that there is more wage pressure in the last couple years than there's been for awhile. So, we're still finding people, but sometimes it costs a bit more than it used to.
YOUNG: One of the issues is that the company has been pushing product out faster than corporations can customize it. Is that situation going to change any time soon?
HENLEY: Well, I think again that this might go back to the shortage of labor, which I think is part of the problem. Sometimes we have some great technology, but it still takes talented people to implement it and so forth.
I've heard from several customers actually that if they could find more people, they could implement our technology faster than they're doing right now.
YOUNG: I'm curious about a unit that you formed with Netscape to create network computers. Is it generating revenue or still consuming revenue?
HENLEY: Well, we're still losing money. Although not as much, and I think we'll turn that around over time. But we are pleased that we've landed several deals. We just announced one this last week with Cable & Wireless over in the United Kingdom, and we think there will be some more that we can announce in the near future. Some of these will be in the consumer space, some of them will be in the corporate space.
MARCHINI: You mentioned earlier that you can't control what happens in the Asia-Pacific region, and consequently you can't fully control what happens to the bottom line. How much potentially could Asia-Pacific hurt?
HENLEY: Well, it has been hurting, unfortunately, for the last several quarters. I think it was about 15 percent of our revenue. It's becoming less, you know, because it's not doing very well. But, it's certainly costing us some significant pain.
The problem is we don't know when it will get better, but we're assuming that it's going to take probably another few quarters at least, maybe a year, maybe more. So, we're trying to readjust our spending to compensate for the expectation that the growth will be kind of flat for at least a few more quarters.
YOUNG: Jeff, when you announced your numbers in the last quarter, you not only took down Oracle investors' holdings but the whole sector. Do you think that Sybase (SYBS) and Informix (IFMX) are going to benefit from your report yesterday?
HENLEY: I don't know for sure, but I doubt it. I don't think that they are in the same position we are. They don't really have much of a position on NT. That's where a lot of our growth is right now, as you look at the numbers. I suspect that they probably won't benefit as much as we are.
YOUNG: Mentioning NT makes me wonder whether there is going to be much impact in your business as NT becomes more widely adopted. And indeed -- going forward -- as Intel produces Merced, the industrial strength chip.
HENLEY: Well, we've always been operating system independent. Over the years, we've tried to make sure that our products work on every platform, and certainly NT is a real popular platform right now. So, we've been working hard to make sure we get good market share in NT. We have the number one market share in NT and the number one market share on UNIX, so we're not sure what the future holds. [227Kb WAV] or [227Kb AIFF]
Certainly for awhile, at least, seems like NT is going to be very strong and we want to be sure we get our fair share of it.
MARCHINI: It seems like your shareholders are happy because, as I'm sure you know, Oracle stock (ORCL) is up 1-3/8 at 29-1/8. 
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Oracle Corp.
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