Your profits might have risen, but they haven't gone up enough to keep everyone happy. It's time for some fresh ideas to get the company - and its shares - back on top.
Dear Oracle,
Well, after over 10 years of almost continuous exponential
growth, the crash has finally happened. Your share price plunged
by more than a third to just over $25, despite the fact that you
had just reported a substantial rise in profits. For financial
Q2, you reported a rise in profits and a 23 per cent increase in
revenue to $1.6bn, comparedwith $1.3bn for the same period the
previous year. Profits stood at $187m, compared with $179m the
year before. The problem was that even these growth figures were
not enough. You had previously returned revenue growth of at
least 30 per cent, setting expectations dizzyingly high. The
plummet prompted fears in the market that the bottom had fallen
out of the database market. After your experience, some analysts
are now predicting a tailing off of growth and a revenue plateau.
Your ebullient CEO, Larry Ellison, saw more than $1bn wiped off
his personal fortune in the share bloodbath.
(...) Ellison isn't wrong in
thinking Microsoft is likely to try to take some of your market
share with its advances in the database market. Your Redmond
rival is about to release SQL Server 7.0 at a very low price
point - about a tenth that of a large relational database like
yours, but with many similar features. If it succeeds, even at
the low end, it further cuts your opportunities for growth.
Ellison may be in for a rough ride over the next year or so. You
need fresh ideas and a new edge to beat Microsoft, expand your
market and regain your confidence - and your share price. We
recommend price cuts and possibly restructuring in 1998 - nasty
medicine, but you know it's good for you. And your customers
won't complain either.
Yours, Business Computer World
(February 1998, p12)