September 21, 2005 8:41 PM PDT

Ellison looks to double Oracle revenue

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Too much on Oracle's plate?

September 21, 2005
SAN FRANCISCO--Oracle chief Larry Ellison hopes to double his company's revenue over the next few years.

Speaking to reporters at the company's Oracle OpenWorld conference on Wednesday, Ellison said his game plan is to grow the software giant from a nearly $15 billion company to a $30 billion behemoth over the next few years--and to do so at a pace that maintains a 40 percent operating margin.

"In order to grow at this pace, there'll have to be a couple of acquisitions along the way," Ellison said. "The tricky thing is to grow at this rate and maintain a 40 percent operating margin."

The company's $10.3 billion PeopleSoft acquisition and pending acquisition of Siebel Systems may help Ellison achieve that $30 billion goal.

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Oracle OpenWorld
Customers gather in San Francisco to learn the software maker's plans for products picked up during a year of acquisitions.

Ellison said the PeopleSoft deal demonstrates that Oracle can undertake large deals without giving up its 40 percent margins.

And though Oracle is not ready to take on another multibillion-dollar buy while it digests its Siebel acquisition, Ellison has demonstrated he is willing to do smaller, niche-market deals at the same time.

Ellison argued that while the company's database business remains king, the business applications market has become extremely lucrative for Oracle. A third of Oracle's revenue come from applications, but the contribution to profits is in excess of 40 percent, the CEO said.

"The growth rate is also higher than our database business. It's a sticky business with the license renewals and is on the high end of our value chain," Ellison said.

Oracle is interested in markets like hosted services and believes its acquisition of Siebel will give it a leg up in the realm of on-demand products for customer relationship management, or CRM. Siebel's on-demand business competes with Salesforce.com, a company in which Ellison invests.

"We want to go after Salesforce.com as much as we can," Ellison said. "I'm an investor in Salesforce, and I want to see my investment go to zero."

Business intelligence players and middleware developer BEA Systems, however, are less-attractive acquisition targets, Ellison said.

"At one time we highlighted BEA for a possible acquisition, but less so now," Ellison said. "We have passed them up...and they don't really want to be bought."

He added that Oracle, through its presence in the database market, is already a top leader in the business intelligence market, reducing his desire to expand further via acquisitions.

Oracle is also considering de-emphasizing some projects of the companies it acquires.

Siebel, for example, is working on Project Nexus, its services architecture. But since Project Nexus is not written in Java, Oracle will not likely attempt to preserve its code, Ellison said. Oracle is currently undertaking a major effort to integrate PeopleSoft, and later Siebel, software into its open-source, standards-based Project Fusion architecture.

"The code is pretty much overrated," Ellison said. "It's more important to know such things as structure, features and functionality."

 

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