Oracle shoots for $2 billion in savings

Eighteen months after Oracle CEO Larry Ellison pledged to transform the company into a truly Web-enabled business and reduce expenses by $US1 billion, Oracle has announced plans to shock skeptics on Wall Street again by doubling those savings.

Eighteen months after Oracle CEO Larry Ellison pledged to transform the company into a truly Web-enabled business and reduce expenses by $US1 billion, Oracle has announced plans to shock skeptics on Wall Street again by doubling those savings.

Gary Bloom, Oracle's executive vice president, made the announcement during his opening keynote speech at the Oracle OpenWorld conference. Bloom's remarks coincide with a multitude of product announcements by the company that will be showcased here during the weeklong exposition.

"We've taken well over $US1 billion in expenses out of Oracle," says Bloom, harkening back to a promise made by Ellison in June 1999. Although Wall Street analysts chalked up Ellison's plans as "marketing hype," Bloom says the company has delivered "real results" and plans to shave even more from its overhead. "We think we can actually take it to $US2 billion," says Bloom. "We don't think it's marketing hype at all."

Oracle's latest cost reduction initiative aims to continue the process of converting Oracle from a traditional business into an e-business, says Bloom. To date, the company has centralised a significant portion of its internal business processes and infrastructure, including its global data centres and email servers. Likewise, the company will continue to look for savings through consolidation of internal operations, such as human resources, accounts payable and order management, Bloom says.

"Everything here is about exploiting economies of scale," says Bloom. In addition, the company plans to consolidate its own information technology support - a move it expects will save at least $US250 million. Other initiatives include further Web-enabling of customer interaction and internal operations, Bloom says.

For example, Oracle consolidated 44 of its data centres into two global data centers, says Bloom. In addition, the company consolidated 97 of its email servers into two mail servers that use clustering technology from Hewlett-Packard. Licenses for the company's database products have increased by 21%, which has also lent a boost to Oracle growth during the past 12 months. "It's a little bit more than marketing hype," says Bloom.

Revenue for the company increased by 15%, to $US10.4 billion, during the last year, says Bloom. Likewise, net income has increased by 76%, to $2.3 billion, he says.

Net income for the first quarter, which ended August 31, increased 111% to $US501 million, or 17 cents per share, up from $US237 million, or 8 cents per share, a year earlier. The per-share figure topped analysts' estimates by a full 4 cents.

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