Posted on 04/01/2003 12:17:07 PM PST by Starwind
Oracle's Ellison: 1,000 Tech Firms Should Go Bankrupt
By Peter Loftus Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--Just call Larry Ellison the dark oracle of Silicon Valley.
Ellison, the founder and chief executive of software giant Oracle Corp. (ORCL), says the high-technology industry must undergo a sweeping consolidation that will spell the end for many of his rivals.
"We think there's at least 1,000 Silicon Valley companies that need to go bankrupt," Ellison said during a meeting here Tuesday with reporters and editors from The Wall Street Journal and Dow Jones Newswires.
Not surprisingly, the hard-charging billionaire predicted Oracle, of Redwood Shores, Calif., would be among the survivors. Ellison's other survivors included several big-name tech firms like Microsoft Corp. (MSFT) and International Business Machines Corp. (IBM). (Both IBM and Microsoft are heated rivals of Oracle's, so Ellison doesn't go out of his way to say nice things about them.)
Further consolidation will occur because there are too many tech firms based on a single product, Ellison said. As technology products become commodities and prices fall, these smaller firms won't be able to compete independently. He asserted that nearly all software profits were at five companies, including Oracle, out of hundreds in the sector.
The industry is maturing, yet many in Silicon Valley are in denial and haven't embraced efficient models of operation, he said.
"The whole model doesn't make sense," he said. "There's a bizarre belief that we'll be young forever."
Ellison acknowledged that Oracle itself faces challenges, three years into a tech-sector downturn. The company, which specializes in database software, had strong sales in December and January, but February was weaker.
Now, "our customers are being cautious on capital spending," Ellison said, especially in light of the U.S. invasion of Iraq. Oracle's fiscal fourth quarter ends in May; Ellison didn't offer an update on the company's financial targets.
Separately, Ellison reiterated the company's position that it would consider paying cash dividends to shareholders if dividend taxes were eliminated, as proposed by President George W. Bush.
"We'll start paying dividends when they stop taxing them," he said. Meantime, the cash-rich company will continue to repurchase its shares as a way to boost shareholder value, he said.
Ellison also complained that Wall Street has focused too heavily on recent declines in the company's revenue from new software licenses. He said investors overlooked the fact that the company's revenue from license renewals by existing customers is on the rise.
"What people don't understand is that we are a subscription-based business," he said.
Oracle shares have fallen about 10% over the last three months. They recently changed hands at $10.79, down 6 cents for the day. .
-Peter Loftus; Dow Jones Newswires; 201-938-5267; peter.loftus@dowjones.com .
(END) Dow Jones Newswires
04-01-03 1512ET- - 03 12 PM EST 04-01-03
We'll start paying dividends when they stop taxing them," he said. Meantime, the cash-rich company will continue to repurchase its shares as a way to boost shareholder value, he said.
There has to be an elimination of the double tax on dividends. While it's great companies like Oracle are earning enough to buy back shares it's not as cost effective as paying those sums directly back to shareholders in the form of dividends.
With Oricle on your Unix platform your odds are better of doing just that.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.