REPORT
Top Dog Oracle Losing Database Market Share

Oracle (Nasdaq: ORCL) continues to hold the lion's share of the market for database software, but two hulking rivals, IBM (NYSE: IBM) and Microsoft (Nasdaq: MSFT), have chipped away at the company's onetime stronghold, according to a new report from IDC.

Framingham, Massachusetts-based IDC said Oracle's share of the market for object and relational database management software slipped below 40 percent, to 39.4 percent. IBM gained the most market share, reaching a total of 33.6 percent of the sales, while Microsoft gained 1.4 points to take 11.1 percent of the market, making it the fastest-growing vendor by percentage.

Changing Lanes

All other vendors held only single-digit shares, IDC said, with Sybase (NYSE: SY) ranking fourth at 3.6 percent, about the same as the year before.

"The gap between Oracle and IBM is narrowing, Microsoft continues to grow, and the three of them are increasingly well ahead of the rest of the field," said IDC information management researcher Carl Olofson. "Performance varied widely across the vendors in 2002."

Redwood City, California-based Oracle, which will report quarterly earnings next week, slipped because it has always thrived on large-scale enterprise deployments, which saw the biggest slowdown in 2002, Olofson told the E-Commerce Times.

"Vendors who depend on large systems deployments suffered the most last year," he said. "The relative strength was in the smaller purchase areas."

Stopping the Slide?

However, Morningstar.com stock analyst Michael Trigg told the E-Commerce Times that Oracle has been successful at stopping sales losses and appears to be in line to rebound with the IT marketplace.

He noted that a report released last year by Gartner (NYSE: IT) suggested that Oracle had already been surpassed by IBM in the overall database market. Oracle disputed that assertion, but it may have served as a wakeup call of sorts for the company that long controlled the database marketplace.

"There will be some give and take in market share, particularly in times when sales are flat and small gains get magnified," Trigg said. "Oracle seems to have remained focused on keeping its core customers happy and not veering off course."

Think Small

Overall, Olofson added, the market for database tools was essentially flat, growing less than 1 percent worldwide. "With the whole market just stagnating, the companies that do well with smaller deployments have a better chance of making inroads," he said.

That could begin to change in 2003, IDC said in its report. In fact, the firm already has seen "some thawing" of budgets within large enterprises, which could lead to additional spending on higher-end systems.

"There is some reason for optimism," Olofson said, adding that a best-case scenario would be single-digit growth across all markets.

Skid Row

In December, Oracle said its quarterly sales had dropped compared with the year earlier, but it still managed to turn in financial results that beat estimates. At the time, Oracle said it was optimistic that a long-term downward sales trend was leveling off.

To counter the drop in its core database business, Oracle has fanned out, recently signing a long-term deal to develop new data storage technology with Japan's Hitachi (NYSE: HIT). And last summer, Oracle unveiled a software suite designed to directly challenge Microsoft Exchange.