The Database Report – July 2004

Although the ongoing saga between Oracle and Peoplesoft continued to dominate the news this past quarter, several other interesting database events made the news as well. We’ll examine the
highlights in this edition of The Database Report.

Gartner’s DBMS Market Numbers

Perhaps the most interesting news of the past quarter was the release of Gartner’s annual report on the database software market. And it contained some good news: the relational database software
market grew 5% last year with sales of more than $7 billion in 2003.

The three largest DBMS vendors maintained their same ranking as last year: IBM, Oracle, and then Microsoft. IBM must be pleased as it remains on top with 36% of the market. Coming in second place
with 32.6% of the market is Oracle, but it is a mixed blessing because Oracle lost market share for the third straight year. Microsoft’s SQL Server gained market share in 2003, coming in with an
18.7% share.

Gartner’s research indicates that most of IBM’s success comes from its proprietary iSeries and zSeries hardware. In the more hotly contested Linux, Unix, and Windows space IBM did not see the
same growth.

Oracle’s growth on Linux platforms was particular intriguing as it streaked to sales of $207 million – which represents 69.1% of the overall market for DBMS software on Linux platforms. IBM was
the Linux leader last year, with sales of $67 million. Although still growing on Linux at a 27.5%, IBM fell behind Oracle this year due to Oracle’s stellar 360.8% growth rate on Linux. Some of
IBM’s growth is tempered by its Informix product line that is experiencing negative growth on Linux (-15.6%). The overall DBMS market for Linux grew 158% last year, with year over year growth in
new license revenue of $116 million in 2002 to almost $300 million in 2003.

On Unix platforms alone, Oracle continues to lead with sales of $1.3 billion, but a negative growth rate of -8.3%. Similarly, on Windows platforms only, Microsoft continues to lead with sales of
$1.3 billion and a growth rate of 11%.

Another interesting research study that complements the Gartner finding was published by ITtoobox this past quarter. The 2004 ITtoolbox Database Purchasing Survey was conducted in early May 2004 to
gain insight into DBMS purchasing trends among corporations worldwide.

The findings of the survey indicate that most of the participants are satisfied with their current database software and expect it to be able to meet their company’s needs. Although some
respondents intend to replace their DBMS software in 2004, most were looking to upgrade specific features to improve performance and functionality. In fact, 57% of those surveyed were planning to
upgrade their DBMS in 2004, but only 18% were planning to replace their DBMS.

The complete survey can be reviewed at http://emergingtech.ittoolbox.com/documents/document.asp?i=1898.

IBM Previews Stinger

In early May at IBM announced the first public preview of Stinger, its next-generation release of DB2, which is slated for availability later this year. IBM’s previous DB2 public previews lasted
around six months – and if IBM stick to the same schedule that would put Stinger on track for a late 2004 release.

As announced previously, Stinger features tighter integration with Microsoft’s Visual Studio .NET development environment, as well as IBM’s WebSphere Studio IDE. With all of the delays
surrounding Microsoft’s Yukon release of SQL Server, IBM is making a lot of noise about its .NET support. IBM DB2 will support .NET better than Microsoft SQL Server when Stinger is released, and
that might tempt some Windows developers who use SQL Server to try out DB2 instead.

Perhaps in response to Stinger, in late May Oracle and Microsoft announced an agreement to more tightly integrate Oracle’s DBMS software with Microsoft Visual Studio .NET 2003. Oracle plans to
offer a download for integration with Visual Studio .Net 2003 from the Oracle Technology Network Web site later in 2004.

But back to Stinger: Other Stinger highlights focus on making DB2 easier to manage and administer. Features like the Configuration Advisor, a much-improved Design Advisor, and the learning
optimizer make database administration simpler and more automated. Stinger also offers a client rerouting capability that enables a user’s desktop to automatically fail over to a backup database
when the primary DB2 database server has gone off-line. Indeed, automation is an overarching trend in the database market these days, and Stinger positions IBM well in terms of autonomic database
computing.

DB2 Information Integrator, Round 2

In early June IBM announced an open beta of the second version of DB2 Information Integrator software, code-named Masala. DB2 II V2 provides greatly enhanced functionality with more than 100 new
features. Many of these new features deliver enhanced automation capabilities, improved efficiency, enhanced searching, better integration and overall simplification.

DB2 Information Integrator is IBM’s federated content management offering. It can be used to provide businesses with a single view of their information assets, regardless of where the information
is stored. Furthermore, DB2 II delivers real-time access to data across multiple data stores.

As is becoming more the norm at IBM, the software is going through an “open” beta to shake out the bugs and to gather suggestions from actual users. IBM hopes to have over 100 companies
participate in the open beta for DB2 Information Integrator V2.

Financial News from IBM

In mid-April, IBM reported a second consecutive quarter of improved sales and profits. Big Blue reported first quarter net income of $1.6 billion (93 cents a share) as compared with net income of
$1.4 billion (79 cents a share) in the same quarter last year. And overall revenue grew 11% to $22.3 billion.

There was good news on the mainframe front for IBM as its zSeries business was up 28% in constant currency. IBM software continued to do well with revenues rising 11% (or 3% in constant currency)
to $3.5 billion. Revenues for Data Management software increased 10% including revenues for DB2 database software, which increased 14%.

All in all, the company’s total gross profit margin from continuing operations was 36.0 percent in the 2004 first quarter, the same as the first quarter of 2003.

Financial News from Oracle

Oracle reported its fourth quarter earnings in mid-June. Although earnings looked good for the past quarter, Oracle also issued a warning for next quarter and that seemed to impact the stock as it
declined after the announcement. But with fourth quarter revenue of $3.1 billion, Oracle earned 19 cents a share with net income of $990 million. During the same period last year, Oracle earned
$858 million or 16 cents a share, on revenue of $2.8 billion. These results were ahead of industry analysts expectations of $3.07 billion in revenue, or 18 cents a share.

The good news for the past quarter was tempered by estimates given for next quarter. Oracle indicated that it expects to post a first-quarter profit of 9 cents a share, with revenue rising between
6 percent and 9 percent over the year-ago period. That translates into first-quarter revenue of approximately $2.2 billion.

Let’s go back to the fourth quarter to look at the database figures. New license sales of Oracle’s DBMS were impressive at $1.1 billion, which is a 15 percent increase. Applications sales though,
were down 6 percent to $231 million. Services revenues declined as well to $558 million.

The net result is that the database business is healthy at Oracle, but the applications business looks like it needs a lift. So these numbers help to show why Oracle continues to pursue Peoplesoft.

Yukon Call It SQL Server 2005

In late May, Microsoft unveiled new features in preparation for the release of SQL Server 2005 at the Microsoft TechEd 2004 conference. Yukon has been in the works for quite some time and it still
does not have an official release date. Don’t be confused by its name – although it is likely to ship in 2005, Microsoft has not always aligned the year in the product name with its official ship
date.

Over the past year or so, Microsoft has talked about some of the great new features that will be in Yukon, err, ah, I mean SQL Server 2005. At TechEd, Microsoft continued to announce new features.
SQL Server 2005 will ship with native data encryption support “out of the box.” Furthermore, additional new features will continue to be announced with SQL Server 2005’s new business
intelligence features to be announced next.

Microsoft also announced that support would be discontinued for SQL Server 2000 users two years after SQL Server 2005 ships. However, extended support can be purchased for five years after
mainstream ends, or two years after the version after SQL Server 2005 ships, whichever is greater. This is a reasonable and well thought out support policy for SQL Server users. Because SQL Server
2000 was released in the year 2000, this policy offers users a total of 10 years of support if they so choose – and that is a long time in this industry.

Meanwhile, Microsoft was out patenting double clicking. I’m serious. Read about it at http://story.news.yahoo.com/news?tmpl=story&cid=581&e=1&u=/nm/20040604/tc_nm/tech_patent_dc.

Sybase Buys XcelleNet

Although Sybase lags far behind the market leading DBMS vendors these days, they still offer viable relational database products that are used by many large corporations. Increasingly, Sybase’s
strategy has hinged on providing mobile middleware technology and application infrastructure products. This past quarter, Sybase buoyed that strategy through the acquisition of XcelleNet, a
provider of data management applications.

The buyout, announced at $95 million, will bolster Sybase’s “unwired enterprise” initiative, which focuses on creating mobile software solutions for corporations. XcelleNet will become part of
Sybase’s mobile division.

Sybase expects to gain about 2,200 customers through the acquisition of XcelleNet as well as to expand XcelleNet partner relationships already in place with Hewlett-Packard, Microsoft, and others.

The Sybase strategy is a sound one. By specializing in the mobile category Sybase can differentiate itself more easily from the large enterprise DBMS vendors like IBM, Microsoft, and Oracle.

Open Source DBMS News

This past quarter was a busy one for open source proponents – especially those looking to bolster the open source database market. Perhaps the biggest news was the entry of a new open source DBMS
from Computer Associates (CA). In late May, at their annual CA World conference, CA announced its intent to release its Ingres relational DBMS product into the open source community.

Ingres will be released under the CA Trusted Open Source License (CA-TOSL). Under the CA-TOSL, independent software vendors can incorporate Ingres into their products as long as the Ingres source
code is provided with the product. CA will offer support and indemnification as added-cost options to the CA-TOSL Ingres.

The Ingres source will be made available at http://ca.com/opensource before the end of August 2004. This is the site where contributors will be able to submit
their modifications to Ingres, as well.

This move by CA gives open source developers another database option. So, this is good news for developers. But the open source DBMS market is already somewhat crowded with MySQL, PostgreSQL,
Firebird, and Sleepycat Berkeley DB. Furthermore, PostgreSQL grew out of the original Ingres DBMS, so now we have both Ingres and PostgreSQL available as open source software. Perhaps the growing
acceptance of open source (and PostgreSQL) in the market place helped to force CA’s hand in turning over Ingres to the open source community?

In other open source news, Gupta Technologies announced a Linux version of its embedded database product, SQLBase. Though SQLBase will not itself be open source, the news of another DBMS being
supported on Linux, the software that has led the open source charge, is good news for the open source community. The SQLBase 9.0 Beta Program ran though June 30, 2004 and general availability is
planned for this Fall (2004).

In early June Hewlett-Packard announced plans to support MySQL and the JBoss application server. The plans call for HP to certify, support and jointly sell these open source software solutions on
HP’s servers. This agreement allows for HP to support customers embracing an open source software strategy on HP hardware.

The final tidbit of database-related open source news is Oracle’s announcement of its transition to Linux in its development environment. In late May Oracle reported that it should completely
finish the migration of its in-house development staff (of about 9000 developers) to Linux by the end of the year.

The Oracle PeopleSoft Saga Continues

Oracle continues to pursue a hostile acquisition of enterprise applications software vendor Peoplesoft. Where we left things late last quarter was in court. The US Department of Justice filed an
antitrust lawsuit, and hearings began in early June. But before we go to court, let’s get up to date on the happenings since late March.

Oracle pulled the slate of directors it had nominated for PeopleSoft’s board in an attempt to seize control of the company. Oracle’s current position is that it will battle this out in court.

In mid to late April Peoplesoft extended its controversial customer refund program until either June 30, 2004 or until Oracle ends its bid to take over the company. The program terms remain the
same – license fee refunds will be offered to customers in the event of any “majority change” in PeopleSoft’s board within the next two years. The cost of such refunds is estimated to be between
$800 million and $1.5 billion if enacted by customers. The program is designed to thwart the Oracle take over attempt, but really serves to deter any potential Peoplesoft suitors.

Also in mid April European regulators suspended their probe into Oracle’s PeopleSoft bid. A spokesman for the European Commission claimed to be missing pertinent information on Oracle’s market
position in human resources and financial management software. The European Commission, which notified Oracle and Peoplesoft of its objections to the deal in March, was due to decide on the issue
May 11. However, no new deadline has been set.

In early May, a California judge set a November 1, 2004 trial date for Peoplesoft’s lawsuit against Oracle, which claims that Oracle engaged in unfair business practices against Peoplesoft during
its hostile take over attempt. PeopleSoft is seeking undisclosed financial damages. The lawsuit will be heard in Alameda County Superior Court. Keep in mind; this lawsuit is separate from the
DOJ’s federal court lawsuit in San Francisco that started on June 7th.

Then, in a surprise move on May 14th, Oracle reduced the amount it is offering to acquire Peoplesoft from $26 a share to $21 a share. This reduced the size of the offer from $9.4 billion to $7.7
billion, which according to Oracle is more in line with Peoplesoft’s current value. Peoplesoft’s actual stock price (NASDAQ: PSFT) actually ranged between $17 and $20 during the past quarter. Of
course, Peoplesoft’s board of directors rejected this offer, too.

My point of view is that if Oracle were really interested in still acquiring Peoplesoft, it would not have dropped its offer. Most software company acquisitions happen because the acquirer’s offer
is quite higher than the current stock price. Unless Peoplesoft was on a rapid descent (which it does not appear to be on), there is no incentive for Peoplesoft shareholders to accept Oracle’s
current meager offer. Of course, if this hostile acquisition attempt lingers on, Peoplesoft’s business may suffer causing the stock price to drop even further. If it does, Oracle’s current offer
might look more tempting. But then again, Oracle could drop its offer even lower in the future. What a mess!

The message Oracle would like to send with this reduced bid is that the procrastination of PeopleSoft’s board and executives has cost its shareholders $1.7 billion. Of course, Peoplesoft would
dispute that, instead contending that Oracle’s continuing to pursue an acquisition in nothing but an attempt to disrupt Peoplesoft’s business. I don’t think either of these views is accurate. My
opinion is that Oracle would really like to acquire Peoplesoft, but they probably aren’t willing to spend what it would take. And even so, the DOJ would block it as anti-competitive.

So let’s discuss the DOJ trial. In the days immediately before the trial, everyone involved jockeyed back and forth preparing his or her ammunition. In late May, the DOJ released its witness list
indicating its intentions to call executives from Microsoft and IBM, as well as several big corporate customers including DaimlerChrysler and Kerr-McGee, to testify against Oracle acquiring
Peoplesoft. Oracle, too, released its witness list and it includes Peoplesoft CEO Craig Conway, who is also a former Oracle employee. Of course, Oracle also indicated its plan to call Larry Ellison
as a witness, too.

The week before the trial Oracle tipped its hand indicating that it will defend its bid to acquire Peoplesoft as procompetitive. Furthermore, Oracle contends that blocking the deal would do harm to
the evolution of the high-tech industry. Oracle continues to tout SAP, not Peoplesoft, as the big gorilla in the enterprise applications market. In my opinion, although this is correct, it is not
an accurate judgment of the market – which is dominated by SAP, with Peoplesoft and then Oracle as the only other major players.

The DOJ argument is that Oracle competes against Peoplesoft more often than any other competitor. The DOJ will claim that this forces Oracle to offer larger discounts and that without PeopleSoft in
the market, competition will decrease and prices will increase.

The red herring in all of this is Microsoft. Oracle claims that they compete in this space while the DOJ claims they do not. Indeed, the Justice Department said it would introduce evidence that
Microsoft is not planning to enter the enterprise application software market. Once again, in my opinion, the DOJ is on sound ground here. Although Microsoft acquired Great Plains and its
application business, this software does not compete for the same customers as the SAP, Peoplesoft, and Oracle enterprise applications. The Great Plains software is aimed at much smaller companies.

At any rate, it will be interesting to see the DOJ and Microsoft on the “same side” for a change.

Another interesting pre-trial decision was made just about a week before trial. A federal judge ruled that Oracle would not be permitted to talk about its previous acquisition of the Rdb DBMS from
Digital Equipment in 1994. Oracle has touted its Rdb product line as proof of its ability to keep multiple code bases viable – in this case the Oracle DBMS and the Rdb DBMS. But the court will
prohibit Oracle from submitting “evidence, testimony, or argument at trial, hearing of any motion relating to Rdb Database.” Although this would have been an interesting sidebar to the case, in
my opinion, it was not really relevant as to whether or not an Oracle acquisition of Peoplesoft constituted the creation of an anti-competitive landscape.

As the trial kicked off in June the primary topic was how broadly the business software market should be defined. The broader the better for Oracle because the more competitors there are, the less
the chance that Oracle acquiring one of them would be anti-competitive.

If the DOJ succeeds in its suit to block this acquisition, then Oracle will probably appeal the decision, though it would be wise to drop it and look elsewhere for targets more amenable to being
acquired. But if Oracle wins in court, then Oracle would most likely apply pressure to Peoplesoft’s shareholders to force its management to bargain – which would probably result in a higher offer
from Oracle in return for Peoplesoft dropping its customer refund program. Of course, if Oracle wins the DOJ could appeal, too.

In my opinion, the DOJ’s position is better than Oracle’s, but it has to be proven in court. But regardless of what the court finds, IBM and Microsoft do not compete for the same customers as
Oracle, SAP, and Peoplesoft in the enterprise applications market. Lawson Software is probably the only other software vendor of any size that competes for the same customers as Oracle, SAP, and
Peoplesoft in the enterprise applications market. Anyone in this industry can tell them that – and Peoplesoft has lined up many customers willing to do just that at trial. Even Larry Ellison his
own self might “testify” to that effect. CBS Market Watch reported that the Justice Department has videotaped footage of Mr. Ellison, taped in January, in which he states that Oracle has a market
advantage because it’s one of few software makers offering a “suite” of software used to run customers’ businesses. (Details available at http://cbs.marketwatch.com/news/story.asp?guid=%7B28909337-C0D7-4170-95F3-55A03F0D6760%7D&siteid=google&dist=google).

Interestingly enough, as the trial began in early June news leaked out that SAP and Microsoft had considered a merger in 2003, but called it off for fears of it being too complex to pull off. But,
if you really look at it, whose case is bolstered by such a revelation? In my opinion, it helps the DOJ more than Oracle. Why would Microsoft acquire SAP if it already had enterprise quality
applications? Furthermore, Microsoft has reportedly signed a sworn statement for the Justice Department indicating that it has no plans during the next two years to move into this market.

One of the more interesting pieces of evidence from early in the trial was an estimate from IBM indicating that IBM could lose millions of dollars in software sales if Oracle was successful in
acquiring Peoplesoft. This makes some sense. As I have said before, it is unlikely that Oracle would continue to support DB2 in the Peoplesoft applications for very long. And if the Peoplesoft
customers kept the application, then they’d have to switch database vendors – probably to Oracle.

Be this as it may, most analysts observing the trial seemed to be of the opinion that the judge was reacting favorably to many of Oracle’s arguments. The judge also indicated that too many
documents were being introduced as confidential – many of which seemed to not really contain trade secrets. Indeed, this trial promises to be interesting to follow.

The trial is expected to last for about four weeks, so next quarter we should have news on its resolution – though probably not a resolution to this entire saga.

Summary

And so ends yet another quarter of database news. And next quarter looks like it could be even more interesting with the Oracle / Peoplesoft trial in full swing. So be sure to check back with
TDAN.com next quarter to hear all the latest news about the DBMS market place.

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About Craig Mullins

Craig S. Mullins is a data management strategist and principal consultant for Mullins Consulting, Inc. He has three decades of experience in the field of database management, including working with DB2 for z/OS since Version 1. Craig is also an IBM Information Champion and is the author of two books: DB2 Developer’s Guide and Database Administration:The Complete Guide to Practices and Procedures. You can contact Craig via his website.

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