Posted on 05/03/2002 11:09:53 PM PDT by Ernest_at_the_Beach
PALO ALTO, Calif. (Reuters) - At a time when Oracle Corp. was already grappling with slumping sales, a key executive departure and a stock price hovering near three-year lows, the No. 2 software maker has now become embroiled in a controversy over a deal with the state of California.
"You just don't want this kind of press," said Charles Di Bona, a software analyst at Sanford C. Bernstein & Co., which does not have an investment banking relationship with Oracle.
"It comes at a pretty bad time ... But I don't think Oracle crossed any ethical boundaries that any other software companies wouldn't have crossed," Joshua Greenbaum, principal at Enterprise Applications Consulting, told Reuters.
STATE SOFTWARE SCANDAL
The politically charged brouhaha reaches from Gov. Gray Davis (news - web sites)' mansion in Sacramento to Oracle's Oz-like headquarters in Redwood Shores, California, which is known locally as the "Emerald City" for its striking green-glass architecture.
For months, there have been lingering questions over the deal, since it was not subject to competitive bidding and few state departments had expressed a need for the software.
The uproar over the transaction gained momentum in mid-April, when the state's auditor said the contract, which has an initial term of six years, would end up costing taxpayers $41 million more than if the state had used another purchasing method.
Then on Thursday the controversy reached a new pitch when the governor's office confirmed that a top aide to Davis -- who helped negotiate the software deal -- accepted Oracle's $25,000 donation to Davis' reelection effort shortly after the deal closed on May 31.
That aide resigned and the state's chief information officer -- who was among the proponents of the deal -- was suspended. The state's general services director resigned last week.
Highway patrol officers were called to secure shredders and garbage at the California Department of Information Technology to ensure documents related to the deal were not destroyed.
Some Republican lawmakers, looking to unseat Davis, a Democrat, demanded a federal probe. The state attorney general's office already has begun a criminal investigation.
Oracle officials, who have maintained that the deal could save California $110 million or more over a decade, on Friday said the discounts in the state's contract were very deep -- so deep, in fact, that there was a debate within the company as to whether it really wanted to book such a transaction.
They also disputed reports that Oracle threatened to take away the deal if it didn't close in time to be included in the company's key fourth quarter.
As to the political contribution, Oracle Vice President Ken Glueck said there was a time delay between his decision in April to contribute to Davis' campaign and the delivery of the $25,000 check, via an Oracle lobbyist.
Oracle on Friday offered to nullify the sale, as it had on other occasions.
FALLOUT
"My initial reaction was to think that it wasn't such a big deal. I thought there's an issue here with a customer, and that's not all that unusual," software analyst Di Bona said.
Software companies such as Oracle, i2 Technologies Inc., SAP and Siebel Systems Inc. are no strangers to public battles with customers over the performance of their products.
The latest software controversy is not about the quality of the software, but about the state's ability to make savvy technology purchases, Greenbaum said.
The state was negotiating with Oracle in the final days of the company's fiscal year, when sales representatives are eager to book deals and, therefore, more likely to OK discounts.
"That's the time of the year when you can get the best deal out of a software vendor," said Greenbaum, who added that the Oracle contract appeared to be a "pretty good deal" for the state based on the very limited information available.
"If other government vendors are smart, they're not going to make the same mistake that California did, and they're going to get the same price that California did," he said.
If the California decides to rescind the deal, Oracle would be forced to erase a "relatively small amount" of the revenue it booked in the fourth quarter of 2001, Oracle spokesman Jim Finn said.
"I don't believe this will have any real impact on Oracle's stock ... I think it will have a material impact on Gray Davis' reelection," Greenbaum said.
Stock in Oracle has lost 38 percent since the start of the year.
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Must be a Friday to have all of this bad news released now...
Pretty classic defense... Translation: "Ya, we did some unethical stuff... But everyone does it..."
Echoes of Bill Clinton...
I'm gonna ping you on something else, not related to this!
One of the reporters on Fox News in the Bay area actually said "$25,000 isn't very much money after a fair job of reporting on the problem.!"
This is kinda like a lawyer for a rapist saying that his client didn't have full penetration during the act of rape. So it wasn't a big deal.
93 million for 270,000 seats. That's $344 per seat over ten years, assume two major upgrades. IMHO an outragous gouge for the database, the apps are less then worthless and I don't think this covered it anyhow.
Do they think division is beyond us?
.....and on graydavis' parade. By the time election day rolls
around, gray's gonna be soaking wet, and as mad as a wet hen..........
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