IBM Tops Oracle in Database Market

Gartner Dataquest has confirmed what many suspected: IBM has displaced Oracle as the leader of the database market.

According to Gartner Dataquest’s annual survey of the database software industry, IBM’s total market share for 2001 increased to 34.6 percent, up from 33.7 percent a year earlier. The increase can mostly be traced to IBM’s acquisition of Informix, which accounted for $264.4 million of IBM’s $3 billion of license revenue. IBM purchased Informix for $1 billion in April 2001.

IBM edged out longtime incumbent Oracle, whose market share dropped from 34.1 percent to 32 percent. Without the Informix acquisition, the $2.8 billion of license revenue for Oracle would come in just $30 million ahead of IBM’s total. Microsoft ranked No. 3 with a 16.3 percent market share, up 18 percent from a year earlier.

Overall, Gartner Dataquest reported the database software sales remained mostly soft, inching up 1.4 percent, to $8.8 billion, from 2000.

“IBM showed some good strong growth without the Informix acquisition,” said Betsy Burton, Gartner’s vice president and research area director. “The surprise is the fact that Oracle is losing market share across the board. I think this for the first time shows what everyone suspected and Oracle has been denying.”

Even the Dataquest figures for relational database management systems (RDMS), which Oracle has dominated thanks to its Unix RDMS sub-segment, gave Oracle reason for concern. The research firm found Oracle retained its lead in the relational database market, with $2.8 billion in new license sales, but that lead is slipping. Oracle had 39.8 percent of the market, down almost 5 percent from 42.5 percent a year earlier. IBM made up ground, raising its market share from 32.6 percent to 34.1 percent. Microsoft came in a distant third at 14.4 percent.

The news of Oracle relinquishing its position at the top of the database market comes at a rocky time for the company. The Redwood Shores, Calif-based company has become ensnared in a political scandal in California, where the state attorney general has begun a criminal investigation into the handling of a $95 million software contract Oracle has with the state. Gov. Gray Davis is reportedly in talks with Oracle to wriggle out of the deal.

On top of that, Wall Street has worried Oracle will report weak financial results in its fourth quarter. Lehman Brothers recently downgraded the company’s stock, sending it to its lowest level in three years.

Meanwhile, Oracle tried to counter the impending bad news with some spin of its own. Yesterday, in anticipation of the Gartner Dataquest report, Oracle released its own study that showed it held a strong lead in the database market – if the measurement is done by operational use, not revenue. An Oracle spokesperson said the survey was undertaken to “clear up misperceptions.”

But the perceptions of slipping in Oracle’s core database business, which accounts for 70 percent of its software sales, will not be helped by the Gartner Dataquest report. Melissa Eisenstat, an analyst with investment bank CIBC World Markets, this morning downgraded Oracle’s stock on the news from a buy to a hold, saying Oracle’s sales quotas “appear to be unattainable.”

“We believe the outlook for the company will worsen before it improves, ” she wrote. Already, Oracle has said it expects soft tough challenges in the near term. In a call with investors in March, CFO Jeff Henley said, “As far as we can tell, tech spending for enterprise hardware and software remains very soft and doesn’t yet appear to be improving.”

Eisenstat said Oracle’s position is hurt by some of its pricing methods, which customers have objected to, as well as the strides made by IBM and Microsoft. “Now there’s a credible alternative to Oracle,” she said.

Reprinted from ASPnews.com