Ellison accuses IBM of 'creative accounting'

The chief executive stops short of saying Big Blue has fiddled the figures, but IBM claims that Oracle is simply under pressure
Written by Andrew Colley, Contributor and  Nicole Bellamy, Contributor

As the race for database and application server markets heating up, Oracle chief executive Larry Ellison has accused IBM of using "creative accounting" practices to inflate its market share and sales figures. IBM said Ellison's comments simply indicate that Oracle is "feeling the pressure".

During a press conference held yesterday at Oracle OpenWorld 2001 in San Francisco, Ellison challenged IBM's claims of immense market-share gains over Oracle in the database and application server markets.

"I think people are beginning to question the astonishing numbers, because whenever IBM have to associate a dollar figure with what they are selling, they back right down," said Ellison, claiming that IBM is content to announce percentage growth rates, but rarely uses revenue figures to support the claims.

IBM said that revealing revenue statistics for each market that it competes within would be contravene company's competitive practice policy.

However, Ellison also questioned IBM's statistics directly, scrutinising its claim that the company has grown its share of the application server market by 120 percent over 2001, "killing" BEA.

"We surveyed our base and we believe BEA outnumber IBM ten-to-one in our shops," said Ellison, adding that there weren't enough bases in the market for "IBMs claims to be true."

Strongly refuting Ellison's assertion, IBM Australia quoted IDC statistics, indicating that share of the global application server market grew rapidly over the 1999-2000 period, reaching 15.7 percent, and closing the gap between it and market leader BEA to 3 percentage points.

Ellison's comments stopped short of accusing Big Blue of publishing false statistics, but were consistent with his aggressive entrepreneurial style.

"Whilst these numbers are not made up, they are very creative accounting... IBM claims they are getting market share from us but provide no hard data at all," said Ellison.

According to Ellison, IBM arrives at its numbers by adding product lines and legacy systems into market share category classifications for core business markets such as Databases and Application Servers, having the effect of inflating sales and market share figures in these areas artificially.

"IBM made a public statement they hadn't lost a single Informix customer until we provided a list of about 25 in the last six months," added Ellison.

Circumspect about the prospect of entering a tit-for-tat with its competitor, a spokesperson for IBM Australia said, "we believe Oracle are worried here because we have a well thought out strategy that's paying dividends for us and our customers."

In this instance, IBM suggests the source of Oracle's anxiety lies in the database space.

"In Q3 2001, DB2 on distributed platforms (Unix and NT) grew 56 percent, five times faster than the industry growth rate. Oracle's database segment declined 8 percent in the same period," said the spokesperson in a statement issued today. "In Q2 2001, DB2 on distributed platforms grew 19 percent. Oracle's Database segment was flat in the most recent quarter."

"Clearly, Oracle is feeling the pressure," said IBM's local spokesperson, referring to findings of analyst group Prudential Securities that indicate IBM is gaining market share at Oracle's expense, and predictions by Giga Group's Terilyn Palanca that the company could be number one in database management in three to five years.

Nicole Bellamy travelled to San Francisco as a guest of Oracle.

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