News

Oracle's Ellison-California 'debate' goes on

• By John K. Waters
• June 12, 2002

Oracle CEO Larry Ellison's red-hat-in-hand appearance at last week's "Unbreakable Linux" press conference should not be construed as a symbol of repentance over the controversy surrounding Oracle's $95 million software deal with the State of California. Ellison addressed questions about the deal almost gleefully in his first public comments about the contract, which he called "a fabulous deal" for the Golden State.

State auditor Elaine Howle concluded last month that the controversial 10-year contract could force the state to spend $41 million over its first six years on software it does not need.

But Ellison contended that California could save as much as $160 million on the discounted software package over the life of the contract, as compared to expenses incurred under the state's current practice of buying software piecemeal.

"Why do you think Oracle is so willing to rescind this deal?," he asked reporters. "The deal is a great deal for the state."

Ellison called Howle "an inexperienced auditor" who "did the best job she could. She just made a couple of mistakes."

California will spend somewhere between $95 million and $123 million over 10 years on the Oracle contract, which provides all state employees with access to software databases. Logicon, a firm that worked with Oracle to sell state officials on the deal, initially told the state the contract would save more than $100 million on its software purchases during a 10-year period.

Reuters news agency has reported that Howle, who has worked as a state auditor since 1983, challenged Ellison's latest criticisms of her initial report with a new analysis that incorporated several suggestions made by Oracle representatives. Even with the new numbers, Howle found that the state would lose an estimated $32 million in the first six years of the contract, Reuters reported. Over the span of the decade-long deal, the state could save an estimated $11 million if the Oracle assumptions are correct, said Howle, but she added that she does not agree with those assumptions.

"In no way are we changing our report," Howle said. "Even when we added in a different dollar amount, it doesn't change our conclusion. "

Oracle officials seized on portions of Howle's recent testimony before the state legislature in Sacramento, sending an e-mail to reporters titled "Revised California State Auditor Report" and touting that the report estimates the state "will now save" more than $10 million over 10 years.

Ellison also downplayed recent job cuts at the Redwood Shores, Calif.-based software maker. The elimination of "200 out of 40,000" employees does not qualify as a "layoff."

"By the way," he added sarcastically, "we had a manager quit yesterday. That's more executive shrinkage."