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No. of Recommendations: 16
-Q asked:

As a side note. I see that TMF is rasing some doubt on ORCL. Humm, they make some good points, but was wondering on your take. I thought your comments you sent me on MSFT/INTC/DELL were prudent.

Are you talking about TMFFuzzies' article? John del Vecchio is one of my favorite Fool's and has been a great addition to the Fool staff. He does the research reports for Oracle, Siebel, etc... . He knows the gorilla game and is currently working on a DCF spreadsheet where we will be able to plug in three variations of growth scenarios to forecast out and narrow down a valuation range. You might want to make a post on the Gorilla Game board where he frequents to discuss opinions on Oracle if you are interested.

I'll tackle the issue of Oracle in terms of gaming for you if it helps.

I don't mind discussing this because I have talked about the similar issue on this board before as it pertains to the IP/Broadband solutions companies and the 'games' being carried out in front of our eyes (and money). There is a similar scenario between both the enabling hardware side and the network application (or old client/server) side of the business. That being the case, the choices are basically two. The first choice is for the customer to choose an all-in-one/end to end solutions company. The second choice is for the customer to choose an integrated 'best of breed/best in class' product to end up with the version of an all-in-one/end to end solution that meets their desire and needs. Neither is right and neither is wrong. The customer makes the choice.

We do the same in our consumer purchases if you think about it. When you buy a car, you can choose to have the dealer do all the service, purchase tires through the dealer, have repair work done at the dealer, have inspections done at the dealer, etc... . Or you can choose to have the service done elsewhere, buy your tires elsewhere, have a dent repaired elsewhere, have the inspection done elsewhere. Neither decision is right. Neither decision is wrong. You are the customer. You could buy all of your furniture, carpet and drapes at one store and have the same store do all of the installation and transportation if you so desire. Or you could got to best of breed specialty stores for each of the items and contract out the installation and transportation if you so desire. I could go through a varitey of examples, but you get the idea. The choice is to load everything up from the one-stop shop in your shopping basket needs or visit all the specialty shops and get the best of the best in each category. The choice is the customers.

Some examples of the end-to-end or all-in-one solutions companies on the enabling hardware side for IP/Broadband are Cisco and Nortel. Oracle is that example in the software applications market. They want to offer the full gamut of solutions for their end customer. Or at least for that customer that is satisfied with one-stop-shopping. However, there has been a dynamic generational change in application solutions. The previous generation was the client/server architecture. The new generation is the network application architecture. At the moment, we are firmly in the middle of this transition. That means plenty of product from the client/server architecture is still in use and still being sold. However, most of the new product is usurping the old in terms of revenues these days as the transition continues to take place. The need for network applications drives the IP/Broadband (NGN) space and vice versa. They are really interlinked in terms of a major disruptive change from the way computing and applications were performed in the previous generation BI (before Internet).

Both in enabling hardware and enabling software application 'games', interoperability is important. If I can't connect my toaster to your microwave and print out my weekly shopping list from the database of what's needed in the fridge - then my solutions are not interoperating. An IT department will have high turnover if everyone's toaster isn't working with everyone's vacuum cleaner and picking up the kids after school on time - or whatever. The barriers to entry for an enabling hardware game are higher and more difficult than in a software game because the layer of technology is 'lower on the pole'. Still, software code has got to work with software code and interoperability is key. There are thousands of progammers locked in an office

A recent example is a large Nortel client in Germany (Star 21) announced this week that they would be installing a hefty series of M160's and M10's from Juniper Networks because Nortel didn't have the product they needed and they were comfortable with the JUNOS software and hardware. Nortel is a reseller of Juniper gear until they get their own product up and going. Does that mean that once Nortel has their own gear ready to roll that every Nortel customer will choose the Nortel gear over the Juniper? No. Ditto for Cisco. Every Cisco customer is not choosing only Cisco gear. Both Cisco and Nortel have high end routers coming. Juniper has become the niche space leader in the high end and is now working to broaden their solutions as well as work on the next generation of high end gear. Regardless of that, the customers choice will be end-to-end from one vendor or best of breed from a variety of vendors provided interoperability is satisfied.

The same is true in the software application market. The big worry in 1997 and 1998 was if ERP value added applications like supply chain management or content management or customer relation managment would be able to carve out a niche and become best of breed against the all in one ERP system. Well, they did. Aspect Development, i2 Techologies, Siebel Systems, Manugistics, etc... . Now those niche best of breed companies are broadening their solutions to the point that with the generational change from client/server architecture to network application architecture the entire ERP system as we knew it is in jeopardy of being leap-frogged. What was in the previous generation is no longer in the new generation. So Oracle is up against best of breed powerhouses like i2, Siebel, Bea Systems, Ariba, etc... . Oracle believes the all-in-one/end-to-end solution is what the customer wants. That's true for some customers, but IT departments make the choices and spending and revenue patterns have shown that whether we are talking about an enabling hardware of a software game, plenty of revenue spend goes to the 'best of breed' scenario.

That being said, Oracle is the gorilla in database application solutions. Their historical attempt at broadening that gorilla base to also rule supply chain, human relations, customer relation, content management and other areas like procurement has not come to fruition. i2, Siebel, PeopleSoft, etc.... continue to be the gorillas in their niche and are expanding. I don't know what article you are referring to here at the Fool that was raising doubt in regards to Oracle, but just as the 'game' in enabling hardware is being carried out with the companies we discuss here on the broadband board (NGN/IP/Broadband) - so to are the games being carried out in the network application market.

What all of that means is that as an investor in technology, you have to understand this so you know that Oracle is attempting to be the 'one-stop-shop/end-to-end' solutions company. Or Cisco or Nortel. Likewise, you have to understand the niche gorillas and what they have carved out with their best of breed, or first to market or leadership position to become who they are today. Companies like Juniper, Redback, i2, Ariba, Bea Systems, Ciena, Siebel, Brocade, etc... .

I tend to invest my money in both best of breed niche leaders as well as all-in-one/end-to-end solutions companies. I understand Oracle for what Oracle is just as I understand what their competition is for what they are. We call the mature large companies that are gorillas like Intel, Cisco, Oracle and Microsoft "Silverbacks". New emerging powerhouses like Siebel, Qualcomm, JDS Uniphase, i2, Juniper, Brocade, Bea Systems, etc... all followed 'chasm and tornado' strategies with spot on execution.

BB
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