Oracle a bull on China, but bearish on HK
Wednesday, November 7, 2001
ANH-THU PHAN
Database and business-software maker Oracle expects its business in China to continue to double annually despite a global slowdown in technology spending, according to Jeff Henley, the firm's senior vice-president and chief financial officer.
However, the company's Hong Kong business has been hit hard by the economic slump. Derek Williams, Oracle's Asia-Pacific executive vice-president, said sales had slowed drastically and the SAR was "in a very difficult position".
"The market is very different to what it was a year ago, very different from what it was three months ago. It's on China's doorstep, which is, on one hand, good. On the other hand, it is competing with a peg to the US dollar and the lack of competitiveness that is caused. And also, we are seeing some of the industries now, like financial-services industries, going into China, when manufacturing did that three or four years ago."
For the quarter ending August 31, the China market, excluding Hong Kong, ranked third behind Japan and South Korea for Oracle's licence revenues, but China is expected to take second spot within two years.
Oracle set up a subsidiary with headquarters in Beijing in 1991 and sold software through distributors previous to that.
"We have been here a long time. There have always been people talking about the potential long-term, but it is really beginning to hit the scale where it is going to take off," said Mr Henley.
Most of the company's 65 new applications licensees in China this year had bought traditional back-office software such as enterprise resource management, said Mr Henley, who is visiting customers in Shenzhen, Shanghai and Hong Kong this week.
Mr Williams said China had not slowed significantly, even as other markets in Asia have been affected by a global economic downturn and a new caution on technology investment.
"China has its own growth engine - infrastructure development, WTO, Beijing Olympics - all of these are growth engines domestically," he said.
Mr Williams estimated that, including telecommunications companies, government-related agencies accounted for as much as 40 per cent of the mainland's technology consumption, and local enterprises, rather than multinationals, offered the biggest potential for companies such as Oracle.
"Most of the multinationals have made their decisions at some point, either around the world or in China. But the local companies, particularly those which are coming through profitably, that is a very big market," he said.
Asia accounts for 20 per cent of the company's sales and the market grew by 22 per cent in local-currency terms last quarter. Globally, sales fell by almost a third from the previous quarter, from US$3.26 billion to US$2.42 billion.
Mr Henley said he expected the situation to remain bleak for technology companies until at least next spring. There should be a full recovery in demand by the end of 2002, "barring a huge depression", he added.
Technology firms were now suffering because problems were being compounded, Mr Henley said.
"I think the reason it is so large - in terms of our slowdown, Cisco or Sun or a lot of these people - is there is the economy, there is the over-buying that has to be corrected and there is the vanishing of a whole sector called the dotcom sector," he said.
Mr Henley contested recent market reports that suggested Oracle was in danger of losing its leading position in the industry to recent entrants in the database business.
"I think we are certainly gaining share from the Sybase and Informix and the older companies, but I think even against the Microsofts and the IBMs," he said.
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