Oracle's Software Sales Deal Saved Money for California, Report Says
By MYLENE MANGALINDAN
Staff Reporter of THE WALL STREET JOURNAL
A new analysis of Oracle Corp.'s software contract with the state of California
contradicted a state auditor's report, saying that the deal gave the state $50 million in
savings, not a loss, according to an accounting firm hired by Northrop Grumman
Corp.
Northrop Grumman's information technology unit, formerly known as Logicon, hired
Tucker Alan Inc., a consulting firm of accounting and other financial experts, to
analyze California's software contract with Oracle. Logicon and Oracle teamed up
together in May 2001 to offer a $95 million software contract to the state of
California.
Tucker Alan's report said the state of
California's contract with Oracle offered
$50 million in savings over 10 years.
That contradicts a state audit report that
said the software contract with Oracle
would produce a $5.6 million loss, the
new study said. The new analysis also
said that Logicon's original savings
projection of $111 million over 10 years was "optimistic."
Oracle, Redwood Shores, Calif., and Logicon have been embroiled in a controversy
with the state of California regarding the $95 million software contract, signed
without competitive bidding in May 2001. A state audit report set off an investigation
of the contract and the ensuing imbroglio resulted in the resignation of two state
officials and an embarrassing political situation for Gov. Gray Davis, who is seeking
re-election later this year.
The state audit raised a series of questions about the state's need for the software
and the number of employees who might use it. The contract was supposed to save
the state money by purchasing software in bulk, but the audit found that the state
might wind up paying as much as $41 million more than it would have without the
agreement. Logicon disputes that figure.
Besides issues about the cost and need for Oracle's software, Republican opponents
are questioning the timing of a $25,000 political contribution from the company to the
Democratic governor. Gov. Davis, who is backing an investigation by California's
attorney general, denied knowledge of the deal and said there was no connection
with the donation.
Oracle has offered to rescind the sale, though it disclosed it already has booked
some revenue from the transaction. And Oracle said other companies also involved
in the transaction would have to help unwind it.
Write to Mylene Mangalindan at mylene.mangalindan@wsj.com
Updated June 4, 2002 8:28 p.m. EDT |
