00007
22	Q. All right, sir. And could you tell us

00008
1	what, if anything, you did to prepare for today's
2	deposition?
3	A. Met with counsel.
4	Q. And that would be Mr. Wall?
5	A. Yes.
6	Q. And when did you meet with Mr. Wall to
7	prepare for today's deposition?
8	A. Yesterday.
9	Q. And how long was that meeting?
10	A. Five, six, five hours.

00012
6	Q. All right, sir. You have a document in
7	front of you which, for identification purposes,
8	has marked been marked as Exhibit 550. It's a
9	multipage exhibit. It has numbered in the bottom
10	right-hand corner through page 48. The first page
11	has printed "Board Presentation on M & A
12	Opportunities," dated April 14th, 2003.
13	And I'll ask you if you have seen that
14	before?
15	A. I certainly may have. I don't recall
16	seeing the document.
17	Q. Do you recall Mrs. Catz giving a
18	presentation regarding potential M and A
19	opportunities in this time frame to the board?
20	A. Yes, I do, but I can't imagine it had
21	this many pages. I have never seen a presentation
22	of this length given to the board.

00013
1	Q. Well, let me ask you to turn to the third
2	page of the document where there is a heading
3	there "Enterprise Software Competitive Profile."
4	And then there are a list of technology and apps
5	on the left-hand side and across the top various
6	company names.
7	Do you see that?
8	A. Yes, I do.
9	Q. Have you seen this document before?
10	A. Again, I may have; I don't recall it
11	specifically.
12	Q. All right, sir. Now, on the left-hand
13	side there are -- like I said, there is a box that
14	says "Technology" next to a number of different
15	technological descriptors --
16	A. Yes.
17	Q. -- starting with "Database" ending with
18	"Content Management."
19	Do you see that?
20	A. Yes.
21	Q. Would you read through those to yourself
22	first and tell me when you are finished, and I

00014
1	have a couple of questions about that information.
2	A. (Witness reviewing document.)
3	Okay.
4	Q. Are you familiar with the different types
5	of technologies listed there?
6	A. Yes, I am.
7	Q. And, first of all, database, the first
8	one, what do you understand that to mean?
9	A. General purpose software to manage the
10	storage and retrieval of information.
11	Q. All right, sir. And next to that, under
12	that, is the heading "App Servers."
13	A. Application server, yes.
14	Q. And what does that mean to you?
15	A. It is a development tool environment
16	whereby you create and run your applications. Let
17	me see if I can be a little more clear. In our
18	case it would be the Java language. You program
19	in the Java language and then we have -- so there
20	is a development environment and then there is the
21	execution or run-time environment for running your
22	applications, executing the Java programs.

00015
1	So it is the program logic. If the
2	database is the data-access portion of your
3	application, storing and retrieving information,
4	the program logic would be executed in the
5	application server. For example, the program that
6	says move that $50 out of the database -- out of
7	your savings account and into your checking
8	account. So those instructions, that portion of
9	your application, would be resident and run in the
10	application server.
11	Q. And then the term "Business
12	Intelligence," what, if any, meaning does that
13	have to you?
14	A. That, again, sits on top -- these all sit
15	on top of the database. Business intelligence
16	might look at your sales over the -- you know, the
17	last, you know, the first ten weeks of this
18	quarter and compare it to the first ten weeks of
19	the previous quarter and draw a graph for you.
20	Q. All right, sir. And "Development Tools,"
21	what are they?
22	A. Those would be the development

00016
1	environment. Tools to help the programmer write
2	the Java code, very much -- you have a
3	word-processing editor you type in your documents
4	too. There is a similar editor for programmers
5	that allow them to type their computer
6	instructions into, and it will -- just like if you
7	have a spell checker, it would have the syntax
8	checkers to make sure that you are putting the
9	parentheses in the right place, as much as it
10	could. It also let's you test your program. So
11	it's the environment in which you write the
12	programs and test the programs.
13	Q. And "Application Integration," what does
14	that represent?
15	A. That's a piece of software, often has two
16	parts. One part is the part that allows one
17	program -- one computer program to talk to another
18	computer program. Let's say you are trying to
19	integrate SAP to Oracle, you know. Let's say it's
20	SAP manufacturing and Oracle financials. So you
21	have to have some way for the SAP application to
22	talk to the Oracle application. If you will, a

00017
1	cellphone. Just like if I need to contact you,
2	I can call you up on my cell phone. So there is a
3	software that makes the connection.
4	And the most popular form of that now is
5	called Web Services, allows me to actually just --
6	one program to get in contact with another
7	program, but there still could be a problem though
8	because you might speak Hungarian and I speak
9	French. So there is the other part of the
10	integration software which has to translate how I
11	say "Let's have lunch on Thursday" in a way that
12	you can understand "Let's have lunch on Thursday."
13	And I think the met for is accurate.
14	So how Siebel stores customer records and
15	how SAP stores customer records and how we store
16	customer records is all different, so you need
17	something to translate these formats, these
18	customer record formats, into a common format so
19	the applications can understand one another. So
20	there is two pieces: The communication piece and
21	the translation piece.
22	Q. All right, sir. And the term "systems

00018
1	management," do you have any understanding of
2	that?
3	A. Sure. As these applications are running
4	on a daily basis, there are people in the data
5	center that have to watch the computers. They
6	make sure you don't run out of storage space, and
7	there are tools, consoles, whereby they can
8	monitor and manage the ongoing computer operation.
9	So let's say a disc drive should break
10	and they can -- they should know about that.
11	Sometimes that failure could be catastrophic, most
12	of the times it's not. The systems are relatively
13	fault-tolerant, but it does that you have to pull
14	that disc drive out and plug another one in at
15	some point in time.
16	So it's a set of tools to both monitor
17	and manage your software. Let's say your
18	Oracle -- or you're adding some antiviral software
19	to your e-mail systems, a new virus has just shown
20	up, and you need to upgrade your e-mail software
21	to protect yourself against this virus which is
22	spreading. So there needs to be management tools

00019
1	which allow you what's called a patch, to make
2	small changes to the software you are running, and
3	this is a management console that helps the people
4	in the data center apply that fix or that patch to
5	your software. So that's all part of system
6	monitoring and management.
7	Q. All right, sir. And "Storage
8	Management," what, if any, meaning does that have
9	to you?
10	A. Storage management is a subset of systems
11	management -- well, storage management can have a
12	couple meanings, but it's that subset of systems
13	management that has to do with disc storage space,
14	running out of space, failures, backing up the
15	system. So periodically -- you've got a large
16	system, you want to make sure you make a copy of
17	all the data on that system in case of
18	catastrophic failure, so backing it up, adding
19	more storage as you need it. If there is a
20	performance problem, one disc drive is being
21	exercised excessively, you want to split that data
22	across two separate disc drivers to balance

00020
1	performance.
2	Q. And "Network and Service Management,"
3	what meaning does that have to you, if any?
4	A. That would be the other end, again, of
5	this whole thing called systems management. That
6	would be looking at the network. In the case of
7	Oracle, we have a big data center in Texas, but we
8	have users of our system all over the world. So
9	attached to our Texas data center is this vast
10	private network that we've got, and sometimes we
11	can have -- if we want to know if there are
12	problems, performance problems, on the network, if
13	there has a failure of a device on the network.
14	So, again, it's a set of tools that let us look at
15	the state of the network, how its performing, if
16	there is any system failure, that allow us to,
17	again, monitor and fix faults in the network.
18	Q. All right, sir. And "Content
19	Management"?
20	A. Content management is an interesting,
21	relatively new term. It usually means -- it means
22	different things to different people. I guess the

00021
1	easiest way to describe content management is
2	looking at a lot of things that are on a typical
3	website. If you go to our website, there are a
4	lot of text files, there are a lot of references.
5	There might be an interview with a customer saying
6	how wonderful the Oracle products are. We
7	certainly wouldn't put up an interview if they
8	didn't say they liked our products. So keeping
9	track of customer references, customer interviews,
10	analyst reports, all sorts of things that are
11	not -- that are not traditional database data,
12	that aren't structured data, like these reports,
13	videos, interviews, images, all of those things
14	fall into this rough area called "content
15	management."
16	Q. All right. So now-
17	A. By the way, if I can just say, content
18	management, some content management runs on top of
19	a database and some content management runs on top
20	of file systems.
21	Q. I'm sorry, the last part?
22	A. Some content management runs inside of

00022
1	the database. Most of the stuff sits on top of
2	the database, but you can run it on a file system,
3	if you like.
4	Q. All right, sir.
5	A. Okay.
6	Q. Now, are you familiar with the term
7	"technology stack"?
8	A. Yes.
9	Q. And what does that term mean to you?
10	A. It's a collection of these -- it's a set
11	of these things listed as technology, with the
12	foundation, if you will, you can start at hardware
13	if you want to, say the computer and the disc
14	drives and then you put the operating system
15	software on that, is the most primitive, lowest
16	level piece of software; the database software on
17	top of that, the application server software on
18	top of that. And you can include business
19	intelligence, if you want, and all of those other
20	things as part of your technology stack.
21	Q. You use the term the "operating system
22	software." Is that listed somewhere in the

00023
1	documents you have got in front of you?
2	A. No, it's not, but it's certainly part of
3	the technology stack.
4	Q. And the operating system software is the
5	software that actually runs the hardware?
6	A. That's correct.
7	Q. And gives the hardware the instructions
8	on what to do in order to manage and manipulate
9	the data?
10	A. Correct.
11	Q. Now, does Oracle supply that type of
12	software?
13	A. No, we don't.
22	Q. Well, let's go back this way. Why don't

00024
1	you describe to me again what's in the technology
2	stack as you understand the term.
3	A. Okay. If I can separate the two things.
4	The technology stack would be again, by its very
5	nature, technical. The users of the technology
6	stack are professional programmers. So -- and
7	they build applications. So the two major areas,
8	two major software areas, are technology where the
9	consumers are professional programmers and
10	engineers, and application programs where the
11	users are everybody, you know.
12	So the technology stack, the
13	foundation -- starting with -- ignoring the
14	hardware and just going straight to the software,
15	the lowest level portion of the technology stack
16	is the operating system. On top of the operating
17	system would be data management, which is
18	separated into two pieces, a file system and a
19	database system, and both of those manage
20	information. One is much more powerful than the
21	other. One is much more easier to use than the
22	others.

00025
1	So on your PC, you just store a word file
2	and it's a file. It doesn't go into a database,
3	but you can't do content search. You can't
4	search -- there are a lot of limitations. It gets
5	lost periodically, which some people find
6	annoying. The database tries not to do that, so
7	the simplicity versus complexity, more features,
8	more complexity.
9	So operating system, data management made
10	up of database and file management. On top of
11	that, would be, if you will, your application
12	development software or application server, if you
13	prefer, and those are the three major pieces and
14	all of the other pieces here I would say are
15	somewhat important but peripheral to those three
16	major layers.
17	Q. All right, sir. In the documents you
18	have in front of you, the areas that would fit
19	within what you have just described would be the
20	application servers?
21	A. Absolutely.
22	Q. And then the systems management?

00026
1	A. Well, again, the three critical pieces,
2	if you are drawing a picture, operating system,
3	database and application server. Again, those to
4	me are the large pieces. Then there are
5	peripheral pieces. There are the system
6	management tools. And these are used by people
7	inside of the data center to kind of keep the
8	computer running every day. They do maintenance.
9	We have handed over this pile of stuff to them and
10	they have got to keep it running. So they have
11	basically gauges they watch to monitor what is
12	going on, and if something breaks they have tools
13	to fix what breaks. Those are the monitoring and
14	management tools and that includes for the
15	network, for the storage, for all the software,
16	for the applications, for all of it. So there is
17	a whole cluster of these management tools.
18	Content to management is really part of
19	the data management services. So if I was drawing
20	this picture, our operating system, then the
21	database -- then the data management services,
22	applications server, and then these -- other side,

00027
1	kind of the management tools to keep it running
2	and then the development tools. The programmers
3	have their own set of tools. There are two
4	different jobs here in building these. They are
5	people who build the applications and then the
6	people who run them every day.
7	Q. All right, sir.
8	A. So the development environment for the
9	builders and the monitoring and management tools
10	for the runners, if will you.
11	Q. On the document that you have in front of
12	you, Exhibit 550, on the column next to technology
13	what on there would be the equivalent of the
14	application server? I guess that's up at the top
15	where it says "App Server."
16	A. App server, yeah.
17	Q. And the data management system would be
18	equivalent to what other items listed here?
19	A. Database and content management. And
20	what's not listed there is file management.
21	Q. Okay. And then the other piece that you
22	mentioned -- data management, application server

00028
1	and the operating system.
2	A. And the operating system is not listed
3	here at all. Because, again, this is -- again,
4	this is a competitive profile and we just don't
5	compete in the operating system. So this was not
6	intended to be a complete list of the technology
7	stack, just the areas in which we compete.
8	Q. In the technology, would you include
9	software applications as part of the technology
10	stack?
11	A. No.
12	Q. And why is that?
13	A. Because the users are different. So in
14	one case in the technology stack the users are
15	data processing professionals. In the case of
16	applications, the users are everybody. Microsoft
17	Word is an example of a desktop application. Our
18	accounting systems are designed for professional
19	accountants, not for -- and employees of companies
20	to fill out expense reports on the internet. So
21	these are not aimed -- you do not have to be an IT
22	professional to use applications. You have to be

00029
1	an IT professional to use parts of the technology
2	stack.
3	Q. All right, sir. Now, in the portions --
4	the parts of the technology stack that you
5	described, in which ones of those does Oracle
6	offer a product?
7	A. I think in everything listed here. So
8	this is our list. So we offer a product in
9	database, application server, business
10	intelligence, development tools, application
11	integration, systems management. I'm not sure I
12	would separate out storage management as separate
13	from systems management, but, you know, network
14	services management, content management. So those
15	are all areas in which we compete.

00031
17	Q. All right. Now, is there in the stack as
18	described it, is there a layer there that you
19	would equate with the term middleware?
20	A. Yeah, absolutely.
21	Q. And what layer is that?
22	A. The application server certainly,

00032
1	business intelligence, parts of content
2	management, application integration are all
3	middleware.
4	Q. And you offer those products that you
5	have described as part of middleware?
6	A. Yes.
7	Q. Who else out there offers products that
8	would fit in the category of middleware?
9	A. IBM, Microsoft, Sun, BEA, SAP.
10	Q. What middleware products does SAP offer?
11	A. They have a product called Net-Weaver.
12	And, again, since we last talked, SAP has
13	aggressively moved into the middleware business.
14	They used to just be in the middleware business
15	for SAP applications, but they have gotten very,
16	very aggressive with their Net-Weaver product and
17	they are now selling it. They have aggressively
18	entered the market in competition with IBM and
19	Oracle and Microsoft and a lot of others.
20	Q. And what do you understand their
21	Net-Weaver product to consist of?
22	A. It's got a Java-execution environment.

00033
1	It has an ABAP 4. SAP is written in a language --
2	mainly in a language called ABAP 4.
5	And it's got a Java environment in it.
6	It has business intelligence tools. It has
7	integration components.
8	BY MR. SCOTT:
9	Q. All right, sir. And what function --
10	what does the SAP product do, as you understand
11	it?
12	A. Exactly what all of the middleware
13	software does. It's an environment for running
14	applications. In other words, they have their own
15	set of development tools, and you develop either
16	an ABAP 4 or Java. You write the instructions and
17	then you put the instructions into the application
18	server and the application server executes the
19	program, runs the SAP program.
20	Q. All right, sir. Is the Net-Weaver
21	product, does that operate software applications
22	other than SAP?

00034
1	A. Sure.
2	Q. And is there any that you know of that it
3	does not operate?
4	A. So it runs languages. So the best way to
5	describe it is, if you wrote a program in Java,
6	the Net-Weaver environment would run it. If you
7	wrote -- now, ABAP really is a proprietary
8	programming language to SAP. Java is not. Java
9	is an industry standard language. So it supports
10	both SAP's old proprietary language, ABAP, and
11	where SAP is going, which is Java.
12	Q. Now, your middleware products, what
13	language are they written in?
14	A. Very similar to SAP. Well, you shouldn't
15	say "written in." What languages do they run.
16	It's really a run-time environment.
17	So they run our old fashion forms
18	environment. We move to Java a long time ago, so
19	a lot -- so we were very early on on the Java
20	train. We were the first application company
21	really to go to the internet and we were the first
22	application company to adopt Java as its

00035
1	programming environment. So we support our older
2	environment forms, as well as our new environment,
3	Java.
4	Q. All right, sir. And we may have hit on
5	this, and if I have I apologize. I just want to
6	be clear. Does your middleware product operate
7	applications other an Oracle?
8	A. Of course.
9	Q. Now, are you aware of there being some
10	agreement reached recently between SAP and
11	Microsoft pertaining to the Net-Weaver product?
12	A. Yeah, I think so.
13	Q. And what, if any, understanding do you
14	have of that agreement?
15	A. I believe -- well, Microsoft has its own
16	project language called C-Sharp, and Microsoft has
17	been moving to improve its coexistence with its
18	competitors, to improve its relationships with its
19	competitors. And Oracle, SAP and even Sun have
20	signed agreements or announced agreements with
21	Microsoft supporting coexistence with Microsoft's
22	technology platform which is called .Net.

00036
7	Q. All right, sir. You indicated that
8	Microsoft and Oracle had reached some agreement?
9	A. Right.
10	Q. And could you describe that agreement,
11	please?
12	A. Again, it's pretty much a coexistence
13	with Microsoft's .Net, specifically Microsoft's
14	development tools. Microsoft is very, very strong
15	in providing an environment called Visual Studio
16	for programmers. And sometimes programmers want
17	to program in Java, and if they want to program in
18	Java, that's great. We happen to have a Java
19	development environment ourself and a lot of other
20	people have a Java development environments, but
21	Microsoft has its own development environment for
22	C-Sharp and it's called Visual Studio. And we

00037
1	want to make sure if programmers would like to
2	program in Visual Studio they can still use the
3	Oracle database. So you can use Microsoft tools
4	to write applications and run those applications
5	on top of our database. So, again, it's to make
6	sure there is graceful coexistence between these
7	companies even though we compete.
14	Q. What is your understanding of the deal
15	Sun has with Microsoft?
18	THE WITNESS: Yeah. Again, I think
19	besides the fact that they settled their lawsuits,
20	again, it's all around coexistence. It's all
21	designed -- the general umbrella for all of this
22	is companies have different vendors' products

00038
1	inside the company and Microsoft would like to
2	make sure that their products work well with Sun's
3	products and their products work well with
4	Oracle's product and their products work well with
5	SAP products.
7	Q. Does .Net work well with Oracle's ERP
8	application?
9	A. Well, it depends what you mean by "work
10	with." Oracle's ERP applications are either
11	written in forms or written in Java. They are not
12	written in .Net. It doesn't mean you can't write
13	a program in .Net and integrate it too and have it
14	talk to Oracle applications. So it's back -- you
15	go through our integration layer to go ahead and
16	do that, but, yes, we certainly can coexist, and
17	if you have a Web Services program over here
18	written in .Net and our programs are web-service
19	enabled, and they are, and they are written in
20	Java, those programs can communicate and coexist.

00040
6	Q. Microsoft -- what portions of the
7	technology stack does Microsoft supply?
8	A. Microsoft and IBM are the two companies I
9	can think of that pretty much supply the entire
10	stack. So they have the operating -- everything
11	you have in here, plus the operating system, you
12	name it, they have got it. Those two companies
13	are the only companies I can think of that
14	participate in every area of the stack.
15	Q. And, again, I'm not trying to misstate
16	you, so if I have got the terminology wrong please
17	tell me. I understand, for example, with your
18	product, there is a middleware product upon which
19	your applications are placed and then they work
20	directly off that middleware product; correct?
21	A. Correct.
22	Q. Would your product be able to be put

00041
1	directly on top of the Microsoft middleware
2	product and be able to operate?
3	A. Could our applications?
4	Q. Yes, sir.
5	A. Okay. No. Because our applications are
6	written in Java and the Microsoft middleware
7	doesn't understand Java. In fact, that was the
8	big argument between Sun and Microsoft. So
9	Microsoft doesn't support Java. You come and
10	speak Hungarian to Microsoft, they have no idea
11	what you are saying. So no, you couldn't rehost
12	or you couldn't recompile or you couldn't take our
13	applications and have it run natively on top of
14	the Microsoft middleware because they wouldn't
15	understand the language we were speaking, because
16	we're speaking Java and they speak C-Sharp.

00050
9	Q. Now, the on-demand service that you are
10	offering you used to call outsourcing?
11	A. We used to call it outsourcing.
12	Q. So you are actually running somebody's
13	software for them on your machines?
14	A. It's usually our software, but it's not
15	exclusively our software. So as distinguished
16	between IBM that does outsourcing and Oracle that
17	does outsourcing, we try to -- we specialize in
18	running our own software. IBM really will run
19	anyone's software. We run our own software
20	primarily, but we will run third-party
21	applications and we will run custom applications
22	as well as part of a larger suite.

00051
13	Q. In your outsourcing service does the
14	customer buy the software?
15	A. Yes, they do.

00054
13	Q. All right, sir. Now, you indicated
14	earlier, and, again, please correct me if I have
15	gotten this wrong, that in addition to Microsoft,
16	IBM has what you would call all the components of
17	the stack?
18	A. Yes.
19	Q. And which of the components offered by
20	IBM does your application software work with?
21	A. Which do we work with?
22	Q. Yes, sir.

00055
1	A. Well, again, we coexist. Now, IBM's
2	application server supports Java. Most of the
3	application servers support Java. In fact, the
4	only application server that I know of that
5	doesn't support Java is Microsoft's.
6	So we can -- an application written on
7	top of Web Sphere, which is the name of IBM's
8	application server, an application written on top
9	of Web Sphere is likely written in Java, and it
10	can communicate through Web Services with an
11	Oracle application. You can actually take an
12	application written on top of the Oracle
13	application server and run it on top of the IBM
14	application server. You can't do that with
15	Microsoft. We talked about that before, but you
16	can actually lift one of our Java programs off our
17	application server and run it on -- without
18	modification run it on the IBM application server.
19	Q. Do your applications, if you put them on
20	the middleware that's offered by IBM, would they
21	operate?
22	A. The Java -- so if our applications were

00056
1	written 100 percent in Java, which they will be at
2	some point in time in the future, the answer would
3	be yes. But since they are not, since our
4	applications are written in a combination of Java
5	and an older language called Forms, the Java
6	portion would, but the Forms position would not.
7	Q. Now, you indicated that at some point in
8	time that your software would be written entirely
9	in Java?
10	A. We think so, yes.
11	Q. And when do you project that to occur?
12	A. Oh, every last bit, it would be years.
13	Q. And what percentage of your application
14	software is currently written in Java?
15	A. I'm guessing 30 percent.
16	Q. Now, when did you begin first producing
17	it using Java? And, again, talking about your
18	application software.
19	A. Just starting five years ago.
20	Q. And why did you begin using Java to write
21	your application software?
22	A. We are a great believer in industry

00057
1	standards and interoperability, so our database
2	was based on a standard language called SQL, and
3	we will invent proprietary languages only in so
4	far as that there is no standard out there that we
5	can adopt. So we much prefer a adopting standard
6	languages.
7	Actually, to promote a proprietary
8	language you really have to be the gorilla in the
9	marketplace, and the only companies that have
10	promoted these proprietary languages successfully
11	was IBM when they were number one and Microsoft
12	now because they are number one.
13	Q. Now, the Microsoft -- the Microsoft stack
14	you said doesn't operate on Java.
15	A. Correct.
16	Q. As your software becomes more and more
17	Java enriched --
18	A. Yes.
19	Q. -- for want of a better term, will that
20	make it easier for it to operate on the IBM stack?
21	A. Sure. On the IBM middleware. On the IBM
22	Web Sphere. Let me clarify that.

00058
1	Q. Sure.
2	A. On the IBM middleware, yes.
3	Q. Now, you have used the term "IBM Web
4	Sphere a couple of times.
5	A. Yes.
6	Q. What is that?
7	A. That's IBM's brand name for their
8	middleware.
9	Q. And that's a Java-based product?
10	A. Yes, it is. It's Java plus many other
11	things.
20	Q. All right, Mr. Ellison. Let me ask you,
21	if you would, to turn back to Exhibit 550 to your
22	deposition.

00059
1	A. Yeah.
2	Q. Still on page 3.
3	A. Yes.
4	Q. And just so that -- because we've been
5	over a number of topics, so the record is clear on
6	this, could you describe what database product
7	Oracle currently has available?
8	A. The Oracle database, it's actually called
9	Oracle, same as the name of our company. We have
10	a couple -- three versions actually: Enterprise
11	Edition, Standard Edition and Standard Edition 1.
12	Q. All right, sir. And the difference
13	between those products is what?
14	A. You have the most features in Enterprise
15	Edition, and you can run the most number of
16	processors with Enterprise Edition. So it's
17	scaled. It's just designed for a larger number of
18	users, larger databases.
19	Q. And IBM's database products, what are
20	they?
21	A. DB2. IBM has some older ones called IMS,
22	but they are no longer relevant.

00060
1	Q. And the IBM DB2 product is a product that
2	your Oracle database product competes with?
3	A. Yes.
4	Q. And Microsoft, what database products do
5	they offer?
6	A. It's a product called Sequel Server.
7	Q. All right, sir. And that is roughly
8	equivalent to your Oracle database product?
9	A. Yeah, we don't think it's as good, but...
10	Q. That's why I said "roughly."
11	A. Roughly.

00061
16	Q. Does Oracle's applications product work
17	with the IBM DB2 database?
18	A. No, it does not.
19	Q. Does Oracle's applications products work
20	with the Microsoft Sequel Server database product?
21	A. No, it does not.
22	Q. All right, sir. Now, in the application

00062
1	server, what products does Oracle offer?
2	A. We have a product called the Oracle
3	Application Server.
4	Q. And that product is essentially what?
5	A. It is integration software. Our Java
6	run-time environment, business intelligence
7	software. Again, I'm not sure what I have already
8	mentioned. Forms, Java, business intelligence,
9	integration, those things.
10	Q. And when you say integration software in
11	the context of your application server product,
12	what do you mean?
13	A. It actually has connectors to Siebel
14	systems and SAP Systems and PeopleSoft systems and
15	Lawson systems and Cerner systems and all sorts of
16	other systems for connecting up these systems.
17	Q. To your database?
18	A. No. To connect a Siebel system, Siebel
19	application system, to an Oracle application
20	system. To connect a Lawson system to an Oracle
21	system. It's that software we talked about before
22	where there is two portions; one allows them -- I

00063
1	used the cell phone metaphor; one piece allows
2	program A to connect to program B so you can talk,
3	and then there is the translation piece.
4	Q. All right, sir. And the IBM App Server
5	product, do you know what that is?
6	A. The IBM application server product?
7	Q. Yes, sir.
8	A. Called Web Sphere.
9	Q. And does the Oracle applications, the ERP
10	software, work with that product?
11	A. No. I think you asked me, but it would
12	runs the -- it would run the Java portion of our
13	applications but not the portion in written Forms.
14	So the intent is to get our applications to
15	100 percent to Java, and I said that will take
16	years. At that point it should run on the IBM
17	application server.
18	Q. And the Microsoft, their application
19	server product is called what?
20	A. Just Windows.
21	Q. And Oracle's ERP software does not run
22	with that application software?

00064
1	A. They don't support the Java language. So
2	it couldn't execute. It couldn't run -- we can
3	coexist, coexisting versus running on, but, no, we
4	will never be able to run on the Microsoft
5	application server because Microsoft has no
6	intention of supporting the Java language.

00065
7	Q. And IBM, does it have an application
8	integration product that is over and above what is
9	offered in its application server?
10	A. "Web Sphere" is one of these terms like
11	"On Demand." It's a big umbrella term and IBM
12	throws almost everything with the kitchen sink
13	underneath it. So when IBM says our Web Sphere
14	revenue was so many dollars, I believe it includes
15	all their integration software. But it really --
16	Web Sphere is many different products, including,
17	so Web Sphere is not exactly a product. It's,
18	again, this umbrella term under which lots of
19	products are listed. And it includes -- and all
20	their integration software falls under the
21	category of Web Sphere products.
22	Q. Does IBM offer an integration software

00066
1	product that is independent of its application
2	servers?
3	A. They offer integration software
4	independent of their Java server. Again, what IBM
5	calls an application server, it's like a menu.
6	It's just like you can put this list of products
7	on a menu and we'll call this menu Web Sphere, and
8	so it's this name of this list -- Web Sphere is a
9	name of a list of products. IBM would like you to
10	believe it's a product, but it's really a bunch of
11	products written by different people at different
12	times and they just aggregate it together as this
13	conceptually aggregate thing together.
14	Q. And Microsoft, what do they have in the
15	way of application integration software that's
16	available?
17	A. Windows Event Server.
18	Q. Is that part of the application server?
19	A. It's part of a Windows Event Server,
20	which is an application server, and that is a
21	product.
22	Q. Now, BEA, what type of application server

00067
1	product do they offer?
2	A. Again, it's Java-based. The name of the
3	product is WebLogic and they have integration
4	software and portal software and it's got the same
5	thing. We all compete in these areas.
6	Q. Now, BEA does not have a database
7	product?
8	A. They do not.
9	Q. Their application server, what databases
10	are you aware of that that will operate with?
11	A. All of the majors. Most all of them. I
12	mean IBM, Oracle, Microsoft, Sybase. Probably
13	more than that.
14	Q. And will your application software
15	operate on -- operate with a BEA application
16	server?
17	A. Will our application software coexist --
18	Q. Can you run your application server
19	software on a BEA system application server?
20	A. If it's written in Java. So same thing
21	with IBM. So the Java portion of the application
22	can run on the BEA application server, but the

00068
1	Forms portions cannot.
2	Q. And going down the chart, we have on page
3	3 of Exhibit 550, it shows BEA having a circle
4	half black and half white, which indicates
5	"player" at the top next to application
6	integration.
7	Do you see that?
8	A. Yes, I do.
9	Q. Do you have any idea what that means?
10	A. I guess, you know, they're a relatively
11	new player in applications integration.
12	Q. What integration product does BEA have?
13	A. Again, it's around -- it's built around
14	web services. Again, it has a lot of the
15	characteristics of ours. It's built around Java
16	Web Services and specific application translators.
17	Q. And WebLogic that you talked about, the
18	product that BEA, has what is that?
19	A. WebLogic is the name of their Java
20	application server, but it also now includes --
21	they have expanded it again since we last talked.
22	They have added a lot of integration software,

00069
1	they have added portal software, so they have
2	expanded their footprint.
3	Q. And the integration software that BEA has
4	added since we last talked, what does that consist
5	of, what does it do?
6	A. It's more connectors to more -- you know,
7	to more databases, more application systems. It's
8	a more capable portal. A portal takes data from
9	lots of separate systems and puts them on the same
10	web page.
11	Q. Now, you mentioned Web Services is a
12	means of application integration; correct?
13	A. Yes.
14	Q. And how long have Web Services been a
15	significant means of doing that type of
16	application integration?
17	A. For years.
18	Q. Beginning approximately when? Well, let
19	me ask you --
20	A. Four years ago.
21	Q. Let me ask this follow-up question. Who
22	was the first one that offered Web Services as a

00070
1	way of doing application integration?
2	A. Sun BEA.
3	Q. And was that offered for a particular
4	type of product?
5	A. For their Java -- for their Java server.
6	Q. When did Oracle first begin offering Web
7	Services as a means of application integration?
8	A. Very shortly thereafter.
9	Q. And what products did you offer that
10	integration service for?
11	A. For our application server. It came as
12	part of our application server.
13	Q. And when you say it came as a part of
14	your application server, what does that mean?
15	A. Well, it means if you use our tool set,
16	if you build - if you build your applications
17	using our Java development environment and you run
18	our application server, those -- and program
19	according to the Web Services standards, I mean,
20	programmers have to -- it's a set of standards the
21	way you program to, then program A will be able to
22	communicate with program B across the internet.

00071
1	Q. And does SAP offer similar type services?
2	A. Yes, they do.
3	Q. And do you recall when they began doing
4	that?
5	A. Sometime after -- they adopted Java later
6	than we did, but two years ago.
7	MR. WALL: I'm sorry, what is the "that"?
8	I'm not clear what the antecedent is.
9	MR. SCOTT: The web integration through
10	Web Services.
11	THE WITNESS: So - and it depends where
12	it shows up in the stack. You might have the
13	ability to support Web Services in your
14	application server or your applications might not
15	be written to the standards, so Web Services are a
16	set of standards you have to write to.
17	So first you would create the technology
18	for Web Services and then you would adapt your
19	applications to support Web Services. So first
20	comes the technology then the applications have to
21	be modified.
22

00072
1	BY MR. SCOTT:
2	Q. And were your applications modified to
3	work with Web Services at the time you offered
4	that product?
5	A. The very beginning -- no. The answer is
6	no. It took more time for us. And it's an
7	ongoing process. We because have a lot of
8	application code and a lot of application code has
9	to be updated and updated to support Web Services.
10	Q. And does PeopleSoft offer integration
11	through Web Services?

00073
13	Q. And are you aware of any other software,
14	ERP software, vendor who has developed their
15	software to the point where integration can take
16	place through Web Services?
17	A. I think everyone is doing this, but I
18	just don't know the status of each vendor
19	separately.

00074
10	Q. How was software integration done before
11	the possibility of doing it through Web Services
12	was introduced to the market?
13	A. Again, all Web Services are is a standard
14	protocol. I hate -- I think the metaphor holds.
15	It's just a way of program A, you know,
16	establishing a connection to program B. So for
17	years we've been able to -- we've had different
18	techniques called remote procedure calls, RPCs,
19	where a program in computer A could issue a remote
20	procedure call and talk to computer B. But now
21	that the internet has become a standard way of
22	lacing these computers together, and now that we

00075
1	have -- it's really about standards.
2	We have always been able to have a
3	program -- program A and program B agree on how to
4	communicate through what's called a remote
5	procedure call. What's different about Web
6	Services now is there is a global standard for
7	interconnecting machines called the internet, and
8	there are intranets and private internets and all
9	these other things, but it's a global standard.
10	Now that there is this global standard for
11	interconnecting machines, we can build a program
12	that uses these standards and these are called Web
13	Services that adopts that standard way of
14	interconnecting.
15	It's as if every cellular telephone --
16	and there is not -- there is not a global standard
17	for cellular telephones. The reason you need a
18	different cell phone in Europe is because there
19	are different ways, you know, different
20	technologies, but there is -- so there is no
21	standard way of cell phones communicating
22	globally. There is a standard way for computers

00076
1	to communicate globally. So now we can say, all
2	right, we're all going to go to this standard
3	protocol called Web Services to establish a
4	connection. So any program that can communicate
5	with any other program on any computer any place
6	in the world just as long as they are attached to
7	an internet or intranet or connected in this
8	standard way.
9	It does not solve the problem of, okay,
10	now once we have established a connection, you
11	know, just like me calling someone in Budapest, if
12	I don't speak Hungarian and they don't speak
13	English, we've got a problem.
14	Q. And that would bring into play the
15	translation point of the integration that you
16	talked about earlier?
17	A. Correct.
18	Q. And is that translation point something
19	that's available through the web or is that
20	something that is available through the
21	application server?
22	A. It's definitely not available through the

00077
1	web. It would be available through the
2	application server and perhaps even the
3	applications themselves have to adapt.
4	Q. And when you say the applications
5	themselves may to have adapt, what does that mean?
6	A. We've recently introduced this thing
7	called the customer data hub, and the customer
8	data hub recognizes that companies would like to
9	have -- our big thrust in the e-business suite,
10	the holy grail, the way I sold the e-business
11	suite, one of the great things about it, was all
12	your customer data was in one database. So think
13	about get all your data in one database and then
14	kind of attached the applications to this data.
15	The problem with the e-business suite is
16	it requires customers to get the bulk of their
17	applications from Oracle, and a lot of companies
18	have existing -- have lots of different
19	applications from lots of different vendors. They
20	have been buying applications for the last 10
21	years and they don't want to switch out all those
22	applications and bring in only Oracle, but they

00078
1	love the idea of having all their customer data in
2	one place.
3	So we said, all right, as an alternative
4	to the e-business suite, I think we can solve the
5	problem another way. And solving the problem
6	another way is saying, all right, keep your Siebel
7	and keep your SAP and keep your whatever you got,
8	your PeopleSoft, who knows what you got, all this
9	different stuff, keep it all, the Oracle
10	financials, I mean live in this environment, but
11	we will refer to it as a spoke system and we will
12	have at the center this database called the
13	customer data hub, and every time a salesman
14	enters a new customer into the Siebel we'll make a
15	copy of that data, if you will, it goes from the
16	hub to the spoke. Every time the billing system
17	notes that a customer is late in paying, we'll
18	make a copy of that, that customer information,
19	put that in the customer data hub.
20	So you are going to collect all much this
21	information from all of these spoke systems into
22	this hub system and you can interconnect them

00079
1	using Web Services to establish the connection and
2	then the translation software to -- and then
3	Oracle provides what is called a data model for a
4	very rich database. So we can handle sales
5	information and billing information and marketing
6	information and service information for all
7	different kinds of customers in all different
8	kinds of industries.
9	Q. Do you see this product as a replacement
10	for your application software?
11	A. No. No.
12	Q. Then what is the purpose of it?
13	A. It's -- not everyone is going to buy
14	Oracle's application software. Not everyone is
15	going to buy only Oracle application software.
16	Very large companies, even if they decided to go
17	the e-business way, would take them years to get
18	from where they are today to get to the e-business
19	suite, and they would like to take advantage of
20	having that 362-degree view of their customers.
21	They like the idea of all their customer
22	information in one place. So it is something

00080
1	that's very attractive to large customers who live
2	in an environment of heterogenous technologies and
3	heterogenous applications.

00095
21	Q. Now, do you -- in implementing the data
22	hub and product, do you see that as a means by

00096
1	which you could end up selling more or less
2	application software?
3	A. More.
4	Q. And how is that?
5	A. Again, we think it's a very
6	interesting -- there are two kinds of barriers --
7	there is two problems with selling the e-business
8	suite. One is the conceptual problem which is,
9	gee, I don't want to throw away all my existing
10	applications and go to Oracle, just get out of my
11	office, I'm not going to do it. The other is, I
12	love the idea, but how do I get from here to
13	there. It's going to take years.
14	Q. How do I get from here to there in
15	relation to what?
16	A. How do I go from my heterogenous
17	environment of thousands of separate systems to
18	this nirvana you're talking about of this Oracle
19	e-business suite. I don't know how I gracefully
20	migrate from where I am today. I don't know how
21	to get there. Tell me how I get there.
22	And a customer data hub is designed to

00097
1	address both of those customers. Where the
2	e-business suite has been very successful is
3	smaller companies where the cost and the time
4	required to put in the e-business suite is just
5	not onerous.
15	Q. The data hub product you believe will
16	allow you to sell more application software
17	because it will give a mechanism for customers who
18	want a central database to transition from having
19	a lot of systems to the e-business suite and get
20	the benefit of having a central database during
21	that process?
22	A. Correct.

00098
1	Q. And then for other customers who are not
2	in the market to change because they don't want to
3	go buy a system, it will allow them to centralize
4	their data in one area and allow you to sell some
5	application software to operate on top of the hub?
6	A. Right. Right. Otherwise that customer
7	would just be closed to us for some time.
8	Clearly, we would have opportunities in very large
9	companies. You have opportunities to sell this
10	division and that division and this application,
11	but it's nice to not be on the periphery. It's
12	nice to be in the center.
13	Q. When was the data hub product rolled out
14	by Oracle?
15	A. In the last six months.

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00114
14	Q. When your deposition was taken last year,
15	you had decided to roll out the data hub product?
16	A. What was the date of my deposition?
17	Q. January 20th, 2004. I misspoke. This
18	year.
19	A. This year, right. Probably.
20	Q. Do you have a specific recollection as of
21	the time of your deposition that you had decided
22	to roll out the data hub product?

00115
1	A. I don't.
2	Q. Would there be documents within Oracle
3	that would indicate when you had decided to roll
4	out that product?
5	A. Well, clearly we roll -- it was shortly
6	before we announced it. Shortly, as I say, no
7	more than 60 days before we announced it and maybe
8	as soon as -- the decision might not have been
9	made -- may have been two weeks before, so I just
10	don't remember.
11	Q. Well, certainly when your deposition was
12	taken in January 20th, 2004, you were aware of the
13	data hub product being under development at
14	Oracle?
15	A. Yes, probably, yeah.

00120
1	Q. Now, does the data hub only handle
2	customer-related information?
3	A. Yes, but that's a little bit misleading
4	because when you keep track of customers, you
5	would like to know what products those customer
6	buy. So when you say I'm just going to keep track
7	of customer data, you are forced to keep track of
8	product information.
9	Q. For example, does the data hub and the
10	software that comes with it, does that support
11	what we will call human resource functionality?
12	A. In a narrow sense. For example, you
13	might want to know who are the customer support
14	people that support General Electric, right, so
15	the answer is yeah, kind of.
16	Q. Okay. Well, does the data hub product,
17	as currently constituted, support things like
18	payroll and benefits and information and functions
19	related to a company's own employees?
20	A. Well, the answer is we are coming out
21	with a product shortly called the Employee Data
22	Hub, something like that, but, again, these things

00121
1	are all - the trouble - everything is connected.
2	So one of the things you would like to know is how
3	much am I spending selling to General Electric.
4	So to find that out you would have to know who are
5	the salespeople, how much they make, what you pay
6	to them in commissions. So, in other words,
7	you're asking the question show me my most
8	profitable customers, show me my most unprofitable
9	customers, how much did GE buy, how much should we
10	spend supporting General Electric, selling to
11	General Electric, all of those things. So you can
12	argue that's all customer data, that's all -- is
13	that customer data or HR data.
14	Q. Well, you said you are going to come out
15	at some point with something you are calling the
16	HR data hub?
17	A. Right.
18	Q. What is that?
19	A. That is -- again, a lot of people have
20	separate -- I think it's called an Employee Data
21	Hub, and there is a lot of the employee
22	information that you might not necessarily keep in

00122
1	your HR system. For example, you're authorized to
2	approve purchases over $10,000 -- up to $10,000.
3	That might be stored in your accounting system.
4	So your -- your territory includes all of the
5	State of Maine for sales. Well, that might be
6	stored in the sales system. So there is a lot of
7	information that's tied to people that you don't
8	think of necessarily being part of the HR system.
9	Q. Well, first of all, when did you start
10	developing the employee hub?
11	A. We are just -- it's a work-in-progress
12	right now.
13	Q. Do you have an estimated time of arrival
14	for that to hit the market?
15	A. We might, but I don't know what it is.

00124
22	Q. Does the current data hub handle

00125
1	financial management support, things such as
2	general ledger, accounts payable, accounts
3	receivable, asset management, those types of
4	functions?
5	A. No.
6	Q. Do you have any plans to roll out a
7	product that will do that in a data hub context?
8	A. No. The general ledger in a sense is a
9	data hub. There is what's called a consolidated
10	general ledger. Our general ledger product
11	actually allows you to have several different
12	companies in your -- General Electric uses it.
13	They have several different businesses, lots of
14	different businesses and they do what is called a
15	consolidation inside of their general ledger,
16	which is a hub function, statutorily required.
17	Q. So I take it that you're not coming out
18	with a financial data hub that will do that type
19	of thing?
20	A. It would be duplicative.
21	Q. Of your current products?
22	A. Yes.

00126
13	Q. All right, sir. Looking at page 3 on
14	Exhibit 550 again, the pieces that go in the
15	technology stack that you have defined would
16	include database, application servers and
17	application integration, correct?
18	A. The three primary chunks I would describe
19	would be operating system at the bottom, database
20	in the middle, and application server on top. We
21	put application integration as one of the
22	components of application server.

00129
10	Q. All right, sir. Now, in relation to
11	operating systems -- or the technology stack
12	generally, as you have defined it, operating
13	systems, database and application server, would
14	the acquisition of PeopleSoft allow you to compete
15	better with Microsoft?
16	A. Absolutely.
17	Q. And how so?
18	A. Well, Microsoft's -- that's a very -- to
19	compete with Microsoft, we think -- Microsoft
20	relies on its scale to compete. So they sell
21	software in high volume at a low price. And what
22	enables you to sell software at a low price is

00130
1	high volume, because you have a very high fixed
2	cost and almost insignificant or nonexistent
3	marginal cost. So if you can amortize your fixed
4	cost over a large number of customers, you're able
5	to lower prices. That's why the biggest software
6	company in the world has very low prices. So to
7	compete with Microsoft, and the driving force for
8	this acquisition, is for us to get larger, for us
9	to have more customers, so we can compete on price
10	in what's going to be an increasingly
11	price-competitive market.
12	Q. All right. Now, let me back up here.
13	The idea of the PeopleSoft acquisition assisting
14	you in competing with Microsoft is a function of
15	scale?
16	A. Largely a function of scale.
17	Q. And in that context, you define "scale"
18	as meaning what?
19	A. More customers.
20	Q. And more customers would help you compete
21	with Microsoft how?
22	A. Okay. So let's say in order to build an

00131
1	application it costs you a million dollars. Let's
2	say you have one customer. You only got one
3	customer for the application. You have got to
4	charge at least a million dollars for it or you
5	lost money. Let's say you have a million
6	customers for it. You could make two dollars for
7	it and make a lot of money.
8	So the development costs are fixed. In
9	our business the development costs are different
10	than almost any other business in the world. We
11	have very, very large fixed costs and we have to
12	get back the money on the fixed costs by selling
13	more than one copy. The more copies we sell, the
14	more we can lower the price.
15	So if we think that price competition is
16	going to increase, and whenever Microsoft gets in
17	the neighborhood price competition increases,
18	guaranteed. As price competition increases, what
19	enables us to compete is having more customers,
20	because then we can charge a lower price.
21	And -- but, again, it's obviously more
22	complicated than that. We can also spend more on

00132
1	innovation and engineers and engineering and
2	enhancements. So if we have more customers -- if
3	we have one customer we can't spend a million
4	dollars on the product. You can't do it because
5	no one is going to pay you a million dollars for
6	the product. But if you have a million customers
7	or 10,000 customers, you can spend more.
8	So it's a combination. So as you get
9	more and more customers two things happen. You
10	spend more on R and D and you lower the price and
11	you kind of split the difference and, God willing,
12	your profits increase also. So that's the
13	dynamic. That's why Microsoft is so profitable.
14	They have low prices, but they have a huge number
15	of customers. They spend a lot of money in R and
16	D. They spend more money in R and D than anybody.
17	They have the lowest prices, just in general.
18	That's how they beat all their competition in the
19	PC application business. They just had the lowest
20	prices. And the way they get away with that is
21	they have lots and lots of customers. They make
22	it up in volume.

00133
1	For us to compete -- and that's who we're
2	competing with. So here comes Microsoft. What do
3	you do? You have to have lots of customers.
4	Because you have to increase your spending in R
5	and D and you have to lower prices simultaneously,
6	and the only way you can do that is to get to
7	scale, is to get more customers.

00137
20	Q. Now, in relation to - again, looking at
21	exhibit -- page 3 of Exhibit 550 --
22	A. Right.

00138
1	Q. -- on the column at the end --
2	A. I have memorized this page now.
3	Q. I would hope so.
4	At the last column there is the heading
5	"PSFT," which I take it stands for PeopleSoft?
6	A. Yes.
7	Q. And under that it indicates that
8	PeopleSoft has some presence, though according to
9	the key, not significance presence in business
10	intelligence, developmental tools and application
11	integration.
12	Do you see that?
13	A. Yes, Ido.
14	Q. Does the technology -- or do you know
15	anything about the technology they have in those
16	areas?
17	A. Yeah. There development tools are --
18	they have this proprietary language called
19	PeopleTools and they built business intelligence
20	on top. Their programs are written in this
21	language called PeopleTools. And this is all the
22	stuff that's around PeopleTools. Because it's

00139
1	unique to PeopleSoft, they have to build their own
2	integration pieces and their own development
3	environment.
4	Q. And I take it that since those are
5	proprietary, obtaining that technology is not what
6	is driving you to do this deal?
7	A. No. No.
8	Q. Okay.
9	A. No.

00151
5	Q. Is there a particular size or scale that
6	you have as a target out there that you want to
7	achieve either through this acquisition or some
8	other mechanism?
9	A. Yeah, you have to -- I mean, our
10	problem -- our problem is, you know, in the
11	technology area is IBM's a little bit bigger than
12	us in software and Microsoft is a lot bigger than
13	us in software. So we certainly have to -- you
14	know, and those are our two major areas in the
15	technology stack, two major competitors in the
16	technology stack. And we have to get -- if you
17	take away Microsoft's X box business or MSN, we
18	have to get close to their size in software. So
19	if we're 10 billion dollars now, I would be much
20	more comfortable that we could defend ourself if
21	we were 20 billion, than 10. We would probably
22	have to be twice as large as we are now.

00153
13	Q. So you see the world as we go forward
14	ending up being Microsoft on one side and
15	essentially everybody else on the other?
16	A. Microsoft versus mankind with Microsoft
17	in the lead.

00160
9	Now, based on your earlier testimony, I
10	take it that you have competed with Microsoft in
11	the database arena for quite sometime?
12	A. Yes.
13	Q. And how long have you folks been going
14	head to head in database products?
15	A. Certainly over a decade.
16	Q. Were they in first or were you?
17	A. We were.
18	Q. And how much of a lead did you have on
19	them timewise?
20	A. We had a huge lead, but they actually
21	purchased their product from Sybase. They bought
22	the code from Sybase, very much like they bought

00161
1	NetVision and, you know...
2	Q. All right, sir. And over time, do you
3	have any -- as of today, do you have any idea,
4	roughly, of what your share is versus their share
5	in the market?
6	A. We're definitely --
7	MR. WALL: "The market" defined as what?
8	MR. SCOTT: As database products.
9	MR. WALL: So all relational database?
10	MR. SCOTT: All relational database
11	products.
12	THE WITNESS: They are probably slightly
13	larger than we are on Windows and of course they
14	don't exist on mainframes or on Unix or on Linux
15	at all, so we're considerably larger there.
16	BY MR. SCOTT:
17	Q. Now, in the area of relational database
18	products, have you been able to grow share against
19	them or have they grown it against you?
20	A. I think they have consistently grown it
21	against us.
22	Q. Are they at a point in database products

00162
1	where you could consider them to have a monopoly
2	on relational database products?
3	A. No.
4	Q. Now, in the relational database product
5	area, how is it that you have been able to
6	maintain a competitive position against them such
7	that they have not been able to monopolize that?
8	A. We had a many, many year head start and
9	we have been able to keep our engineering team
10	together, but we think we have an engineering team
11	that's better than theirs and we started before
12	them, way before them.
13	Q. From a cost standpoint, looking at it
14	from a customer standpoint, how do you compare to
15	Microsoft in the relational database arena?
16	A. We have more customers.
17	Q. I'm sorry, I meant how much does it a
18	customer, the cost of acquiring yours, versus the
19	cost of acquiring Microsoft's comparable products.
20	A. Microsoft has a lower purchase price.
21	Again, I'm oversimplifying. But, in general,
22	Microsoft has a lower purchase price and we think

00163
1	we have a lower total cost of ownership. For
2	example, if we run substantially faster on a
3	computer than they do, you don't have to spend as
4	much money on the computer. You can get a smaller
5	computer. If we require less labor to operate the
6	system, you don't have to hire as many people to
7	run it. So when we talk about the total cost of
8	ownership, it's very different than purchasing
9	just the database component.
10	Q. Now, in the area of enterprise software,
11	based on your experience in competing with
12	Microsoft in database, do you believe that they
13	would be able to monopolize the sales of
14	enterprise application software?
15	A. No.
16	Q. And why is that?
17	A. It's a very competitive market right now.
18	The systems installed are highly durable. People
19	don't pull these systems out and reinstall them.
20	Now, I suppose if you said, you know, 25
21	years out could they get to a monopoly position or
22	30 years out, I wouldn't so glibly answer no, but

00164
1	certainly in my -- in the next 10 years, no
2	chance. The rate of turnover of these products is
3	relatively slow. People don't change their
4	accounting system, HR, manufacturing, supply chain
5	systems very frequently. Even small businesses
6	don't change them very frequently.

00189
11	Q. All right. Mr. Ellison, you have in
12	front of you a document which has been marked for
13	identification purposes as Exhibit 553 to your
14	deposition.
15	A. Yes.
16	Q. It's a one-page document bearing
17	ORCL-EDOC-0122 -- 12 -- let me start that again.
18	All right. You have in front of you a
19	document which has been marked as Exhibit 553,
20	identification ORCL-EDOC-01242183. It's dated
21	June 7th, 2003, e-mail from you to Charles
22	Phillips and Safra Catz, re:

00190
1	Accenture/PeopleSoft.
2	Do you see that?
3	A. Yes.
4	Q. And that's an e-mail that you wrote, the
5	one at the top, "What a great opportunity to
6	expand our reach. This is looking better every
7	hour. Larry."
8	A. Yep.
9	Q. And below that is an e-mail that you
10	appear to have been sent from Mr. Phillips,
11	talking about a call that he had received from the
12	CFO at Accenture?
13	Do you see that?
14	A. Yes.
15	Q. Is that someone that you knew?
16	A. His name is Harry Eu. I know him now,
17	but I didn't know him then.
18	Q. And this says, "The potential acquisition
19	of PeopleSoft hit home and made them," referring
20	to Accenture, "realize we could turn into a
21	must-have partner and he offered to set up a
22	meeting between me and their top 10 partners which

00191
1	I plan to do."
2	Did you have any understanding of what he
3	meant by Oracle turning into a must-have partner
4	from Accenture's standpoint?
5	A. As we get bigger, our importance in the
6	marketplace increases; so, yeah, we're a bigger,
7	more important company.
8	Q. Well, do you know if Accenture had any
9	type of relationship with PeopleSoft prior to your
10	announcement that you were going to try to acquire
11	PeopleSoft?
12	A. We have a relationship with Accenture.
13	PeopleSoft has a relationship with Accenture. SAP
14	has a relationship with Accenture. Cerner has a
15	relationship --
16	MR. WALL: Slow down. You are hitting
17	warp speed at this point.
18	THE WITNESS: Sorry.
19	I think most major software companies --
20	Accenture is one of the two largest system
21	integrators in the world, and I think every major
22	software company has a relationship with them.

00192
1	BY MR. SCOTT:
2	Q. And your reply to this e-mail says, "What
3	a great opportunity to expand our reach." What
4	did you mean by that?
5	A. To get to get more Accenture partners
6	involved in our business.
7	Q. And what do you mean by the term
8	"Accenture partners"?
9	A. Accenture, even though it's a publicly
10	held corporation now, still has a partnership
11	structure, and each of these partners runs their
12	own business in certain geographic areas, and we
13	would rather -- they would be increasing the
14	amount of business they did with Oracle.
15	Q. So by developing a relationship with more
16	of these partners, you have the potential to do
17	more business and thereby expand your reach?
18	A. Yes.
19	Q. When you said here "This is looking
20	better every hour" in this e-mail, what did you
21	mean by that?
22	A. I guess this is the day after our tender,

00193
1	so things were happening quickly at this time, and
2	I think we were happy with our decision to make
3	the tender.

00215
7	Q. Well, do you recall at any point in time
8	where your growth slowed to a point in
9	applications where it was unacceptable to you
10	personally?
11	A. Sure. The last -- 2001, 2002, 2003 were
12	tough years, you know, post-bubble. I mean,
13	people were spending a lot less on tech. And,
14	plus, some companies had accustomed themselves to
15	a much higher rate of spending. At least we
16	hadn't done that.
17	Q. And you attribute your dissatisfaction
18	with your level of applications sales to what?
19	A. Well, primarily, not only, but primarily
20	the macroeconomy then. I mean, we can blame
21	ourselves, you know, our own people after that.
22	It's our own.

00216
1	Q. So would it be fair to say that there was
2	less applications business out there with the same
3	number of players trying to win it?
4	A. There was a lot less of all technology
5	business. There was less database. There was
6	less computer hardware, less PC business. You
7	name it, there was less of it.
8	Q. As a result of the economy having an
9	impact on what people were spending in tech, did
10	that make competition more aggressive?
11	A. That's an interesting question. It's a
12	brutal business. I'm not sure it's any more
13	competitive in bad times than it is in good, to
14	tell you the truth. I have heard, but I don't
15	really think it's -- you know, it affected that
16	dynamic. It's a very tough -- people fight for
17	every deal.
18	Q. But in 2002-2003, you would agree there
19	was less business to be had with essentially the
20	same number of players trying to have it?
21	A. Yes.
22	Q. In the applications area?

00217
1	A. Yes.

00218
2	Q. Let me ask the question again so we're
3	clear.
4	A. Sure.
5	Q. You said that you saw in some period of
6	time after the dot-com bubble burst that there was
7	a reduction in tech spending by companies,
8	correct?
9	A. Yes.
10	Q. Over what period of time did you see
11	that?
12	A. It dropped quite rapidly in 2001, and the
13	thing is I would like to distinguish -- you use
14	the metaphor "dried up." It really didn't dry up,
15	but it dropped down. I realize it's just a
16	metaphor, but it did drop down to a lower level
17	and then people always talked about, gee, we're
18	going to have this recovery. We're going to have
19	this recovery. And recovery didn't come.
20	Recovery didn't come. And I made several speeches
21	saying there wasn't going to be a recovery if what
22	you meant by recovery was a return to the year

00219
1	2000 or 1999, that there was never going to
2	happen.
3	And, in fact, people had been spending --
4	if you look at the curve, their IT spending just
5	shot up precipitously and actually returned to
6	what I would call a more normal level. And I
7	think as much as it dropped -- now, industry by
8	industry. If we look at the telecommunications,
9	which just got killed, and the suppliers, you
10	know, to those industries. Cisco dropped
11	precipitously and other suppliers. Lucent dropped
12	precipitously. Nortel, those suppliers really got
13	hurt as tech suppliers. But, in general, whether
14	you looked at Oracle or Microsoft or IBM, HP, any
15	of the major tech companies, our sales dropped
16	down, but it wasn't -- you know, it wasn't -- it's
17	not going to be a curve that looks like this, down
18	and then back up. You are going along nicely with
19	normal growth. You had some huge spike and now
20	you just slip back to where you would have been
21	had that spike not occurred.
22	And there were a lot of reasons for that

00220
1	spike. The year 2000 phenomenon, the -- my
2	counsel said the mass hysteria of the dot-com
3	investment boom, all these companies being formed
4	and taken public, and them buying software and
5	computer systems and doing all this stuff and they
6	hadn't shown a penny of profit. All that should
7	have never happened. So I don't think this is a
8	valley we're going through and then it's going to
9	go back up again. I think the environment we're
10	in right now is the tech environment for some time
11	to come. It will grow slowly with the economy,
12	but it's not going to, quote, recover to its
13	former glory, nor should it, because they were
14	spending way too much money on tech in those days.
15	Q. Within Oracle, do you see any signs that
16	the spending for technology has increased over the
17	past twelve months?
18	A. You know, maybe a little, but I'll
19	emphasize, just a little. Again, I publicly said
20	I don't expect there to be a comeback. This is
21	the recovery. This is it.
22	Actually, the economy is doing quite

00221
1	well. The people don't think so. The American
2	people don't think so necessarily, but
3	unemployment is lower now than it was in the
4	1970s, 1960s, 1980s, 1990s. The economic growth
5	is really quite good. We've added a lot of jobs
6	recently. The economy is not doing badly at all.
7	So this is it. There is not going to be a sudden
8	upturn coming. So the competitive climate -- I
9	know you just said is competition tougher now.
10	This is it. This is the environment we live in
11	and will be living in for some time.
12	Q. You saw less business available with
13	essentially the same number of competitors after
14	the dot-com bubble burst?
15	A. Right, because that was an abnormal
16	demand spike. In a rational world it would not
17	have occurred.
18	Q. And the level of business available that
19	you saw after the dot-com bubble you don't expect
20	to get significantly higher?
21	A. No, I don't.
22	Q. So either the same number of players will

00222
1	be going after that level of business or some of
2	those players will fall by the wayside.
3	A. And, again, I publicly stated that the
4	industry is going to go through -- as this
5	industry matures, we'll go through a
6	consolidation. We have to.

Ellison 05-23-04