00005
|
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| | Q. Ms. Catz, could you please state your name for |
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| the record, please. |
16
| | A. Safra, S-a-f-r-a, Ada, A-d-a, Catz, C-atz. |
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Catz 05-20-04 1 00006
|
9
| | Q. Just very briefly, your current position at |
10
| Oracle Corporation is what? |
11
| | A. I'm president, I'm one of the presidents of |
12
| Oracle Corporation. |
13
| | Q. Have you finished? |
14
| | A. I think I have. |
15
| | Q. And how long have you been in that position? |
16
| | A. A few months. |
17
| | Q. Prior to becoming a co-president of Oracle, what |
18
| was your position with the company? |
19
| | A. I was an executive vice president. |
20
| | Q. You held that position for how long? |
21
| | A.I think around four years. I'm also a board |
22
| member of Oracle Corporation. |
Catz 05-20-04 2 00007
|
1
| | Q. And how long have you been on the Oracle board? |
2
| | A. At least two years. |
Catz 05-20-04 3 00073
|
20
| | Q. And who was involved in those considerations? |
21
| | A. The board. |
22
| | Q. And did you actually make a formal board |
Catz 05-20-04 4 00074
|
1
| presentation regarding making a possibility of making an |
2
| offer for J.D.Edwards? |
3
| | A. I think we did. |
4
| | Q. And what was your recommendation? |
5
| | A. Not to do it. |
6
| | Q. Why was that? |
7
| | A. Because we thought we'd have to -- we would just |
8
| bid it up and that if we allowed PeopleSoft to buy them, |
9
| we could just buy them both. |
10
| | Q. Do you recall when that was? |
11
| | A. No. It had to have been before J.D. Edwards and |
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| PeopleSoft closed in July. |
13
| | Q. Was there a formal board meeting on this point, |
14
| whether or not to pursue J.D. Edwards independent of |
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| PeopleSoft? |
16
| | A. I don't know if there was a formal board meeting |
17
| or an acquisition committee meeting, but I'm sure that |
18
| information is available in documents we've turned over |
19
| to you. |
20
| | Q. All right. Now, can you describe for me your |
21
| involvement in pricing at Oracle. By "pricing" let's |
22
| focus on pricing that is offered for Oracle's application |
Catz 05-20-04 5 00075
|
1
| software. |
2
| | A. I don't know if you're talking about list prices |
3
| or price on any particular transaction. |
4
| | Q. Let's start with list prices. What involvement |
5
| do you have in setting list prices? |
6
| | A. I attend a meeting called the PBMC, where |
7
| pricing ~ where new products are priced, a proposal is |
8
| made, generally presented by Jacqueline Woods, who I |
9
| mentioned, I think, to you earlier in -- maybe I didn't |
10
| mention her name -- in this pricing group, and a |
11
| presentation's made and the development organization that |
12
| actually really makes the presentation gives the input |
13
| for the presentation, presents a price, and we have a |
14
| discussion about it. And I attend that meeting and I |
15
| participate in the discussion. |
16
| | Q. What factors are considered by this group in |
17
| setting Oracle's prices for its application software? |
18
| | A. Very importantly, the ease of managing the price |
19
| and its consistency with the rest of the price list and |
20
| the - in some cases prices of competitive products and |
21
| the type of product that it is, the type of metrics that |
22
| would be appropriate to try to capture some of the value |
Catz 05-20-04 6 00076
|
1
| of the product and also whether it should be even an |
2
| independent product priced separately or whether it |
3
| should be included at no extra charge with some of the |
4
| other products, which is often the recommendation. |
5
| | Q. What do you mean by "ease of managing the |
6
| price"? |
7
| | A. Well, customers have often many different |
8
| products, either from us or from our competitors, and we |
9
| like to set our prices in such a way that they're very |
10
| simple for the customer to count and to measure as to |
11
| avoid any kind of disputes or disagreements later. |
12
| | Q. When you say that you at times consider the |
13
| prices of competitive products in setting Oracle's list |
14
| price for application software, what does that mean? |
15
| | A. It would depend on the product, but we may look |
16
| to see where some other companies have similar products |
17
| and what their list prices are. |
18
| | Q. Why would you look at that? |
19
| | A. Just to get an idea of what's in the market. |
20
| | Q. What do you mean by getting an idea of what's in |
21
| the market? |
22
| | A. What would be available to customers as an |
Catz 05-20-04 7 00077
|
1
| alternative to Oracle's product |
2
| | Q. Why would that be important in setting your |
3
| price? |
4
| | A. Well, it could impact your strategy. It would |
5
| relate to your strategy of how you want to position your |
6
| product and what your goals are with it. |
7
| | Q. And when you say it would impact your strategy |
8
| of how you would want to position your product, what does |
9
| that mean? |
10
| | A. Well, for example, we have a feature of the data |
11
| base that we call Real Applications Cluster, that for |
12
| the -- that we actually give for free with our standard |
13
| edition product because we like to position it as a |
14
| standard part of the product and to expand its market |
15
| penetration and its use. |
16
| | Q. Focusing on application software, why would you |
17
| look at what other products are being offered by other |
18
| software vendors to execute whatever strategy you have |
19
| regarding selling yours? |
20
| | A. Well, for example, in Oracle many other things |
21
| companies sell as add-on modules, we actually include as |
22
| part of the base product in an effort to compete so that, |
Catz 05-20-04 8 00078
|
1
| for us, the standard product may include some interesting |
2
| intelligence part to it that we believe should be a part |
3
| of it, while one of our competitors may decide that they |
4
| want to charge extra for it and we think it gives us a |
5
| competitive advantage to have a product that includes |
6
| more. |
7
| | Q. Does what your competitors or other software |
8
| vendors charge factor in any other way into what you |
9
| charge for your products? |
10
| | A. In any other way beyond -- |
11
| | Q. Your strategy issues. |
12
| | A. Oh, it can guide us as to what other folks are |
13
| doing as to what we should set our price at. |
14
| | Q. Well, why would what other folks are doing |
15
| indicate to you what you should set your products at -- |
16
| your prices at for products? |
17
| | A. Well, in general, we don't feel that it would |
18
| make a lot of sense to have a product that many customers |
19
| don't even consider because the list price, in their |
20
| mind, might be too high. So we like customers to feel |
21
| that our products are a good price and so that they |
22
| invite us to compete in a competition to be purchased. |
Catz 05-20-04 9 00079
|
1
| | Q. Are there particular application software |
2
| vendors that you look at for when you do your pricing, |
3
| you go through the exercise of determining what you will |
4
| charge for your products? |
5
| | A. Well, it depends on the different modules that |
6
| or product that we would be pricing. |
7
| | Q. So it varies? |
8
| | A. It would vary. |
Catz 05-20-04 10 00096
|
16
| | Q. Do you have any understanding of what price |
17
| discrimination strategies have been proposed by the |
18
| plaintiffs in this matter? |
19
| | A. I have read the Complaint and though I do not |
20
| exactly know which customers you have defined within your |
21
| market, I do believe that you are arguing that we will -- |
22
| that Oracle, as a result of this merger, will be able to |
Catz 05-20-04 11 00097
|
1
| increase prices on some group of customers that we will |
2
| be able to identify in advance, and I guess that's my |
3
| understanding of what you are arguing. |
4
| | Q. And I take it you disagree with that argument? |
5
| | A. I do. |
6
| | Q. And could you tell me why you disagree? |
7
| | A. For so many reasons. I could start - I could |
8
| start telling you. |
9
| | Q. Well, that would be a good idea. |
10
| | A. First of all, the customers that I think you are |
11
| referring to receive the best prices, not the worst |
12
| prices. Oracle would have no ability to -- if your |
13
| definition is these largest -- whatever your |
14
| definition -- highly complex companies, those companies, |
15
| whoever they specifically are, to the extent that they |
16
| are the largest companies, they receive the best prices, |
17
| not the worst. |
18
| | In fact, the ability of Oracle as a vendor to |
19
| a - to take advantage of those customers is absolutely |
20
| none; that, in fact, there are many constraints on our |
21
| ability to raise prices to those customers, including the |
22
| many alternatives that they have. |
Catz 05-20-04 12 00098
|
1
| | Q. Any other reasons that you believe that Oracle |
2
| would not have the ability to charge some customers |
3
| higher prices post merger? |
4
| | A. Because the customers have many alternatives, |
5
| because we don't have full information of who even these, |
6
| quote, vulnerable customers would be so that in the event |
7
| that we guess wrong, we would lose much more than we |
8
| could possibly gain by raising their price say ten |
9
| percent or whatever it is, and the risk of being wrong, |
10
| so outweighs any potential value of increasing prices on |
11
| these customers. |
12
| | The fact that many of these customers, if we |
13
| could in figure out who they are, have already purchased |
14
| their H.R. products and their core accounting and will |
15
| not be making any purchases. So, again, the potential of |
16
| us increasing prices on them is none. |
17
| | The fact that we could even get away with |
18
| charging smaller customers less than large customers is |
19
| just foolish and counterintuitive and impossible; that |
20
| many companies are actually considering doing away |
21
| entirely with their H.R. and financial software and are |
22
| going to outsourcers and business process outsourcers. |
Catz 05-20-04 13 00099
|
1
| | That's not a complete list. It's a long couple |
2
| days and by the time I testify, I will have remembered so |
3
| many of the reasons if I'm asked. |
Catz 05-20-04 14 00116
|
17
| | Q. Now, there's here a number of justifications, |
18
| Request 1, Justification 1, justification 2, |
19
| Justification 3 and I take it that those are set up to |
20
| deal with different aspects of the transaction, at least |
21
| on this form? |
22
| | A. No, they have to do with different requests. |
Catz 05-20-04 15 00117
|
1
| | Q. That's what I meant. |
2
| | A. Oh, okay. Yes, so whatever the requests were. |
3
| As I mentioned, I don't usually see - I don't usually |
4
| actually look at the forms so and this one is actually |
5
| kind of a funny one because this is -- obviously, I'm |
6
| kind of deciphering it. This happened clearly at the end |
7
| of Oracle's fiscal year and they're almost dated like |
8
| daily here during a negotiation. |
9
| | And so it's obviously kind of an in-process |
10
| thing and at the very top of it they're sort of saying |
11
| "This is the last request" and they - the things we were |
12
| looking at right now, reading, were stuff done previously |
13
| in the month. |
14
| | Q. Okay. Do you know to what extent Oracle's |
15
| salesmen know who their competition is in these deals? |
16
| | A. I don't know. |
17
| | Q. So let me -- to understand the analysis that you |
18
| go through here, some of the things you look at when |
19
| you're looking at whether to approve a different discount |
20
| would include the identity of the customer and if they're |
21
| in an industry or vertical that you're interested in |
22
| establishing a presence at? |
Catz 05-20-04 16 00118
|
1
| | A. Uh-huh. |
2
| | Q. Correct? |
3
| | A. Yeah, or if they're a good reference for some |
4
| other reason; they're a good name to have; they're a new |
5
| customer; they're good to have as a customer. |
6
| | Q. So if they're good to have for some of those |
7
| reasons as a customer, you may be inclined to give them a |
8
| lower price in order to get them in the door? |
9
| | A. Yes, and a dramatically lower price, especially |
10
| if they are historically not a data base user also. |
11
| | Q. So also if there's a chance by selling the |
12
| application software you can get them as a data base |
13
| customer, that may lead you to give them a lower price on |
14
| the application? |
15
| | A. To introduce them to Oracle, if we don't have |
16
| them at all and this would be an opportunity to have a |
17
| new customer. |
18
| | Q. If they have a software from someone else, |
19
| PeopleSoft or SAP, would that lead you to possibly give |
20
| them a lower price than you otherwise might, if you were |
21
| going to -- |
22
| | A. If they're install base and I could replace one |
Catz 05-20-04 17 00119
|
1
| of the competitors? |
2
| | Q. Yes, ma'am. |
3
| | A. Replacing a competitor is also a very good |
4
| reference because then when you're competing in - head |
5
| to head, you can -- in another competition, the salesmen |
6
| can say, "We replaced these guys." So, again, it's a |
7
| value of a good reference. |
8
| | Q. All right. The other factors you said what |
9
| might be also -- I've lost them in my notes. |
10
| | A. I can give you some more actually. There's |
11
| additional ones where there's potential to sell more |
12
| later, so a customer that's starting with one thing and |
13
| you understand that this transaction may not be as large |
14
| but there's a lot of potential going forward to sell |
15
| more. |
16
| | Then, of course, very important is the size of |
17
| the transaction. Large transactions often have the best |
18
| discount, that's just volume purchasing that everybody |
19
| knows about. |
20
| | Q. When you're making your decisions regarding how |
21
| to -- what level of discount you're going to get in the |
22
| license - strike that. |
Catz 05-20-04 18 00120
|
1
| | Let me ask you this question. Does the amount |
2
| of the license fee affect their maintenance price, dollar |
3
| volume? |
4
| | A. The way it works is that the discount, if you |
5
| look at it, you'll see that the discount that we approve |
6
| for the license, applies for the support, which is the |
7
| maintenance fee. |
8
| | That maintenance fee at Oracle, though I think |
9
| at some of our competitors they actually -- they differ |
10
| and they may charge them off list prices. At Oracle your |
11
| maintenance fee is a percentage of your net -- your |
12
| discounted license fee. |
13
| | Q. So the discount that they get on the license |
14
| will have an affect on the price that they're praying on |
15
| a going forward basis for their support fees? |
16
| | A. Yes. |
17
| | Q. Now, when you are pricing or deciding what level |
18
| of discount to approve on a particular transaction, do |
19
| you take into account at all the cost of the product to |
20
| you? |
21
| | A. I don't have. |
22
| | Q. Do you take into account the cost of sales, for |
Catz 05-20-04 19 00121
|
1
| example, your salesmen the demo people, that type of |
2
| thing? |
3
| | A. Well, it kind of depends what you mean. And I |
4
| should answer the previous question better, in that since |
5
| the product -- when one of my customers when they buy |
6
| let's say a license for a thousand users, which would |
7
| be - which could be a typical - they actually - it may |
8
| not cost me an additional anything. I may not even have |
9
| to send them a CD because they could download the |
10
| software from our servers. |
11
| | So when you ask the cost, if you meant the cost |
12
| of the CD and stuff, since the -- it comes into my mind |
13
| in that the cost is nothing, very, very low. |
14
| | So if it was very, very high, for example, I |
15
| would have to consider that. |
16
| | Q. When you do the pricing, do you consider, in |
17
| addition to any costs associated with providing them with |
18
| the physically preparing the product, do you include any |
19
| or consider any costs associated with the sales process, |
20
| salesmen, the amount of demo, how much you had to invest |
21
| to get that transaction? |
22
| | A. What I really think of is that if we don't get |
Catz 05-20-04 20 00122
|
1
| that deal, we don't get anything, regardless of how much |
2
| we've spent trying to get it. So we want to get it. |
3
| | Q. So the sales costs are not factored into your |
4
| pricing of the transaction-- |
5
| | A. To me- |
6
| | Q. -- from the standpoint of approving discounts? |
7
| | A. To me, in fact, I think I don't even know what |
8
| has been spent by the salesforce in trying to get that |
9
| customer, generally. I want all the customers. |
Catz 05-20-04 21 |