Prospect of war doesn't concern Oracle CFO

By FRAN O'SULLIVAN

If war breaks out in Iraq, Oracle numbers man Jeff Henley is confident the company's global growth plans will not be unduly affected.

He's more concerned about the impact of the "people in Congress" who have over-reacted to the Enron affair.

Henley puts the real problem of the 1990s down to price-earnings ratios which went through the roof: "It was a huge bubble ... it had nothing to do with what Oracle or anybody else was doing.

"But now there is this bunch of bright lawyers who are probably over-engineering the degree of regulation again."

Henley, who has helped turn Oracle into a US$9 billion ($16 billion) company since becoming chief financial officer in 1991, says "anything that creates uncertainty is not helpful.

"But I am not sure I can attribute the softness in IT spending having anything to do with Iraq at this point. Because this thing has been going on for a couple of years."

Like many US transnationals, Oracle is going with the mainstream US view that any war will be a short burst. Any other scenario could disrupt the world's largest enterprise software vendor (self-claimed) and cause a significant economic effect.

Where Henley does have a concern is if war "becomes a bigger calamity created with biological weapons or the like".

Ironically such a scenario carries both downside and upside effects: It's not a money thing - Oracle makes lots. But only 51 per cent of its revenue is derived from outside the US. It wants to maintain profitability and if the economy weakens further "we may have to take steps to downsize our workforce".

"We haven't done too much of that so far," says Henley. "Our belief is that things aren't going to get a lot worse. But if they do then we would clearly have to look at down-sizing the company.

"That's not our current assumption ... but that's the only way we know how to deal with it if it were to happen."

At a Trans Tasman Business Circle lunch in Sydney this week, Henley was all bog-standard Oracle. His presentation "Creating Business Prosperity in a Challenging Environment" has been shown to executives and customers throughout the world.

The presentation uses Oracle as a motif for how to re-engineer a business using its own software and database capabilities. It's an oft-told story which Henley has used in wall-to-wall customer presentations updated to current conditions.

But tech spending has been at a standstill. In the 2002 financial year, Oracle had its first down year from a revenue perspective, although operating margins increased to a record 37 per cent.

Oracle has set some big challenges: Doubling a US$1 billion savings target to US$2 billion by becoming an e-business; cutting US$200 million from operating expenses within two years.

"People are still doing a lot around the internet," says Henley. "Most companies have not by any means webified themselves. They're still in the process of creating self-service web access to their data, things like that.

"That's still a very ongoing demand driver ... that really hasn't changed other than people are more subdued in their spending."

He's heartened that - Iraq notwithstanding - the US economy has hit the bottom. "I think the worst is over for tech spend," says Henley. "Tech spend has kind of bottomed out and the assumption is it's not going to get a lot worse ... but on the other side it's not going to dramatically get a lot better for some time.

"This is just so-so and we see, if anything, maybe a little bit of growth this calendar year but certainly not a lot ... but that's still better than what we have seen for the last two years."

Ironically, while Henley believes some of the new Government-imposed governance measures contained in last year's Sarbanes-Oxley are unwarranted and will stifle smaller companies, there is an upside.

The Act, which applies in general to publicly held companies and their audit firms, dramatically affects the accounting profession and hits not just the largest firms, but any accountant working as an auditor of, or for, a publicly traded company. It contains measures including requirements for back-up files and the necessity to keep documents secure.

"They're saying 'Do we have the right backup and good security to stop people hacking our files or terrorists?'

"So we have some more things around our databases than before 9/11."