Oracle's revolting shareholders, Amazon grace and internet traffic booms

Oracle has upset its shareholders. According to some, it has misrepresented its financial figures for most of the third quarter to give Larry Ellison time to shift a whole load of shares before the inevitable drop in value. As a result, a number of class action suits are in the pipeline.

The problem, it is claimed, is that Oracle spent all of its third quarter stating that its results would be in line with expectations despite the fact that much of the IT industry was revising its estimates downwards. Oracle is said to have claimed that its pipeline was as strong as ever and that sales were growing rapidly.

On 1 March came the announcement that Oracle did not expect to meet its third quarter revenue targets. As a result, the stock value dropped over 20 per cent to just under $17. Later, it was alleged Larry Ellison sold around $900m worth of stock in January and February at the premium price of $32.

This would not be of any great interest if Larry was constantly moving his stock around but, apparently, this is not the case and shareholders have been left with a bitter taste in their mouths and paper losses amounting. There are a number of class actions that have resulted from this alleged misrepresentation - including a pension fund and a number of law firms.

As if that wasn't enough, the complaints go further and criticise Oracle's claims for its technology. A part of the reason for the revenue shortfall, it is said, is that Oracle indicated that the Oracle 11i suite would require no programming effort to integrate with existing solutions. The claimants say this is not the case.

It is also claimed Oracle could only make its $1bn in internal savings because it sacked 2000 employees, not as a result of using its own technology.

This is a story that starts off by engaging our thoughts with the apparently scandalous behaviour of Mr Ellison and his public relations machine. Could it be possible that Oracle deliberately pulled the wool over the eyes of the shareholding public?

You just begin to think that it might have happened when somebody adds a totally vague claim that the product is difficult to implement. Then things are made worse when they add a claim that Oracle might have lied about its savings.

Surely anybody can see the argument that, even if the savings came through reduced headcount, it was the software that made it possible.

*The World According to Amazon*

Last week started off positively enough for Amazon.com with details of an offline deal with retailing giant WalMart. However, hopes of this deal coming to fruition were dashed just as everyone was waiting with baited breath - the talks, it would appear, were simply exploratory.

Next was the news that Bibliofind, the division of Amazon that deals in rare and out of print books, had suffered a security breach that exposed the credit card details of nearly 100,000 customers. What makes this hack particularly interesting is the belief that Amazon knew of it for some four months and failed to take any action.

CEO Bezos himself did little to raise the mood as he lodged documents with the US Securities and Exchange Commission declaring his intention to sell 800,000 shares, approximately a third of those he has sold, worth approximately $12.2m. This trading comes just after Amazon executives received a report suggesting the company may not be able to survive the year. This is in stark contrast with the Amazon belief that they will finish the year with $900m in cash.

Perhaps the most bizarre chapter of the current Amazon story, however, was when Bezos told BBC TV's Money Programme: "We are a volatile stock. We're working hard in building a lasting company and we think over time we'll build a very valuable company. But for a short-term investor, or for a small investor, I wouldn't invest in internet stocks."

So what does the future hold for Bezos and Amazon? The company has survived the dot-com collapse of last year and seems to have more lives than the average cat. But recent events look set to prove Amazon's sternest challenge.

Amazon has been in business for nearly six years and sooner or later someone must ask Bezos just how long his building process is going to take and when investors will start to see the fruits of his labours. Amazon continues to deny there are any problems either with their internal cash flow or Bezos' share dealing. They also deny the WalMart talks were anything more than speculative but it must be asked whether or not the talks were actually the first part of Amazon developing an exit plan if the current concerns prove to be true.

*Fate and fatter - UK net pipes*

According to the London Internet Exchange (Linx), internet traffic in the UK peaked at more than 6 gigabits per second (Gbps) last week. This represents a 20 per cent growth in traffic in two months and is three times the level of a year ago.

LINX is well placed to provide this kind of information because it is a non-profit organisation that provides a hub for over 120 ISPs. It provides the connections between all of the various networks that it supports and handles around 90 per cent of all UK internet traffic.

It is also given the task of monitoring traffic and predicting future growth so service providers can ensure adequate capacity is available. If you examine the figures, traffic was at about 1Gbps at the beginning of 2000. It reached 3Gbps in June, 4Gbps in October, 5Gbps in January 2001 and 6Gbps in March. A simple plot of this will show a rapid acceleration since the middle of last year and is an indicator of the growing popularity of the internet.

Much of this increased usage is put down to the availability of unmetered services meaning users are no longer concerned about the amount of time spent online.

The Office for National Statistics backs up this view with its latest quarterly figures that show a five per cent increase in the number of UK homes with a computer - the figure has risen to 7.8 million. The EU also claims that, with 150 million, Europe has about as many internet users as North America.

For more research see: http://www.it-director.com