Oracle Receives More Flak for Eschewing Truth in Advertising
Oracle Receives More Flak for Eschewing Truth in Advertising by UCStrategies Staff
Beginning in April 2012, Oracle was forced to pull out three ads – all claiming that Oracle computers performed much better than those by IBM – after IBM lodged complaints to the Better Business Bureau (BBB) and the National Advertising Division (NAD). Oracle failed to present any proof of its advertising claims on all three complaints regarding the company’s ads.
The latest ad was taken down in November, slapped by NAD as having unsubstantiated claims. In the ad, Oracle claimed that its Exadata server would run five times faster than IBM’s Power server “or you win $10,000,000.”
“The advertiser did not provide any speed performance tests, examples of comparative system speed superiority or any other data to substantiate the message that its Exadata computer systems run data warehouses five times as fast as IBM Power computer systems,” the National Advertising Division explained in a statement.
The NAD also reported that Oracle disagreed with the findings but it would take “NAD’s concerns into account should it disseminate similar advertising in the future.”
At ReadWrite, Antone Gonsalves dubbed Oracle’s advertising as “more than the result of an overzealous ad exec.” In July 2012, for instance, Oracle was challenged by NAD for touting that a big European retailer had switched its database from an IBM Power server to Oracle Exadata and saw that the latter server ran 20 times faster. Earlier in April, NAD slammed another Oracle ad campaign flaunting that Oracle’s SPARC SuperCluster T4-4 computer system “runs Oracle and Java twice as fast as IBM’s fastest computer.”
Rob Enderle, president and principal analyst for the Enderle Group, wrote in his CIO column that Oracle’s decision to allow the ads to be shown was “strategically stupid.” Enderle said that with that discretionary move, Oracle risked its credibility with large corporations.
“The difficulty with false advertising is that it speaks to trust and enterprise vendors must be trusted to be successful,” Rob Enderle told ReadWrite. “But it really depends on how many customers become aware of this problem. Not many watch the BBB, but in this age of social media, this stuff is circulating and if you don’t trust what you are being told by any vendor, and particularly in the enterprise class, you tend to avoid buying from them.”
It is an inopportune time for Oracle to continue its “creative” advertising strategies. The company’s hardware sales have slumped. According to IDC, worldwide factory revenue from Oracle’s servers plunged more than 23 percent during the third quarter compared to the same period in 2011. As a whole, the market slid down four percent. Note that IBM saw the highest revenue among the different companies on the IDC list.
Oracle’s strategy when it comes to selling its hardware is to market servers alongside the company’s database software and business applications. The hardware is largely based on the 2010 acquisition of Sun Microsystems for $7.4 billion. So far, Oracle has seen modest success.
However, salespeople from Oracle were not too thrilled by Sun hardware. In an unconnected legal dispute with Hewlett-Packard, text messages uncovered from Oracle sales officials referred to Sun Microsystems’ hardware as “baaaallllloooooooows” and “pig with lipstick.”
By the fiscal first quarter that ended on August 3, 2012, Oracle had sold $5.7 billion in software but only $1.35 billion in hardware. The company attributed the discrepancy to its giving up of certain Sun systems to concentrate on selling high-margin products like the new Exadata server.
In the meantime, Oracle’s sales and earnings are expected to trickle down. Bloomberg data pointed to a yearly average 20 percent growth for earnings and 18 percent for sales. But for the next two fiscal years ending in May 2014, analysts predict a slow per-share annual profit growth of less than 10 percent and revenue growth of no more than seven percent.
Taking into account the pulled out ads and the prediction of slowed growth, Antone Gonsalves concluded: “As long as Oracle remains silent on the ads, it's impossible to know the company's motives. But the longer Oracle's hardware business fails to take off, the more the sordid behavior looks like desperation.” (KOM) Link.