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Oracle: We're still Number One...

While Oracle Corp. copes with a brewing scandal over a California state software contract and fierce competition from its rivals, the database giant sought to get ahead of upcoming research reports on the state of the database industry with one of its own.

The FactPoint Group research ranked Oracle No. 1 as the primary database of the Fortune 100, with a 51 percent market share, in a study commissioned by Oracle. Rivals IBM and Microsoft came in second and third, capturing 19 percent and 8 percent respectively. (Fifteen percent of respondents reported using a combination of database vendors.)

Los Altos, Calif.-based FactPoint interviewed over 400 IT managers at Fortune 100 companies. The survey was based on operational use, not revenue.

An Oracle spokesperson said the survey was undertaken by Oracle to "clear up misperceptions" about the company's lead in the database industry. The FactPoint Group's survey comes before The Gartner Group and IDC release two broader reports on the database market this week, which are expected to show Oracle's share of the market shrinking. (Oracle has already tussled recently with Gartner over a recent report that criticized the company's pricing methods.)

Reports of declining market share would add to the Redwood Shores, Calif-based company's slew of problems. The latest is a nascent scandal over a $95 million software contract with the California government. A state auditor uncovered that Oracle was the only bidder on the contract, and few state agencies reported needing the software. Echoes of Enron were heard on Thursday, when Gov. Gray Davis sent the California Highway Patrol to prevent document shredding at the state's Department of Technology. The Wall Street Journal today reported Davis is in talks with Oracle to void the contract.

While the six-year contract is relatively small potatoes for Oracle, the imbroglio comes at an awkward time for the company, which has been buffeted by challenging economic conditions and internal turmoil. Last week, Sebastian Gunningham departed his post as senior vice president for product industries and Latin American sales. His exit was the latest of a string of long-serving executives to depart the side of Oracle CEO Larry Ellison over the last two years.

Wall Street has also worried that Oracle will show weak fourth-quarter numbers when it reports earnings this month. Lehman Brothers recently lowered its earnings estimates for the company, which it expects will be hurt by persistently sluggish corporate tech spending. The financial worries pushed Oracle's shares down to near their lowest level in three years.

Database sales are at the core of Oracle's business, accounting for 70 percent of its software revenues. But the company's database revenues have declined for four straight quarters, including a 30 percent slump in the most recent period. And in March, Oracle CFO Jeff Henley said the fourth quarter would continue to be challenging. "As far as we can tell, tech spending for enterprise hardware and software remains very soft and doesn't yet appear to be improving," he told investors on a conference call.

Last year, the Gartner Dataquest report on the database market, which used revenue as a measuring stick, ranked Oracle No. 1 in the market, with a 33.8 percent share compared to IBMs 30.1 percent share and Microsoft's 14.9 percent. Gartner Dataquest pegged the worldwide market for databases at $8.8 billion.

A lower share in the database market would worry some analysts. "Although Oracle management has vociferously denied that it is losing share in the database market, Microsoft and IBM are both undeniably playing more aggressively in this area," Morningstar analyst Christopher Beaulieu wrote in a recent research note. "Any weakness in Oracle's bread-and-butter database business would be a big problem."