California AG Returns $50K Oracle Donation

Despite its pledge to scrap a controversial software contract with the state
of California, Oracle Corp. remains entangled in an
ever-growing political scandal there, as California’s attorney general gave
back its campaign contributions.

Last night, Attorney General Bill Lockyer announced he returned $50,000 in
Oracle campaign contributions “to ensure that there isn’t the slightest
appearance of conflict” as he probes the $95 million contract. Oracle
repeated its stance that its political activity was nothing out of the
ordinary.

“Ever since the sale of Oracle software to the state of California became a
public issue, we have tried to describe our position on the matter,” Jeff
Henley, Oracle’s chief financial officer, said in a statement last night.
“Because Oracle is headquartered in California and is one of the largest
employers in the state, we think it is important for us to participate in
the political process.”

Oracle maintains the software contract, signed last year with no competing
bids, could save the state over $100 million, despite a state audit that
said it could cost California as much as $41 million.

California Republicans have questioned the impartiality of Lockyer and his
fellow Democrat, Gov. Gray Davis, whose re-election campaign received a
$25,000 Oracle contribution two weeks after the software contract’s signing.
Lockyer rejected the notion that the contributions could have any influence
over his probe.

“These contributions neither create a conflict of interest for me or my
office, nor do they constitute any violation of the law,” he said in a
statement. “Further, the contributions from Oracle came long before I or
anyone in my office learned of any controversy involving the ELA [enterprise
licensing agreement] or any other issue involving it and state government.”

Further intensifying interest in the matter is this year’s gubernatorial
race between Davis and Republican Bill Simon.

Oracle has reacted with increasing exasperation in the matter. Yesterday, it
released a long list of state agencies and municipalities using Oracle
software, as well as a list of 29 technology and services companies that
also donated money to Gov. Davis in 2001.

The company’s central role in the California scandal has been a black eye
for the company, which has been battling a soft market for corporate IT
spending. Earlier this week, Gartner Dataquest confirmed that Oracle
has slipped to No. 2
from its longstanding position atop the overall
server market. According to the report, Oracle continues to lose market
share to both Big Blue and Microsoft.

Meanwhile, analysts have worried that Oracle will report disappointing
results in its upcoming quarter. On Tuesday, CIBC World Markets analyst
Melissa Eisenstat downgraded the company to a hold recommendation, which is
tantamount on Wall Street to advising clients to sell. She said her
pessimism about the company was based on poor feedback from Oracle’s sales
force.

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