Oracle Systems (Robert F. Burner Case)

Executive Summary

Oracle Systems Corporation is an established company that produces competent and innovative softwares. For recent years, the company has been experiencing a favorable financial position with high revenues and stock market price. However, in September 1990, as it disclosed

Problem

How will the company emphasize on profitability and product quality?

Point of view

The group assumes the point of view of Larry Ellison, CEO. We are presenting to the Board of Directors.

Areas of Consideration

1. Organizational restructuring. The company claims that it is restructuring its organization which contributed to their first loss from inception.

2. Financial ratios. The financial ratios are indicative of the company’s performance and problem areas.

3. Sales strategy. The company is shifting their strategy from emphasizing market share and sales growth to profitability and product quality.

4. Market movement

Assumptions

1. Numerical values in the financial statements given are at the very least factual, despite their issues with revenue recognition.

2. The company is recognized as producers of competent and sophisticated software and will be able to maintain a significant market share despite reorganization and changes in policies.

Observations

1. Oracle’s Salient Financial Ratios versus Industry Average

ORACLE SYSTEMS | | | | | | | |INDUSTRY AVERAGE | |Ratios |1985 |1986 |1987 |1988 |1989 |1990 |Average | | |Accounts Receivable to Sales |0.71 |1.15 |1.18 |0.99 |0.93 |0.80 |0.99 |---- | |Accounts Receivable to Assets |0.58 |0.46 |0.45 |0.52 |0.56 |0.59 |0.53 |28.2 | |Days Sales Outstanding |142 |175 |181 |168 |164 |176 |168 |102 | |Receivable Turnover |2.54 |2.06 |1.99 |2 |2 |2 |2.16 |6.26 | |

Looking at the Accounts Receivable to Sales and Assets Ratios, we could see that a large part of the Sales generated is through Credit, and half of its Assets are Accounts Receivable. It was also mentioned that the...