Oracle Of Gloom

Call it the most important software release no one will notice. Oracle is set to launch a new version of its database software, dubbed 11g, Wednesday.

While database software remains obscure the business is a money spigot for Oracle (nasdaq: ORCL - news - people ). The Redwood City, Calif.-based software company has been the largest vendor of heavy-duty database software for decades. It owns 47.1% of the market compared with just 21.1% for IBM (nyse: IBM - news - people ), its closest rival. And it's a lucrative racket: Factor out expenses and Oracle's software business cranked out $2.5 billion in profits for the quarter ending Feb. 28.

The problem, of course, is that after a surge in demand in the 1980s and another in the late 1990s, the market for big-time database software is saturated. More troubling still, a host of free and cheap alternatives, such as MySQL, have stalled demand for pricey database software among less demanding customers.

The fix, then, has been for Oracle Chief Executive Larry Ellison to steer Oracle into other businesses. Ellison has gone on a three-year, $20 billion acquisition campaign to break out of the database business and build Oracle into a business applications powerhouse, snapping up Siebel, J.D. Edwards, PeopleSoft and a raft of lesser-known vendors.

The results have been good. Last month, Oracle reported quarterly net earnings had risen more than 20% to $1.6 billion over the year-ago period. Oracle shares are up more 35% over the past year.

It seems obvious now. But if Ellison hadn't done it, Oracle would be in the same fix as Microsoft (nasdaq: MSFT - news - people ), another one-time growth star that updated its franchise-building product, Windows, earlier this year with the release of Vista.

But while Ellison decided to buy his way out of trouble, Gates decided to sink billions into an effort to build fast-growing new businesses in everything from online search to console gaming. The result: Oracle's shares are up 98.3% over the past five years. By contrast, Microsoft's shares are up just 7.7% over the same period.