(FORTUNE Magazine) – Just six months ago, software maker Informix was a leading challenger of Oracle, the giant that dominates the $6 billion database business. The two companies' rivalry was one of Silicon Valley's bitterest, featuring dueling billboards along the six-mile stretch of Highway 101 that separates their headquarters, thefts of each other's employees, and lots of nasty rhetoric.

Now, says Oracle CEO Larry Ellison about Informix, "they are gone. We just never see them anymore." The competitor he worries most about these days is Microsoft.

What happened? Well, in classic tech industry fashion, Informix stumbled because of marketing missteps. Both Oracle and Informix design databases that store and manipulate vast troves of corporate data (from sales figures to payroll records) and make that information available across computer networks. It's not glamorous, but it's extremely lucrative. Last year, however, Informix acquired Illustra Information Technologies, a company whose new database technology is terrific for handling data such as drawings or videos that don't fit neatly into rows and columns. Informix refocused its marketing on Illustra's technology at the expense of its own core database business. As a result, says International Data Corp. analyst Carl Olofson, "customers were left wondering, 'Is this a company making a standard database I can use, or is it in the stratosphere?' "

On April 1, Informix announced that first-quarter financial results would be horribly disappointing. It would later show a $140 million quarterly loss --more than the company's revenues for the period, which, at $134 million, were down 35% from a year before. In addition, the company revealed that about a fourth of the database licenses it sold last year never made it past third-party distributors. Even though these sales are irrevocable and Informix booked them as such, until distributors unload their unsold product they have no reason to buy more. "Informix's technology may be the greatest thing since sliced bread," says Oppenheimer & Co. analyst Melissa Eisenstat, "but there is no real market for it yet."

The awful financial news sent Informix's already tottering stock price crashing. In January it was $24 a share; after the April announcement it dropped as low as $7 (on June 26 it was around $9). That's $2.7 billion in market value gone in a few months, and it meant that the company stock options held by Informix employees were suddenly worth a whole lot less. Hordes of sales reps and engineers jumped ship. The last CFO (the position remains unfilled) left after just four months on the job.

Oracle's sales force wasted no time planting seeds of doubt in the minds of potential customers, calling into question Informix's financial viability and playing up the fact that Oracle is a more stable choice. "People want to make sure the database company they choose will not have padlocks on its doors in five years," says Oracle marketing VP Mark Jarvis.

Such tactics, concedes Informix executive Steve Sommer, are "good marketing." But Sommer says that his company's problem is the message, not the technology--and that its sales force is now reemphasizing the mainstream database products that brought it success in the first place. Informix is also rolling out superstores to help cut its long sales lead times and counter Oracle's one-stop-shop approach.

That is a good plan, but on top of all Informix's troubles, Oracle just launched a new, much improved, and long awaited version of its database software. For now, Oracle marketers like Kelly Herrell are free to gloat, and they do. "Informix picked the fight," he says, "and Oracle finished it."

--Erick Schonfeld