In an exclusive excerpt from her upcoming book "Everyone Else Must Fail," author Karen Southwick lays out a bleak future for Oracle, and for Larry Ellison. Could Oracle's best days be in the past?
With all the hoopla surrounding Oracle, PeopleSoft and Larry Ellison, Karen Southwicks timing couldnt be better. Her in-depth look at Oracles past, present and futurefocusing on Larry Ellisonis scheduled to come out in November.
We got our hands on an early copy of her booktitled "Everyone Else Must Fail"and couldnt put it down. Chock full of juicy rumors, detailed reporting and a brutal look at Oracles past and present business practices, every Oracle customeror competitorshould read this book.
So we set about trying to give you an exclusive preview of "Everyone Else Must Fail"and thats what you see here. Weve opted to bring you a section from the latter part of the book, where Southwick looks at where Oracle and Ellison are going from here. She paints a bleak picture, suggesting that Oracles better days are behind them.
So read through our exclusive excerpt, and after youre done, stop by our Southwick will be hanging out all week, answering your questions about Oracle, Larry Ellison or any of her past booksincluding the detailed look at Sun and Scott McNealy she published back in 1999.
Oracle Peers over the Precipice
At the close of 2001, Jay Nussbaum, the executive vice president of Oracle who oversaw sales, marketing, and consulting in the services industries, left to join the
consulting firm KPMG Peat Marwick. "Jay built and leaves us
with a deep management team that is well prepared for additional
responsibilities," Larry Ellison felt compelled to write
in an E-mail to employees announcing the departure.1 In fact,
Oracles management team is woefully depleted. With the
exception of Jeff Henley, virtually all members of the senior
team who participated in Oracles turnaround and tremendous
growth during the 1990s have left the company. They
include Gary Bloom, Ray Lane, George Kadifa, Polly Sumner,
Randy Baker, Pier Carlo Falotti, Robert Shaw, Jeremy Burton,
George Roberts, and many, many more. Sandy Sanderson,
who had been filling the void that Lane left as Oracles
customer-facing executive, took a medical leave in August
2001 and wasnt expected to return. Henley himself is questionable.
Rumors have swirled on occasion that the chief
financial officer was leaving, causing Oracles share price to
plunge. Although Henley steadfastly denies any intention to
resign, he has sold his house in Silicon Valley and lives in
Santa Barbara, commuting up to Oracle every week.
This leaves Ellison with the tricky task of running Oracle
without a net of strong executives beneath him. "Oracle has
moved from a team of B players led by A players to a team of
C players led by B players," Sumner says. Ellison now
depends heavily on Executive Vice President Safra Catz, a
onetime investment banker who acts as his chief of staff and is
about as much of an enigma as her boss. She has shunned the
limelight, even though Lane and others describe her as Ellisons
"hatchet man" in carrying out what he wants done. But
she has no experience running a company on her own and no
public persona, hardly qualifications to be CEO. No one else
inside Oracle leaps to mind, either. Ellison adamantly refuses
to name a second-in-command, saying hes going to wait until
its apparent that he needs one. So Oracles stakeholderscustomers, partners, shareholders, and employeesare at the
mercy of a nearing-sixty CEO who indulges in high-risk
behavior and whose interest in his company is fitful. In late
2002, Ellison spent weeks at a time anchored off the coast of
New Zealand, while the eighty-foot yacht that he paid for,
Oracle, participated in the Americas Cup trials. Early on in
the trials, Ellison was a crew member, but the captain, Chris
Dickson, yanked him for a more veteran sailor. Ironically,
Ellison had elevated Dickson to captain to replace someone
else. The Oracle head capitulated meekly to being thrown off
the boat, conceding that the captain must prevail.
Even if Ellisons energy level and commitment to being
CEO remain high, no lone executive, no matter how capable,
can single-handedly run an operation as complicated as
Oracle and also focus on how to reposition the company
for the future. While competitors like IBM and Microsoft
smoothly transitioned their leadership from, respectively, Lou
Gerstner and Bill Gates to Sam Palmisano and Steve Ballmer,
and built up teams around them, Ellison coyly toyed with
executives like Lane and Bloom. Although some observers still
see Bloom, the CEO of high-flying Veritas, which makes software
to store and protect data, as a possible outside successor
to Ellison, Bloom proclaims that hes going to build Veritas
into another Oracle and doesnt need to come back. "Before
Larrys ready to step down, I have an equally good chance of
making Veritas a similar-size company," says Bloom. "I want
Veritas to have all the prestige and respect Oracle gets."
In late 2002, Oracle wasnt getting a lot of respect. For
more than a year, sales and earnings had failed to meet expectations.
It was only after Henley guided the Wall Street estimates
down a couple of times that the company managed a
quarter that wasnt worse than expected. In its fourth quarter
of fiscal 2002, ended May 31, Oracle reported a 16 percent
decline in sales and a 23 percent decline in net income. But
those otherwise dismal results were slightly better than what
had been forecast. Finally, in the first half of fiscal 2003,
Oracle managed to grow new database salesby 4 percentbut application revenue continued to decline, as did overall
revenue. Between 2001 and 2003, Oracles revenues shrank
by more than $1 billion, from $10.9 billion in the fiscal year
ending May 31, 2001, to $9.5 billion in the year ending May
31, 2003. Even by 2004, revenues were still projected to be
below the high-water market of $10.9 billion in 2001. While
Ellison and Henley continued to blame the poor economy and
the collapse in corporate spending after September 11, 2001,
that reasoning was wearing thin. It was becoming obvious
that most of Oracles problems were internal, related to its loss
of management at the top, its alienation of everyone from customers
to partners, its conflict-ridden culture that sucks
energy into the black hole of corporate politics and last but
not least, the flawed personality of the Oracle himself, Larry
Next page: Whither Oracle?