?"> Whither Oracle? Two primary scenarios could play out at Oracle, each with differing ramifications. The first is if Ellison, for whatever reason, were to leave unexpectedly in the near term. The second is if he stays for the longer term. Its unlikely that Ellison would ever be forced out of Oracle, since he owns one-fourth of the stock and has a relatively weak board of directors. But given his propensity for fast jets, fast cars, and sleek yachts, some kind of accident is possible. Once, Ellison almost died in a surfing accident off Hawaii. Or he could decide that Oracle has become boring and simply leave to start a biotech company.If Ellison went with no warning, definitely chaos would ensue at Oracle. "They arent prepared at all if he walks out suddenly," says Lane. "Its better for him to stay in the short term because theres somebody with a vision." Former board member Arnold Silverman agrees. "Without Larry, Oracle would go through a difficult period. There would be a lot of arm waving and flapping around. Maybe somebody would come in, grab the reins, and stabilize it." Maybe, but who that would be is a mystery. Lane says hed go back if Ellison were out of the way, because Oracle would need a proven leader. "It would have to be somebody with a very, very different style than Larry. Id do it because Oracle is an incredible asset thats being destroyed," he says. But other insiders tell me that Lane may have burned his bridges at Oracle by speaking out publicly against Ellison and by addressing the trade conference of competitor SAP, so returning as CEO is problematic. Of course, the many exOracle executives who head other companies, like Bloom (Veritas), Craig Conway (PeopleSoft), Greg Brady (i2 Technologies), Marc Benioff (Salesforce.com), and so forth, would be candidates, but whoever did it would face monumental challenges. He or she would simultaneously have to fix a troubled company, overhaul a counterproductive culture that has been a quarter century in the making, and fill the shoes of one of the most high-profile corporate leaders in the world. In Ellisons absence, the other possibility would be a merger. A number of observers suggested that a Sun/Oracle combination could make a lot of sense, giving the new company ownership of everything from the server to the database to applications. Since significant competition exists at all those levels, its doubtful that antitrust concerns would derail such a combine. Suns McNealy is a charismatic CEO with a demonstrated ability to lead an unconventional company with a maverick approach. Sun and Oracle have the same enemies and the same essential strategy: focusing on products instead of solutions. Says Lane, "Sun could be Larrys exit path. Together they can fight the other two integrated competitors: IBM and Microsoft." Naturally, neither Sun nor Oracle would officially comment on this. Laughs Suns Bohlig, "Im sure some analyst every year is saying thats a possibility. We dont see it." If Ellison continues to lead Oracle, as seems most likely, the outlook for Oracle is murky. "If he stays, Oracle doesnt change," says Lane. "Hes a very capable leader in terms of putting together a product strategy, expressing vision to the marketplace, and telling people what to do. But theres also a lot thats missing, like management style. Theres no team underneath him. Its basically a dictatorship, and everybody works in the hope that theyll get rich." If Oracle continues to falter, the board might exert more pressure on Ellison to bring in strong managers beneath him, as he did in the early 1990s with Lane and Henley. "What people are looking for today from senior leadership is not simply vision," says Gartner Group analyst Betsy Burton. "Oracle is out of balance. The yin has left, and only the yang remains." But given Ellisons track record of running through executives, it might not be as easy for him this time to attract the best people. Even if Ellison were to step down as CEO and remain chairman of the board, as some scenarios have suggested, "I dont think topnotch people will go to Oracle," says exboard member Silverman. "Who would want to be CEO with Larry still involved? Anybody qualified to do it wont do it." With no new initiatives on the horizon, Oracle faces tough battles in expanding its core database market, which accounts for nearly all its profits, and in making applications a viable line of business by winning back wary customers. The database business is especially critical, since its hefty profit margins enable Oracle to support applications and application servers. "If I were sitting in Larry Ellisons chair, the first thing I would focus in on is, How do I regain my control of the database market?" Burton says. However, that may mean sacrificing price for volume. Worrisome for Oracle is the movement toward cheaper databases, a trend augmented by its own clustering technology. In 2002, Oracles low-end product, called Standard Edition, accounted for half of its database license revenue, up from about 15 percent just two years previously. "The SE product was designed to compete with Microsoft on price, which it does well, but Oracle never anticipated it would grow to half of its database revenue," says analyst Charles Phillips, of Morgan Stanley (who later joined Oracle). The hope for Oracle is that customers will upgrade to the high-end product, Enterprise Edition, but Phillips says that migration path is not guaranteed. "The SE product is sufficient for even large customers" in many instances, he says. Although Oracle doesnt appear to be losing existing customers to IBM and Microsoft, those two "are certainly winning their share of new business," Phillips adds. "Oracle still has the leading product that can span from very small to very large applications with the markets most reliable database." But count on more pricing pressure, both from competitors and from reluctant customers that have become more pricesensitive in a slower economy. Phillips forecasts that, at least in the near term, Oracles growth will be flat and profit margins will depend on controlling expenses. On applications, Oracle has been losing market share to PeopleSoft and SAP, due to the quality issues that surfaced with the early release of 11i. Phillips believes that Oracle has fixed the technical problems but has a long way to go to repair the damage to its reputation from having mistreated customers. Jennifer Chew, analyst for E-business applications at Forrester Research, says that any of the three leading ERP vendors can meet functionality and business process requirements and they are fairly equal on service. That means the decision comes down to intangibles, like with whom would you rather work, and there Oracle has hurt itself. "Attila the Hun looks kind compared to Larry," she says. "Oracle needs to abandon the all-Oracle, all the time message." It can still fashion a winning strategy on applications since its able to bundle so much more than SAP or PeopleSoft, she says. "Because Oracle has so many other products, like database, toolset, and services, they can afford to discount very heavily on applications and still know that over the life cycle, theyll get plenty of money out of the customer." Next page: Oracle and Web Services
It is just those kinds of scenarios that cause the CEOs of most major companies to do succession planning. Not Ellison. One wonders if he can even conceive of Oracles existence without him. Other people wonder, too. "If Larry was incapacitated, the cult would dissolve," says former executive Marc Benioff. "Its unclear if Oracle is a sustainable enterprise without Larry because his personality is so firmly entrenched."