Larry Ellison: Everyone Else Must Fail

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 future—focusing on Larry Ellison—is scheduled to come out in November.

We got our hands on an early copy of her book—titled "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 customer—or competitor—should 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 books—including the detailed look at Sun and Scott McNealy she published back in 1999. —Editor

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 stakeholders—customers, partners, shareholders, and employees—are 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 sales—by 4 percent—but 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 Ellison.

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