Oracle's Prognostication: Tomorrow Looks Terrific

Larry Ellison, 49, is famous for being a daredevil. On Christmas Day, 1991, trying to surf some enormous waves in Hawaii, he broke his shoulder, neck, and three ribs, and punctured a lung. A year later, bicycling for physical therapy, he collided with a car and shattered an elbow. "I think I like living too much on the edge," he admits.

For a while, it also seemed as though Ellison's Oracle Corp., the leader in data-base software, had gone right over the edge. After nearly doubling every year until reaching $916 million in the fiscal year ended May 31, 1990, the company was suddenly out of control. Products were late and bug-ridden. Auditors found questionable practices in the way Oracle booked revenue, forcing the company to restate its 1990 earnings. Its reputation, sales, and stock collapsed (chart, page 94). Board members say Oracle was on the brink of bankruptcy.

Today, Lawrence J. Ellison and the company he founded in 1977 appear to be not only mended but more ambitious than ever. For the year ended May 31, Oracle earnings jumped 130%, to $142 million, on revenues of $1.5 billion, up 28%. Ellison's ambition now: to leapfrog $3.7 billion Microsoft Corp. as the world's preeminent software company. "People keep saying IBM is the present and Microsoft is the future," says Ellison. "That's wrong. IBM is the past, and Microsoft is the present."

STARRING ROLE? The future, he says, belongs to Oracle. Why? Because 15 years of selling data-base programs for minicomputers and workstations gives the company a sizable lead in the fast-growing world of client-server computing--where powerful "server" computers with large data bases dish up information and programming to desktop "clients" across networks. Microsoft, ruler of desktop software, is only beginning to tackle this market. Oracle is moving ahead to create software needed to store all the varieties of information--electronic mail, financial transactions, magazines, even video--that will flow through the "information superhighway."

Can the executive who presided over a company's near-demise fulfill such an ambitious agenda? Can a company whose products have mostly been used to store mundane accounting data play a starring role in the convergence of computing and mass media?

Ellison is no stranger to contradiction. He can spin long-term visions on topics such as biotechnology and education, yet he admits that it was his own shortsightedness that got Oracle into trouble. "I'm embarrassed about that and responsible for it." He wears trendy Canali suits and jokes about wanting to be "the best-looking executive in Silicon Valley." Yet he sometimes appears quite shy in public. He admires Japanese art and enjoys the tranquility of a Japanese-style home and garden. But in business, Ellison is a samurai warrior.

To get ready for the information superhighway, Oracle boosted research and development spending 32%, to $146 million, last year. In conjunction with supercomputer maker nCUBE Corp.--in which Ellison is a major financial backer--Oracle is developing software for massively parallel computers using hundreds of microprocessors. Ellison says that Oracle's software can now manage whole libraries of text and thousands of hours of video footage. Oracle is working with US West Inc. on a system that will serve up movies on demand to many homes at a time.

SIMPLE PLEASURES. As it diversifies, Oracle faces stiff competition in its traditional market. The big battle between Oracle and rivals such as Informix Software Inc. and Sybase Inc. is to make data-base programs far easier to use. On another front, Oracle's programming "tools" to help programmers work faster are being challenged by offerings from upstarts such as Powersoft Corp. and Gupta Corp. To move faster beyond its core business in minicomputers and onto PC networks, Ellison has linked up with Novell Inc.

Developing the future while managing current challenges could again test Ellison's mettle. Like Microsoft Chairman William H. Gates III, he's a self-made, bachelor billionaire (although Ellison is twice-divorced). After studying physics at the Universities of Illinois and Chicago, he dropped out and moved to Silicon Valley to work as an engineer at Ampex Inc. and then Amdahl Corp. Eleven years later, he co-founded Oracle, seeing a huge opportunity to commercialize new IBM research. This involved arranging data in "relational" tables that were easy to store and search.

While on a visit to Japan for Amdahl, Ellison fell for that nation's culture. He identified with the aggressive nature of Japanese executives and their intense corporate loyalty. He also admired their appreciation of simple pleasures, such as cherry blossoms. "When I got to Kyoto, I knew where God got the idea for heaven," he says. Ellison's Silicon Valley home reflects this: It's an elegant Japanese-style mansion with ancient Japanese art and samurai armor.

It was Ellison's own samurai tendencies, of course, that got Oracle into so much trouble. During Oracle's boom years, its U.S. sales managers fostered a take-no-prisoners culture with such gimmicks as pins saying "cut off the oxygen" and T-shirts showing an octopus strangling competitors. As long as the salespeople met their quotas, Ellison says, he didn't pay attention to their methods. Indeed, former employees recall his aloofness and an attitude of executive privilege, typified by the day he squealed into the Oracle parking lot with a police car, lights flashing, in hot pursuit. Caught speeding, Ellison refused even to open his window. Instead, he called the company lawyer on his car phone to come help.

Even people who greatly admire Ellison, though, question that he could have been totally ignorant of the sales force's missteps. Kenneth I. Cohen, a former Oracle marketing vice-president, says Ellison was "obsessively" hands-on, interviewing every new hire, writing every ad, and demanding numerous last-minute changes in products. "When things spun out of control, Larry was in it up to his teeth," says Cohen.

THE CHASM. Today, a whole new cast of executives--whom Ellison calls the "adults"--are in charge. He's the largest shareholder, with about 23% of the company's stock, and directs long-term strategy, but the company is run largely by Oracle USA President Raymond J. Lane, a former Booz Allen & Hamilton Inc. executive, and Vice-Chairman James Abrahamson, a former NASA executive who headed the Space Shuttle and Strategic Defense Initiative projects. They're restructuring the Oracle sales force and compensation plans, building a new consulting-services group, and improving relations with major customers. "It's a totally different company now," says Anthony Ziemba, president of Adirondak Information Resources, a computer consultancy in upstate New York. "Now, they ask us what we want and need."

Ellison says he has also changed the way he thinks and acts. He says the near-death experience of his company made him reflect. "Sitting there looking into the chasm is wonderful for your clarity of thought," he says. "I decided either I should get out, mr I should do my job." For Ellison, it was his best daredevil stunt.

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