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Speaker 1: Get in touch with technology with tech Stuff from how

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Speaker 1: stuff works dot com. Hey there, and welcome to tech Stuff.

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Speaker 1: I'm your host, Jonathan Strickland. I'm an executive producer with

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Speaker 1: how Stuff Works and I love all things tech. And

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Speaker 1: in the last episode we were talking about the Oracle story.

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Speaker 1: We're going to continue that with this episode. We will

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Speaker 1: not finish the Oracle story with this episode because the

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Speaker 1: company has been around for a while and it's there's

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Speaker 1: been a lot of things that have happened with Oracle,

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Speaker 1: both good and bad, and so we're going to really

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Speaker 1: dive into some of the more tumultuous years at Oracle.

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Speaker 1: The the period of the nineties were really really big

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Speaker 1: for Oracle's history, very important years, years where Oracle could

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Speaker 1: have gone away if things had turned out slightly differently.

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Speaker 1: And also just as a reminder that we're going to

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Speaker 1: published tech Stuff more frequently for a little while, at

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Speaker 1: least kind of doing an experiment, you guys are going

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Speaker 1: to get episodes on a much more frequent basis. They

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Speaker 1: might be a little shorter, but you're going to be

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Speaker 1: getting them a lot more frequently. So we're excited about this.

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Speaker 1: I can't wait to really experiment with it and see

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Speaker 1: how it works and to hear your guys feedback. Looking

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Speaker 1: forward to all that. But let's jump into Oracle story

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Speaker 1: Part two. Now. In that last episode, I mentioned that

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Speaker 1: Oracle had made a bit of a boo boo in

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Speaker 1: n which is an understatement. It was a problem that

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Speaker 1: had some people wondering if the company that had been

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Speaker 1: on a meteoric rise was going to be on the

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Speaker 1: verge of collapse. So what was going on? Well, it

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Speaker 1: turned out that the company had been regularly misreporting revenues

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Speaker 1: for the fiscal year that ended on May thirty one,

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Speaker 1: for at least three quarters, because the first quarter of

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Speaker 1: that year apparently there were no problems, but for at

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Speaker 1: least three quarters the company had made errors, which led

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Speaker 1: some people this aspect that people were purposefully misrepresenting their

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Speaker 1: earnings in an effort to drive up Oracle stock prices. Now,

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Speaker 1: that was a charge that executives at Oracle flatly denied.

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Speaker 1: They said this was not intentional. It was not at

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Speaker 1: all a case of us trying to inflate the stock price.

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Speaker 1: But what was going on was definitely a little hinky.

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Speaker 1: There were instances of the company recording orders as actual sales,

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Speaker 1: So imagine that you walk up you're a salesman and

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Speaker 1: or a salesperson, I should say you're a salesperson. You

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Speaker 1: walk up to a potential client, you have a discussion

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Speaker 1: with that client, and you have a handshake that says

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Speaker 1: the client's really gonna think about purchasing your product, and

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Speaker 1: you go back and you record that as an actual sale. Well,

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Speaker 1: that would be disingenuous because the client has not really

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Speaker 1: put any money forward, they haven't agreed to anything, so

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Speaker 1: for you to call that a sale to boost your

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Speaker 1: numbers would be unethical. Part of the allegation were that

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Speaker 1: that was what was going on with Oracle, although Oracle

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Speaker 1: said no, it wasn't intentional. It was that we had these, uh,

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Speaker 1: these promises to purchase our products that were being counted

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Speaker 1: as sales because it was all taken in good faith,

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Speaker 1: but no sale had yet taken place. And there were

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Speaker 1: other examples of clients apparently being double billed, such as

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Speaker 1: when a client would pay for an upgrade and Oracle

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Speaker 1: would issue a new invoice for support services without canceling

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Speaker 1: the old support services invoice from before the upgrade, So

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Speaker 1: essentially this client is being invoiced twice for support services.

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Speaker 1: Now they shouldn't have to do that, because while you

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Speaker 1: are upgrading and you have to pay for the upgrade,

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Speaker 1: the support services should remain pretty much steady. So you

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Speaker 1: would cancel the old invoice, use the new invoice to

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Speaker 1: indicate this is for the upgrade services. But you wouldn't

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Speaker 1: build the client twice. You wouldn't continue to give them

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Speaker 1: support for both the old version and the new version,

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Speaker 1: so that was an issue. There are also cases of

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Speaker 1: clients who had returned products to Oracle for a refund,

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Speaker 1: and the company just never canceled out the sale in

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Speaker 1: their own records, so while they were returning money to

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Speaker 1: the clients in their records, that sale was still existing

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Speaker 1: on a ledger somewhere as being legitimate instead of being

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Speaker 1: a return. So there were multiple instances of Oracle having

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Speaker 1: sales on the books that did not actually exist in

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Speaker 1: the real world, and so the numbers were not matching up.

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Speaker 1: The reported revenues and the actual profit were way out

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Speaker 1: of alignment. You would look at the sales and say, well,

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Speaker 1: according to this, we made you know, fifty million dollars

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Speaker 1: in sales, but when we look at the actual profits,

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Speaker 1: they're very, very low. So there's a huge disconnect here

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Speaker 1: because either our expenses went out of control or the

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Speaker 1: revenues that we've uh indicated in this sheet are not

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Speaker 1: really accurate. So some shareholders were noticing these problems as

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Speaker 1: early as March nine, and they began to file lawsuits

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Speaker 1: against Oracle, some of which became class action lawsuits. So

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Speaker 1: how could this have happened without it being purposeful? Well,

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Speaker 1: the sales environment at Oracle in the late eighties and

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Speaker 1: early nineties was incredibly aggressive, something that Larry Ellison, one

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Speaker 1: of the co founders of Oracle, had himself encouraged. Now

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Speaker 1: according to a book written by Karen Southwick, it's a

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Speaker 1: book titled Everyone Else Must Fail. The Unvarnished Truth about

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Speaker 1: Oracle and Larry Ellison, sales at Oracle depended upon representatives

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Speaker 1: making aggressive quotas, both to earn sweet commissions and to

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Speaker 1: avoid being at the bottom of a widely circulated list.

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Speaker 1: So those commissions were a big incentive driver. If you

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Speaker 1: hit your quota, you would get a certain percentage of

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Speaker 1: those sales on commission. If you went above your quota,

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Speaker 1: if you sold more than what your quota was asking for,

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Speaker 1: you got an even bigger commission. For all additional sales.

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Speaker 1: So if you made three million dollars in sales, you

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Speaker 1: would get a decent commission. And if you did another

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Speaker 1: million dollars of sales on top of that, on top

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Speaker 1: of your quota, you would make a bigger commission and

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Speaker 1: actually make more money off of that fourth million than

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Speaker 1: you did off the first three million combined. So there

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Speaker 1: was a real incentive to go out there and very

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Speaker 1: aggressively try to sell Oracles products. On top of that,

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Speaker 1: there was this list I was telling you about. Well,

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Speaker 1: the sales team was originally led by a guy named

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Speaker 1: Mike sea Scholls, who headed sales until nineteen six. That's

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Speaker 1: when Larry Ellison fired him to replace him with Gary Kennedy. Now,

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Speaker 1: Gary Kennedy had previously been a direct report to Mike

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Speaker 1: sea Schell, so he was uh under Mike sea Schell

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Speaker 1: in the hierarchy. But Kennedy was an incredible salesperson, like

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Speaker 1: he was just out selling Sea Schell quarter after quarters.

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Speaker 1: So eventually Ellis said, why do I have you working

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Speaker 1: under this other guy. You're clearly outperforming him. You should

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Speaker 1: have his job. So he fires Mike Siechel and then

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Speaker 1: promotes Gary Kennedy to Siechell's job. Now, Kennedy would create

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Speaker 1: a list every quarter and he would rank all the

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Speaker 1: salespeople in his department according to how well they met

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Speaker 1: their respective quotas. Being at the bottom of the list

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Speaker 1: was really not good, and if you showed up more

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Speaker 1: than a couple of times, you were likely on the

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Speaker 1: way out now. According to Anneka seal A, who was

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Speaker 1: the twelve person ever hired at Oracle, she was a

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Speaker 1: salesperson there, She said that people would tend to leave

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Speaker 1: on their own before they were asked to go or

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Speaker 1: they were fired, because if they showed up at the

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Speaker 1: bottom of the list a few times, their morale was

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Speaker 1: shot and they would essentially quietly quit and leave the company.

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Speaker 1: Kennedy's second in command was a guy named Craig Ramsey,

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Speaker 1: who later said he felt that this particular strat g

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Speaker 1: backfired on the company and that ranking people like that

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Speaker 1: in a way to try and reward top performers was

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Speaker 1: actually really just punishing the people at the bottom of

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Speaker 1: the list beyond measure. It was discouraging them, and it

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Speaker 1: was sabotaging their efforts to do better moving forward, because

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Speaker 1: you would freak out so much about being at the

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Speaker 1: bottom of the list. You would end up creating a

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Speaker 1: self fulfilling prophecy of failure, and you would end up

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Speaker 1: failing out of Oracle. Not necessarily getting fired, but you

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Speaker 1: would be so shaken by the experience because there's so

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Speaker 1: much pressure on you to perform, that you were more

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Speaker 1: likely to just leave the company. The point I want

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Speaker 1: to make here is that the sales environment at Oracle

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Speaker 1: was incredibly competitive and stressful, which may explain how so

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Speaker 1: many errors were happening. People were trying to hit those numbers,

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Speaker 1: and they were doing this the best they could. Like

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Speaker 1: they would get a promise to purchase products they would

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Speaker 1: put as a sale, so they were essentially robbing future

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Speaker 1: figures to feed into present day figures. So a sale

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Speaker 1: for tomorrow would get recorded today, Now that would mean

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Speaker 1: the next day, when tomorrow comes, you suddenly are down

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Speaker 1: one sale. Now now you're looking ahead of the next day.

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Speaker 1: So it was this constant game of trying to massage

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Speaker 1: your numbers by looking at all the prospects you had

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Speaker 1: moving forward and incorporating that into the present day. But

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Speaker 1: it was an unsustainable approach, and ultimately it started to

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Speaker 1: get people's attention and people begin to ask what exactly

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Speaker 1: is going on here. On August nine, Oracle disclosed that

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Speaker 1: it had miscalculated revenues for five quarters, with the most

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Speaker 1: recent quarter ending on May thirty one, nine nine, and

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Speaker 1: they had to restate their revenues to correct the matter,

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Speaker 1: which caused the company's stock value to drop quite a

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Speaker 1: bit in response. Uh the market lost a lot of

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Speaker 1: confidence in Oracle because restating your revenues something that you

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Speaker 1: had supposedly been disclosing quarter after quarter, and then saying,

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Speaker 1: you know what, turns out those numbers we gave you

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Speaker 1: last year aren't right. That's not great. A bit later

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Speaker 1: in nineteen ninety, Oracle announced that the first quarter of

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Speaker 1: nineteen ninety one, which technically ended on August thirty first,

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Speaker 1: nineteen ninety represented the company's first quarterly loss in revenue

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Speaker 1: in its history. Oracles fiscal years, by the way, start

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Speaker 1: in June and they end in May, and the company

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Speaker 1: refers to the fiscal years by the end of year,

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Speaker 1: not the start year. So fiscal year nineteen ninety one

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Speaker 1: for Oracle began in June nineteen ninety and ended in May.

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Speaker 1: The end of May, the company reported a net loss

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Speaker 1: of thirty six million dollars in that first quarter of

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Speaker 1: fiscal year nineteen ninety one. A year earlier, the company

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Speaker 1: had reported earning eleven point seven million, so they went

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Speaker 1: from a profit of eleven point seven to a loss

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Speaker 1: of thirty six million. And Oracle reported this loss despite

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Speaker 1: actually generating more revenue in the first quarter of nine

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Speaker 1: than it had the previous year. So in ninety one,

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Speaker 1: in that first quarter they made two hundred three point

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Speaker 1: eight million dollars in sales. That's not profit, that's in

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Speaker 1: just revenue. But in n they only made one seventy

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Speaker 1: five point five million. I say only that's a huge number.

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Speaker 1: But the point I'm making is that while Oracle had

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Speaker 1: sold more in the company was actually experiencing a net

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Speaker 1: loss in instead of a profit. So this was not

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Speaker 1: great news. Oracle also announced in nineteen ninety that it

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Speaker 1: was going to downsize by laying off about ten percent

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Speaker 1: of its domestic workforce, and at that time, Oracle had

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Speaker 1: four thousand employees in the United States. So here was

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Speaker 1: a company that was dealing with a quarterly loss, a

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Speaker 1: hit to stock prices, a ten percent layoff, and charges

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Speaker 1: that the company had at least been negligent and sloppy,

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Speaker 1: if not actually trying to mislead shareholders. So in other words,

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Speaker 1: it was not a good scene. One of the guys

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Speaker 1: who was laid off at that time was a fellow

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Speaker 1: named Gary Kennedy. That was the the head of sales himself.

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Speaker 1: That was the guy who had kind of encouraged that

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Speaker 1: whole UH environment of cutthroat salesmanship, and so he was

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Speaker 1: let go. He had been the tenth Oracle employee when

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Speaker 1: he started back in nineteen eighty two, but the accounting

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Speaker 1: disaster was one he could not bounce back from and

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Speaker 1: he got his walking papers in. Another person who was

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Speaker 1: important in the sales department was a guy named Tom Siebel,

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Speaker 1: who Gary Kennedy had recruited into Oracle in nineteen eighty four.

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Speaker 1: Siebel had a reputation for being an extremely effective salesman,

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Speaker 1: and he had reportedly approached Larry Ellison about creating a

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Speaker 1: sales automation product, but Ellison was not interested in hearing

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Speaker 1: about it, so unlike Kennedy, Siebel actually left on his

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Speaker 1: own accord. He quitted the company, and this was after

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Speaker 1: Ellison had turned down his idea for this this UH,

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Speaker 1: this sales automation tool and so he went on to

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Speaker 1: found a new company called c BL Systems, which ended

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Speaker 1: up going into direct competition with Oracle. This will become

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Speaker 1: a familiar theme. One of the most interesting things I

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Speaker 1: find about Oracle's history is that Larry Ellison has this

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Speaker 1: history of alienating some of his top executives. Whether it's

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Speaker 1: because they were not a good fit for Oracle, or

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Speaker 1: because of personality conflicts, or just because of who Ellison

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Speaker 1: is interesting to see how many of them left Oracle

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Speaker 1: company that would go into direct competition with Oracle. It's

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Speaker 1: almost as if saying Larry Ellison has upset me so

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Speaker 1: much that I need to try and take him down

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Speaker 1: a notch. That's probably be putting words into other people's mouths,

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Speaker 1: But that's the implication I get, because the story happens

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Speaker 1: over and over again. The following year was more of

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Speaker 1: the same, with more instances of bad accounting piling up.

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Speaker 1: In fact, Oracle would have to restate its earnings again

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Speaker 1: for the fiscal year ending May thirty first nineteen, So

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Speaker 1: for the year ending nineteen and the year ending nine

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Speaker 1: they had to restate their revenues. Two years in Aurow

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Speaker 1: not good. It was rumored that the board of directors

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Speaker 1: was even considering firing Larry Ellison. But the board was

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Speaker 1: pretty small. In fact, there are only four people sitting

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Speaker 1: on it at the beginning of all this mess. There

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Speaker 1: was Bob Minor, one of the co founders of Oracle.

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Speaker 1: There was Don Lucas, and there was Arnold Silverman, who

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Speaker 1: would leave the board during this time and would be

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Speaker 1: replaced by a guy named Joe Costello. Joe Costello was

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Speaker 1: brought in specifically as the outsider board member, the idea

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Speaker 1: that this was a guy who could stand up to

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Speaker 1: Larry Ellison because he didn't have any fear of the man.

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Speaker 1: He didn't have any uh he wasn't beholden to him

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Speaker 1: at all, and so Costello and Ellison would end up

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Speaker 1: facing off against each other quite a few times. Ellison

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Speaker 1: reportedly liked keeping the board small on purpose in order

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Speaker 1: to make it a little bit easier to control them.

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Speaker 1: Ellison was not austed, but one thing was clear. The

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Speaker 1: company had a distinct lack of internal controls and they

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Speaker 1: needed to fix that. They had to find a way

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Speaker 1: to catch and prevent these types of problems moving forward,

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Speaker 1: something had to be done, and I'll talk more about

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Speaker 1: what was done in just a minute, but first let's

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Speaker 1: take a moment to thank our sponsor. But one of

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Speaker 1: the things that was done in response to all of

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Speaker 1: this controversy was another high profile firing, and that would

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Speaker 1: be of Jeff Walker, who was the chief financial officer

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Speaker 1: for Oracle. He was shown the door. Now, he had

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Speaker 1: been with Oracle since nineteen eighty five, but he had

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Speaker 1: started out off as a software developer. He was not

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Speaker 1: a financial officer by trade. Uh And in fact, Larry

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Speaker 1: Ellison had apparently said on multiple occasions that you didn't

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Speaker 1: need to have experts in finances, you were a bean counter.

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Speaker 1: And so there were a lot of interesting reports about

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Speaker 1: why Larry Ellison was so hot on having Jeff Walker

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Speaker 1: as chief financial officer. A lot of the reports suggested

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Speaker 1: that Ellison wanted a person that was really easy to influence,

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Speaker 1: so that he could end up quote unquote controlling Walker

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Speaker 1: and not have someone who was more independently minded and

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Speaker 1: have firmer ideas of how the financials should be handled

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Speaker 1: for his company. Um, which says a lot I think,

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Speaker 1: but I don't know how true. Those accusations are they

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Speaker 1: could just be people who are bitter about Oracle in

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Speaker 1: general who are casting as versions. I don't know, but

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Speaker 1: the general story was that Ellison wanted Jeff Walker in

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Speaker 1: that position because it was someone else that he could influence.

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Speaker 1: Ellison would defend Walker to the rest of the board

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Speaker 1: while they were all debating on who should replace Walker

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Speaker 1: as CFO, so Ellison was saying, no, we shouldn't get

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Speaker 1: rid of him, we should keep him. Costello, however, was

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Speaker 1: on the opposite side of this argument. Remember Joe Costello

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Speaker 1: had been brought onto the board during the tail end

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Speaker 1: of all this mess, and he was saying, no, we've

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Speaker 1: got to get somebody who has a background in uh

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Speaker 1: in leading a financial department to become the chief financial officer.

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Speaker 1: That's the only responsible result, that's the only responsible response. Rather,

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Speaker 1: we could have to this. So he said, we're in

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Speaker 1: dire need of a financial expert in the role. We're

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Speaker 1: gonna look outside the company and find somebody. Ellison was

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Speaker 1: dismissive of this idea. He said, you don't have to

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Speaker 1: be an expert. It's just just numbers. It's easy. The

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Speaker 1: board persisted, and eventually Ellison would back off kind of.

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Speaker 1: After the fall out, there was a lot of blaming

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Speaker 1: going around at Oracle. Ellison largely blamed Gary Kennedy and

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Speaker 1: said his sales strategies were the reason for all the

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Speaker 1: accounting discrepancies. Kennedy and Siebel, who had both left Oracle

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Speaker 1: at that point, said that Ellison's attitude of anything goes

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Speaker 1: was ultimately to blame. That Ellison set the tone that

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Speaker 1: he said essentially everything is fair game until you get caught.

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Speaker 1: So if you're not caught, you can pretty much do

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Speaker 1: whatever you need to do to get the results you

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Speaker 1: want to get. That's what they say. Larry Ellison's philosophy

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Speaker 1: was One move the company made to try and right

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Speaker 1: the wrongs was to make a new hire to replace Walker,

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Speaker 1: and Oracle would eventually reach out to Jeff Henley. Henley

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Speaker 1: had served as the chief financial officer of the Pacific

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Speaker 1: Holding Company. That was a holding company that had a

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Speaker 1: life insurance company underneath it, as well as investment strategy company,

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Speaker 1: brokerage firms, that kind of thing, and according to Costello,

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Speaker 1: Ellison initially try to cut the offer the board was

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Speaker 1: going to extend to Henley. Ellison's like, no, this guy

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Speaker 1: doesn't need that much cut it in half. But the

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Speaker 1: rest of the board stood up to Ellison. They said, no,

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Speaker 1: he really does need this this package in order to

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Speaker 1: bring him on board to Oracle. We're never going to

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Speaker 1: hire him away otherwise. And it became kind of a

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Speaker 1: battle between Ellison and the rest of the board. Now,

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Speaker 1: Ellison was a majority, well at least not a majority shareholder,

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Speaker 1: but a major shareholder in Oracle. He had a huge

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Speaker 1: amount of cloud because he owned so much of the company.

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Speaker 1: But Costello would not back down, and he kept telling Ellison, no,

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Speaker 1: we've got to absolutely extend this package. And eventually, uh,

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Speaker 1: Ellison would back down because Costello said, listen, if you

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Speaker 1: don't agree to this, the rest of the board is

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Speaker 1: going to have a discussion about whether or not you're

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Speaker 1: actually fit to lead this company, and you could find

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Speaker 1: yourself out of a job. And at that point Ellison

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Speaker 1: back down and agreed to offer the employment package to Henley,

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Speaker 1: which was pretty attractive. It included half a million shares

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Speaker 1: in the company just to start off with. Now, Henley

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Speaker 1: began to whip the company into shape right away from

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Speaker 1: a financial responsibility standpoint. He cleaned up the company's practices,

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Speaker 1: He established controls to prevent another disaster like the two

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Speaker 1: previous fiscal years had been. He also had to figure

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Speaker 1: out how to get an inflow of cash into Oracle

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Speaker 1: to keep the business running because they had a hundred

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Speaker 1: seventy million dollars in outstanding loans and they needed collateral. Well, first,

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Speaker 1: they began to put up its receivables as collateral, but

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Speaker 1: the problem was the receivables weren't entirely reliable as the

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Speaker 1: previous two years had shown, so they needed to find

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Speaker 1: some other means of doing this because again Oracle had

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Speaker 1: been selling future products for present day cash, which is

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Speaker 1: really just robbing the future to pay the present. So

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Speaker 1: ultimately Oracle was able to get some money from Nipon

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Speaker 1: Steel that's a Japanese steel company that was really interested

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Speaker 1: in making a huge investment in Oracle in return for

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Speaker 1: a essentially a majority share in Oracle Japan that was

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Speaker 1: going to be the the branch that Oracle was opening

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Speaker 1: in Japan. Uh Ellison initially said no to the deal

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Speaker 1: because it was for a a large personage like more

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Speaker 1: than of of Oracle Japan, and Ellison did not want

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Speaker 1: that to become an issue. And so while the company

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Speaker 1: needed the money. He said, no, I'm not comfortable doing this.

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Speaker 1: So they then renegotiated a plan and came back with

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Speaker 1: an eighty million dollar loan to Oracle and steak in

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Speaker 1: Oracle Japan on behalf of Nipon Steel, and that was

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Speaker 1: the agreement they actually were able to come to terms

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Speaker 1: on and UH. That meant that Oracle could stay in business.

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Speaker 1: And in fact, people have since said this was a

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Speaker 1: really wise decision on Ellison's part because he was able

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Speaker 1: to maintain control of this company and not hand it

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Speaker 1: over UH. And it must have been really hard to

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Speaker 1: do because Oracle was so desperately in need of cash,

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Speaker 1: but he did not want to invite disaster. Henley would

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Speaker 1: serve as the CFO for Oracle until two thousand four

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Speaker 1: when he would become the chairman for the company, and

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Speaker 1: he remained in that role until two thousand fourteen. So

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Speaker 1: I'll talk more about what happened in two thousand and

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Speaker 1: fourteen in the next episode. Again, it gets pretty crazy,

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Speaker 1: but then all the executive moves in Oracle get pretty crazy.

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Speaker 1: Oracle reached out to Raymond J. Lane, who had started

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Speaker 1: his career as a salesman for IBM in the nineteen sixties.

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Speaker 1: He had also worked under future presidential hopeful Ross Perot

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Speaker 1: at Electronic Data Systems and then for the consulting firm Booze.

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Speaker 1: Allen Hamilton's Oracle brought him on to head the sales

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Speaker 1: and marketing efforts at Oracle, and in June he would

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Speaker 1: be named the president of Oracle USA, so the domestic

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Speaker 1: branch of the company. Four years later he would become

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Speaker 1: president and CEO of the whole Dann company. And he

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Speaker 1: gets a lot of credit for helping turn Oracles sales

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Speaker 1: efforts around in the nineteen nineties, and he would serve

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Speaker 1: as president of the company until the year two thousand,

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Speaker 1: when he would announce his resignation suddenly. And more on

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Speaker 1: that in a bit, because it gets real juicy. At

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Speaker 1: this time, Oracle's international business was actually doing pretty well,

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Speaker 1: so while things at home were a little rough, internationally

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Speaker 1: it was a different story and that helped balance out

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Speaker 1: the problems that the company was facing in the United States,

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Speaker 1: and work continued on the latest version of Oracle database software.

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Speaker 1: Some analysts had pointed out that Oracle was starting to

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Speaker 1: fall behind on its promised release schedule. It's also good

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Speaker 1: to point out that By the time Gary Kennedy left

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Speaker 1: the company in n Oracle was selling about a billion

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Speaker 1: dollars worth of products sales. But with the addition of

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Speaker 1: Henley and Lane to Oracle's executive leadership team and with Ellison,

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Speaker 1: they essentially became the leaders of Oracle, the stage was

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Speaker 1: set for that number to increase tenfold. Bob Minor, one

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Speaker 1: of the co founders of the company, left his role

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Speaker 1: as head of product and development at Oracle to become

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Speaker 1: the leader of a spinoff unit focusing on advanced technologies.

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Speaker 1: He did this in nineteen two, but the following year

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Speaker 1: he sadly passed away due to lung cancer caused by

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Speaker 1: exposure to asbestos. He was fifty two years old and

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Speaker 1: the uh the one co founder to have passed away.

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Speaker 1: In nineteen three, the company tried to put its accounting

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Speaker 1: fiasco behind it by settling shareholder class action lawsuits and

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Speaker 1: paying a fine that was the result of a complaint

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Speaker 1: from the Security and Exchange Commission, or SEC. The The

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Speaker 1: class action lawsuits cost Oracle about twenty four million dollars

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Speaker 1: to settle, and the SEC fine was more like a

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Speaker 1: hundred thousand dollars. Henley himself said that that signaled the

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Speaker 1: beginning of a new era with financial controls and a

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Speaker 1: more responsible sales strategy, and Oracle began to recover from

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Speaker 1: its previously precarious position, which is some great alliteration right there,

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Speaker 1: Analysts agreed. Timothy McCullum, who worked for the company Dean Witter,

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Speaker 1: which is a stock brokerage in securities firm, told The

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Speaker 1: New York Times that Oracle had brought itself back from

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Speaker 1: the precipice and was in a good position to grow again.

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Speaker 1: And that's exactly what the company did. They made a

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Speaker 1: merger move to streamlined business. This was kind of a

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Speaker 1: merger in name. There was a holding company called Oracle

433
00:25:41,520 --> 00:25:45,119
Speaker 1: Systems Corporation, and then there was the actual operating company

434
00:25:45,160 --> 00:25:47,600
Speaker 1: that was called Oracle Corporation. So you kind of had

435
00:25:47,720 --> 00:25:50,040
Speaker 1: a holding company that was sort of a parent that

436
00:25:50,080 --> 00:25:53,080
Speaker 1: didn't really do anything. It just was there for financial purposes,

437
00:25:53,600 --> 00:25:55,240
Speaker 1: and then you had the operating company, this was the

438
00:25:55,240 --> 00:25:58,399
Speaker 1: actual company that did stuff. The merger was a corporate

439
00:25:58,440 --> 00:26:02,440
Speaker 1: move to kind of reincorporate the entire entity, to make

440
00:26:02,480 --> 00:26:06,440
Speaker 1: it one corporation again and reincorporate it in the state

441
00:26:06,520 --> 00:26:09,960
Speaker 1: of Delaware. And I've I've talked about in previous episodes

442
00:26:10,359 --> 00:26:13,600
Speaker 1: why Companies incorporated in Delaware. It's kind of interesting you

443
00:26:13,640 --> 00:26:17,760
Speaker 1: should look into that Oracle depended upon version seven of

444
00:26:17,800 --> 00:26:21,360
Speaker 1: its software for a few years. The company had introduced

445
00:26:21,359 --> 00:26:25,159
Speaker 1: Oracle Version seven in the summer of nineteen two, and

446
00:26:25,200 --> 00:26:28,479
Speaker 1: the following years saw Oracle update this version several times,

447
00:26:28,800 --> 00:26:32,560
Speaker 1: with seven point three shipping in nineteen nineties six. The

448
00:26:32,640 --> 00:26:36,200
Speaker 1: new features got pretty futuristic for the mid nineteen nineties,

449
00:26:36,240 --> 00:26:40,320
Speaker 1: including support for biometric authentication and support for video and

450
00:26:40,359 --> 00:26:43,320
Speaker 1: audio data management. Now I've got a lot more to

451
00:26:43,400 --> 00:26:46,480
Speaker 1: say about what happened in the mid nineteen nineties to

452
00:26:46,600 --> 00:26:48,679
Speaker 1: late nineteen nineties at Oracle, but before I do that,

453
00:26:48,800 --> 00:27:00,600
Speaker 1: let's take another quick break to thank our sponsor. In ninete, E. Garnett,

454
00:27:00,640 --> 00:27:03,199
Speaker 1: who was a marketing executive at Oracle, had a falling

455
00:27:03,200 --> 00:27:06,680
Speaker 1: out with Ellison. It seems like a common theme throughout

456
00:27:06,680 --> 00:27:09,439
Speaker 1: the history of Oracle. The two had made plans to

457
00:27:09,560 --> 00:27:13,000
Speaker 1: create an interactive TV venture, but then, according to Garnett,

458
00:27:13,280 --> 00:27:17,080
Speaker 1: Ellison called him into his office, canceled the project, and

459
00:27:17,119 --> 00:27:20,479
Speaker 1: then fired Garnett. So Garnett went out and founded a

460
00:27:20,600 --> 00:27:24,200
Speaker 1: venture capitalist investment company, and then he became the acting

461
00:27:24,280 --> 00:27:29,199
Speaker 1: CEO of a small database company called Ingress or Inger's

462
00:27:29,280 --> 00:27:32,160
Speaker 1: if you prefer I, N G R E S only

463
00:27:32,200 --> 00:27:35,800
Speaker 1: one S. So Garnett ended up hiring several former Oracle

464
00:27:35,880 --> 00:27:39,280
Speaker 1: executives and developers for this company. So it seems like

465
00:27:39,320 --> 00:27:43,960
Speaker 1: Ellison was continuing his pattern of alienating people to the

466
00:27:44,000 --> 00:27:46,600
Speaker 1: point where they would go and join other companies to

467
00:27:46,640 --> 00:27:49,240
Speaker 1: compete against Oracle, at least that's what it looks like

468
00:27:49,320 --> 00:27:54,280
Speaker 1: on casual plans. In n Ellison made another trademarked flamboyant

469
00:27:54,280 --> 00:27:58,880
Speaker 1: prediction at a technology conference in Paris when he proclaimed

470
00:27:59,080 --> 00:28:04,000
Speaker 1: that the Internet would make Microsoft irrelevant and kill the company. Now,

471
00:28:04,040 --> 00:28:07,679
Speaker 1: to be fair, Microsoft has definitely had to pivot with

472
00:28:07,760 --> 00:28:11,399
Speaker 1: its software offerings because we have seen a slow migration

473
00:28:11,440 --> 00:28:15,280
Speaker 1: away from native software, but the company still is in

474
00:28:15,640 --> 00:28:20,480
Speaker 1: decent shape. In Ed Oates, co founder of Oracle, would

475
00:28:20,480 --> 00:28:23,760
Speaker 1: retire from the company. He had originally told Ellison that

476
00:28:23,800 --> 00:28:25,920
Speaker 1: he had planned to quit if the company ever grew

477
00:28:25,960 --> 00:28:28,560
Speaker 1: to ten thousand employees, but he actually stuck around a

478
00:28:28,560 --> 00:28:31,159
Speaker 1: bit longer. He resigned once the company had grown to

479
00:28:31,200 --> 00:28:34,679
Speaker 1: about twenty thousand employees. He went on to buy a

480
00:28:34,760 --> 00:28:39,560
Speaker 1: business that provided home theater equipment and installation for wealthy clients.

481
00:28:40,000 --> 00:28:43,960
Speaker 1: Some of those folks included Larry Ellison and Steve Jobs. Later,

482
00:28:44,000 --> 00:28:46,080
Speaker 1: he became a board member of a couple of different

483
00:28:46,120 --> 00:28:49,920
Speaker 1: companies and organizations, and also a guitarist in a band

484
00:28:50,000 --> 00:28:56,600
Speaker 1: called Chocked In n Oracle eight database premiered at this time,

485
00:28:56,680 --> 00:28:59,520
Speaker 1: Larry Ellison felt like the next big move in computers

486
00:29:00,040 --> 00:29:03,160
Speaker 1: is a trend toward a network computer model. Now, if

487
00:29:03,160 --> 00:29:05,920
Speaker 1: you listen to my episodes on cloud computing, you might

488
00:29:05,960 --> 00:29:08,840
Speaker 1: remember I talked a bit about mainframe computers and how

489
00:29:08,880 --> 00:29:11,920
Speaker 1: you would access those computers through a dumb computer terminal.

490
00:29:12,200 --> 00:29:14,840
Speaker 1: Now that's not a comment on a terminal's usefulness, but

491
00:29:15,000 --> 00:29:17,520
Speaker 1: rather the fact that the terminal itself didn't have any

492
00:29:17,560 --> 00:29:21,320
Speaker 1: computing power. It was just an interface to access the

493
00:29:21,360 --> 00:29:25,560
Speaker 1: main frame. Ellison felt that the future of computing could

494
00:29:25,640 --> 00:29:28,720
Speaker 1: be related to that past version. So I'll explain more

495
00:29:28,720 --> 00:29:32,080
Speaker 1: in just a second. A network computer is sort of

496
00:29:32,120 --> 00:29:35,760
Speaker 1: like those dumb terminals for mainframes. You have a computer

497
00:29:36,080 --> 00:29:38,760
Speaker 1: that can connect to a server over a network connection

498
00:29:38,880 --> 00:29:41,880
Speaker 1: such as the Internet. The server does all the actual work,

499
00:29:42,000 --> 00:29:44,680
Speaker 1: so all the programs, all the storage, all of that.

500
00:29:45,160 --> 00:29:48,680
Speaker 1: It lives on the server, the network computer just becomes

501
00:29:48,720 --> 00:29:52,720
Speaker 1: your way of accessing it. Again, is a lightweight interface

502
00:29:52,960 --> 00:29:57,080
Speaker 1: to get access to that software and that information. Ellison

503
00:29:57,160 --> 00:30:00,400
Speaker 1: was sure that was the future of computing, which would

504
00:30:00,440 --> 00:30:03,360
Speaker 1: also mean people would move away from using microcomputers that

505
00:30:03,400 --> 00:30:06,800
Speaker 1: relied on native software on their machines, which would mean

506
00:30:07,080 --> 00:30:10,320
Speaker 1: Oracle could become the largest software company in the world,

507
00:30:10,680 --> 00:30:15,400
Speaker 1: finally toppling its arch rival that would be Microsoft. But

508
00:30:15,440 --> 00:30:18,040
Speaker 1: while you could argue Ellison was on the right track,

509
00:30:18,320 --> 00:30:21,680
Speaker 1: his predictions were a bit premature. Software sales did not

510
00:30:21,840 --> 00:30:26,120
Speaker 1: slow down, Oracle did not become the dominant player in

511
00:30:26,160 --> 00:30:29,800
Speaker 1: the software space, and cloud computing applications would remain a

512
00:30:29,800 --> 00:30:33,680
Speaker 1: few years off before they became a viable industry. Even so,

513
00:30:34,040 --> 00:30:37,040
Speaker 1: Ellison was onto something. He was just way ahead of

514
00:30:37,040 --> 00:30:41,479
Speaker 1: his time on this one. In Oracle updated its product

515
00:30:41,520 --> 00:30:46,240
Speaker 1: to Oracle eight I lowercase I, which had support for

516
00:30:46,360 --> 00:30:50,920
Speaker 1: Java and HTTP technologies, meaning it was Web compatible. That

517
00:30:51,080 --> 00:30:54,240
Speaker 1: same year, Evan Goldberg, who had previously been an employee

518
00:30:54,240 --> 00:30:57,880
Speaker 1: at Oracle, contacted Larry Ellison about a web enabled customer

519
00:30:57,920 --> 00:31:01,520
Speaker 1: relationship management product. Ellis and urged Goldberg to work on

520
00:31:01,560 --> 00:31:05,240
Speaker 1: accounting software first, making it a web accessible product people

521
00:31:05,240 --> 00:31:08,600
Speaker 1: would subscribe to rather than purchase outright, and so Goldberg

522
00:31:08,640 --> 00:31:12,000
Speaker 1: did that and he launched net Ledger, which later became

523
00:31:12,080 --> 00:31:15,480
Speaker 1: net sweet. I mentioned that in that previous episode about

524
00:31:15,520 --> 00:31:18,239
Speaker 1: net suite, so this is when that happened. Also, just

525
00:31:18,280 --> 00:31:21,280
Speaker 1: a little bit later, Mark Bennieoff, who had been working

526
00:31:21,280 --> 00:31:23,720
Speaker 1: for Oracle for a few years, would leave the company

527
00:31:23,800 --> 00:31:27,280
Speaker 1: to found Salesforce dot Com, which also got some help

528
00:31:27,640 --> 00:31:30,479
Speaker 1: both in the form of advice and financial support from

529
00:31:30,680 --> 00:31:33,960
Speaker 1: Larry Ellison and Salesforce and net Suite would go on

530
00:31:34,360 --> 00:31:37,400
Speaker 1: into the software as a service game, an area that

531
00:31:37,440 --> 00:31:40,680
Speaker 1: Ellison really wanted to break into as well. Something else

532
00:31:40,680 --> 00:31:43,920
Speaker 1: that was happening around this time was a near death experience.

533
00:31:44,240 --> 00:31:47,120
Speaker 1: Larry Ellison was participating in a yacht race off the

534
00:31:47,120 --> 00:31:50,880
Speaker 1: coast of Australia and during the race they encountered a storm,

535
00:31:51,000 --> 00:31:56,040
Speaker 1: which was not unusual for the area around Tasmania that

536
00:31:56,080 --> 00:31:58,440
Speaker 1: they were in at the time, but the storm actually

537
00:31:58,480 --> 00:32:02,320
Speaker 1: developed into a full blown hurricane. Out of the fifteen

538
00:32:02,400 --> 00:32:04,760
Speaker 1: yachts that were in the race, only forty four were

539
00:32:04,800 --> 00:32:09,360
Speaker 1: able to complete the course, and six sailors from various yachts,

540
00:32:09,520 --> 00:32:13,200
Speaker 1: none of them Ellison's lost their lives in the storm

541
00:32:13,240 --> 00:32:16,600
Speaker 1: they drowned. Ellison himself had to hand over control of

542
00:32:16,640 --> 00:32:19,760
Speaker 1: his yacht to one of the more experienced sailors on

543
00:32:19,880 --> 00:32:22,520
Speaker 1: the member on his his crew team, and he said

544
00:32:22,560 --> 00:32:25,400
Speaker 1: that the whole experience gave him a new appreciation for life,

545
00:32:25,680 --> 00:32:28,000
Speaker 1: and it also seemed to inspire him to take a

546
00:32:28,040 --> 00:32:31,440
Speaker 1: more direct control of Oracle, which of course led to

547
00:32:31,520 --> 00:32:36,640
Speaker 1: some more conflict. In two thousand, ray Lane would resign

548
00:32:36,880 --> 00:32:40,400
Speaker 1: as president. So remember Lane was the guy who was

549
00:32:40,440 --> 00:32:43,080
Speaker 1: brought in to shape up the sales and marketing efforts

550
00:32:43,080 --> 00:32:46,880
Speaker 1: of Oracle, and Henley had joined a little bit earlier

551
00:32:46,920 --> 00:32:50,120
Speaker 1: to work and fix the financial controls of the company. Lane,

552
00:32:50,160 --> 00:32:53,640
Speaker 1: Henley and Ellison were the trio who made the instrumental

553
00:32:53,680 --> 00:32:58,479
Speaker 1: decisions regarding Oracle's direction. So what the heck caused Raymond

554
00:32:58,560 --> 00:33:01,280
Speaker 1: Lane to resign? Well, if first there was no comment

555
00:33:01,320 --> 00:33:04,920
Speaker 1: from Lane. Ellison's public statement was that the resignation was

556
00:33:05,000 --> 00:33:08,240
Speaker 1: part of a planned transition, But later he would kind

557
00:33:08,240 --> 00:33:11,600
Speaker 1: of qualify that statement. He said, well, by planned, I

558
00:33:11,640 --> 00:33:14,760
Speaker 1: mean I had planned to call Lane while Lane was

559
00:33:14,800 --> 00:33:17,800
Speaker 1: on vacation with his family and planned to announce the

560
00:33:17,840 --> 00:33:21,720
Speaker 1: resignation for the following Wednesday, which does not really seem

561
00:33:21,760 --> 00:33:24,680
Speaker 1: like much of a transition plan to me, but there

562
00:33:24,720 --> 00:33:27,560
Speaker 1: you go. Lane later had a lot more to say

563
00:33:27,680 --> 00:33:33,120
Speaker 1: about his resignation. Now, according to him, Ellison had been

564
00:33:33,160 --> 00:33:39,120
Speaker 1: steadily removing responsibilities from the role of president, and ultimately

565
00:33:39,760 --> 00:33:43,239
Speaker 1: Ellison wanted to take the title of president away from

566
00:33:43,360 --> 00:33:47,200
Speaker 1: Lane and fold the title in with CEO. Now, that

567
00:33:47,200 --> 00:33:49,800
Speaker 1: would leave Lane without a real role at the company,

568
00:33:49,880 --> 00:33:52,440
Speaker 1: and it would effectively strip him of all his power.

569
00:33:52,840 --> 00:33:55,240
Speaker 1: So when Lane asked Ellison, why do you want to

570
00:33:55,280 --> 00:33:58,760
Speaker 1: do this, Ellison said that he felt having a president

571
00:33:58,840 --> 00:34:02,160
Speaker 1: and a CEO meant that there were two people with authority,

572
00:34:02,440 --> 00:34:04,840
Speaker 1: and that would cause confusion about who is in charge.

573
00:34:05,840 --> 00:34:10,160
Speaker 1: This particular explanation I find absolutely hilarious considering what happens

574
00:34:10,239 --> 00:34:12,600
Speaker 1: later in oracles history, but I don't want to jump

575
00:34:12,640 --> 00:34:17,160
Speaker 1: ahead of myself. Many executives would say that Ellison found

576
00:34:17,200 --> 00:34:21,239
Speaker 1: the notion of anyone having remotely the same amount of

577
00:34:21,280 --> 00:34:25,080
Speaker 1: influence that he had over an oracle to be untenable,

578
00:34:25,360 --> 00:34:30,040
Speaker 1: and that that was the reason Ellison eventually uh confronted

579
00:34:30,160 --> 00:34:32,879
Speaker 1: Lane over the phone. He didn't confront face to face.

580
00:34:32,880 --> 00:34:36,520
Speaker 1: He called him while Lane was on vacation, so Lane

581
00:34:36,520 --> 00:34:38,799
Speaker 1: decided that he would resign rather than go through the

582
00:34:38,840 --> 00:34:42,080
Speaker 1: process of having all of his responsibilities stripped away from

583
00:34:42,160 --> 00:34:44,600
Speaker 1: him and the title taken away from him. He was

584
00:34:44,719 --> 00:34:47,000
Speaker 1: just two and a half weeks away from having several

585
00:34:47,120 --> 00:34:50,520
Speaker 1: millions of dollars worth of shares in the company vest,

586
00:34:51,440 --> 00:34:54,320
Speaker 1: and that was kind of a slap in the face.

587
00:34:54,680 --> 00:34:58,399
Speaker 1: It was enough for him to potentially consider going into

588
00:34:58,440 --> 00:35:01,719
Speaker 1: litigation against Oracle. In fact, a lot of executives have

589
00:35:01,920 --> 00:35:06,760
Speaker 1: sued Oracle after being fired, with the suspicion that the reason,

590
00:35:06,920 --> 00:35:09,239
Speaker 1: or at least the timing of their firing was to

591
00:35:09,239 --> 00:35:13,120
Speaker 1: prevent them having more shares in the company vest at

592
00:35:13,120 --> 00:35:17,880
Speaker 1: a certain point. But Lane did not go after a lawsuit.

593
00:35:18,480 --> 00:35:22,200
Speaker 1: He did eventually get those shares, However, he didn't return

594
00:35:22,239 --> 00:35:25,640
Speaker 1: to Oracle's offices either. A secretary instead would forward all

595
00:35:25,760 --> 00:35:28,439
Speaker 1: his belongings to his home, so he was pretty much

596
00:35:28,520 --> 00:35:31,160
Speaker 1: just done with Oracle at that point. Now, a few

597
00:35:31,160 --> 00:35:35,840
Speaker 1: months after Lane's departure, another executive named Gary Bloom handed

598
00:35:35,840 --> 00:35:39,720
Speaker 1: in his resignation. Bloom had been an executive vice president

599
00:35:39,760 --> 00:35:43,080
Speaker 1: of database Development Activities and he had really hoped to

600
00:35:43,120 --> 00:35:46,320
Speaker 1: get the role of president and maybe even eventually CEO.

601
00:35:46,520 --> 00:35:50,320
Speaker 1: He had aspirations of leading Oracle, but Bloom was starting

602
00:35:50,320 --> 00:35:52,440
Speaker 1: to find that it was difficult to get any face

603
00:35:52,520 --> 00:35:56,200
Speaker 1: time with Ellison, who was relying more heavily upon an

604
00:35:56,239 --> 00:36:01,640
Speaker 1: executive that he had hired recently named Software Cats. Software

605
00:36:01,640 --> 00:36:04,000
Speaker 1: Cats had joined Oracle in the late nineties, and she

606
00:36:04,160 --> 00:36:07,600
Speaker 1: was well on her way to becoming a huge influence

607
00:36:07,719 --> 00:36:11,400
Speaker 1: in that company. Ellison would frequently communicate to others in

608
00:36:11,480 --> 00:36:15,320
Speaker 1: Oracle through Cats. He would tell Software Cats what he thought,

609
00:36:15,560 --> 00:36:18,600
Speaker 1: and then she would go on and talk to the

610
00:36:18,680 --> 00:36:23,160
Speaker 1: various people who were uh involved with whatever it was

611
00:36:23,200 --> 00:36:27,080
Speaker 1: Ellison wanted to talk about. Bloom was really frustrated they

612
00:36:27,200 --> 00:36:29,880
Speaker 1: wasn't getting anywhere, and he was suspicious that he was

613
00:36:29,920 --> 00:36:32,200
Speaker 1: never going to get to the top leadership position at

614
00:36:32,200 --> 00:36:35,080
Speaker 1: the company, so he ended up leaving Oracle to become

615
00:36:35,080 --> 00:36:39,279
Speaker 1: the head of another company called Veritas Now. That same year,

616
00:36:39,680 --> 00:36:43,160
Speaker 1: there was a few other shake ups for Oracle. The

617
00:36:43,200 --> 00:36:47,400
Speaker 1: company released an integrated application suite called eleven I, but

618
00:36:47,440 --> 00:36:50,760
Speaker 1: it was really buggy, so that made customers pretty upset,

619
00:36:51,200 --> 00:36:54,000
Speaker 1: and the stock share price fell fourteen percent in the

620
00:36:54,000 --> 00:36:57,840
Speaker 1: wake of ray Lane's departure. But Oracle story does not

621
00:36:58,200 --> 00:37:01,040
Speaker 1: end there. There's a bit more to tell and I

622
00:37:01,080 --> 00:37:03,400
Speaker 1: will go into it when we get to the Oracle

623
00:37:03,520 --> 00:37:06,560
Speaker 1: story part three. In the meantime, if you guys have

624
00:37:06,640 --> 00:37:10,040
Speaker 1: suggestions for future episodes of tech Stuff, please let me

625
00:37:10,120 --> 00:37:12,279
Speaker 1: know what you would like me to cover, whether it's

626
00:37:12,320 --> 00:37:15,120
Speaker 1: a technology, a person. Maybe there's someone you would like

627
00:37:15,160 --> 00:37:17,320
Speaker 1: me to interview or have on as a guest host.

628
00:37:17,760 --> 00:37:20,120
Speaker 1: Write me the email address for the show is tech

629
00:37:20,200 --> 00:37:23,200
Speaker 1: Stuff at how stuff works dot com, or drop me

630
00:37:23,200 --> 00:37:25,319
Speaker 1: a line on Facebook or Twitter to handle at both

631
00:37:25,360 --> 00:37:29,080
Speaker 1: of those is tech Stuff hs W. Follow us on Instagram,

632
00:37:29,239 --> 00:37:32,880
Speaker 1: and remember we broadcast these recording sessions live on Wednesdays

633
00:37:32,920 --> 00:37:36,920
Speaker 1: and Fridays. Just go to twitch dot tv slash tech Stuff.

634
00:37:36,960 --> 00:37:39,719
Speaker 1: You'll see the schedule there. Join in. There's a chat room.

635
00:37:39,760 --> 00:37:41,640
Speaker 1: You can have a lot of fun with everybody else,

636
00:37:42,000 --> 00:37:44,040
Speaker 1: and I'm happy to chat with you whenever I'm taking

637
00:37:44,080 --> 00:37:47,480
Speaker 1: a little break, and I'll talk to you again. Really

638
00:37:47,560 --> 00:37:55,040
Speaker 1: sion for more on this and thousands of other topics.

639
00:37:55,120 --> 00:38:02,040
Speaker 1: Because it how stuff works dot com. Who wo