WEBVTT - The Story of Oracle: Part Two 0:00:04.120 --> 0:00:07.160 Get in touch with technology with tech Stuff from how 0:00:07.200 --> 0:00:13.600 stuff works dot com. Hey there, and welcome to tech Stuff. 0:00:13.640 --> 0:00:16.840 I'm your host, Jonathan Strickland. I'm an executive producer with 0:00:16.880 --> 0:00:19.279 how Stuff Works and I love all things tech. And 0:00:19.400 --> 0:00:23.440 in the last episode we were talking about the Oracle story. 0:00:23.480 --> 0:00:27.000 We're going to continue that with this episode. We will 0:00:27.040 --> 0:00:30.600 not finish the Oracle story with this episode because the 0:00:30.640 --> 0:00:33.280 company has been around for a while and it's there's 0:00:33.320 --> 0:00:35.559 been a lot of things that have happened with Oracle, 0:00:35.720 --> 0:00:38.040 both good and bad, and so we're going to really 0:00:38.600 --> 0:00:42.000 dive into some of the more tumultuous years at Oracle. 0:00:42.080 --> 0:00:47.320 The the period of the nineties were really really big 0:00:47.920 --> 0:00:52.080 for Oracle's history, very important years, years where Oracle could 0:00:52.080 --> 0:00:55.120 have gone away if things had turned out slightly differently. 0:00:55.680 --> 0:00:59.120 And also just as a reminder that we're going to 0:01:00.000 --> 0:01:02.960 published tech Stuff more frequently for a little while, at 0:01:03.000 --> 0:01:05.720 least kind of doing an experiment, you guys are going 0:01:05.760 --> 0:01:09.039 to get episodes on a much more frequent basis. They 0:01:09.120 --> 0:01:10.880 might be a little shorter, but you're going to be 0:01:10.920 --> 0:01:14.679 getting them a lot more frequently. So we're excited about this. 0:01:14.880 --> 0:01:17.520 I can't wait to really experiment with it and see 0:01:17.520 --> 0:01:20.560 how it works and to hear your guys feedback. Looking 0:01:20.560 --> 0:01:23.080 forward to all that. But let's jump into Oracle story 0:01:23.280 --> 0:01:26.200 Part two. Now. In that last episode, I mentioned that 0:01:26.240 --> 0:01:28.200 Oracle had made a bit of a boo boo in 0:01:28.319 --> 0:01:32.000 n which is an understatement. It was a problem that 0:01:32.080 --> 0:01:34.600 had some people wondering if the company that had been 0:01:34.600 --> 0:01:37.200 on a meteoric rise was going to be on the 0:01:37.280 --> 0:01:40.800 verge of collapse. So what was going on? Well, it 0:01:40.840 --> 0:01:45.080 turned out that the company had been regularly misreporting revenues 0:01:45.360 --> 0:01:48.320 for the fiscal year that ended on May thirty one, 0:01:50.200 --> 0:01:53.760 for at least three quarters, because the first quarter of 0:01:53.760 --> 0:01:56.200 that year apparently there were no problems, but for at 0:01:56.280 --> 0:01:59.240 least three quarters the company had made errors, which led 0:01:59.320 --> 0:02:03.480 some people this aspect that people were purposefully misrepresenting their 0:02:03.520 --> 0:02:07.800 earnings in an effort to drive up Oracle stock prices. Now, 0:02:07.840 --> 0:02:11.320 that was a charge that executives at Oracle flatly denied. 0:02:11.360 --> 0:02:14.919 They said this was not intentional. It was not at 0:02:14.960 --> 0:02:18.600 all a case of us trying to inflate the stock price. 0:02:18.960 --> 0:02:22.160 But what was going on was definitely a little hinky. 0:02:22.240 --> 0:02:26.600 There were instances of the company recording orders as actual sales, 0:02:26.919 --> 0:02:29.960 So imagine that you walk up you're a salesman and 0:02:30.200 --> 0:02:32.520 or a salesperson, I should say you're a salesperson. You 0:02:32.560 --> 0:02:35.399 walk up to a potential client, you have a discussion 0:02:35.440 --> 0:02:38.680 with that client, and you have a handshake that says 0:02:38.680 --> 0:02:42.440 the client's really gonna think about purchasing your product, and 0:02:42.480 --> 0:02:46.720 you go back and you record that as an actual sale. Well, 0:02:46.720 --> 0:02:50.079 that would be disingenuous because the client has not really 0:02:51.240 --> 0:02:54.640 put any money forward, they haven't agreed to anything, so 0:02:54.800 --> 0:02:56.760 for you to call that a sale to boost your 0:02:56.800 --> 0:03:00.600 numbers would be unethical. Part of the allegation were that 0:03:00.600 --> 0:03:03.000 that was what was going on with Oracle, although Oracle 0:03:03.080 --> 0:03:07.520 said no, it wasn't intentional. It was that we had these, uh, 0:03:07.560 --> 0:03:12.600 these promises to purchase our products that were being counted 0:03:12.639 --> 0:03:15.079 as sales because it was all taken in good faith, 0:03:15.520 --> 0:03:18.200 but no sale had yet taken place. And there were 0:03:18.240 --> 0:03:21.560 other examples of clients apparently being double billed, such as 0:03:21.560 --> 0:03:24.560 when a client would pay for an upgrade and Oracle 0:03:24.600 --> 0:03:29.160 would issue a new invoice for support services without canceling 0:03:29.320 --> 0:03:33.160 the old support services invoice from before the upgrade, So 0:03:33.240 --> 0:03:38.680 essentially this client is being invoiced twice for support services. 0:03:39.120 --> 0:03:41.560 Now they shouldn't have to do that, because while you 0:03:41.600 --> 0:03:43.840 are upgrading and you have to pay for the upgrade, 0:03:44.240 --> 0:03:47.600 the support services should remain pretty much steady. So you 0:03:47.600 --> 0:03:50.680 would cancel the old invoice, use the new invoice to 0:03:50.680 --> 0:03:54.040 indicate this is for the upgrade services. But you wouldn't 0:03:54.040 --> 0:03:56.960 build the client twice. You wouldn't continue to give them 0:03:57.000 --> 0:03:59.800 support for both the old version and the new version, 0:04:00.440 --> 0:04:02.800 so that was an issue. There are also cases of 0:04:02.840 --> 0:04:06.280 clients who had returned products to Oracle for a refund, 0:04:06.600 --> 0:04:09.480 and the company just never canceled out the sale in 0:04:09.520 --> 0:04:12.760 their own records, so while they were returning money to 0:04:12.800 --> 0:04:17.320 the clients in their records, that sale was still existing 0:04:17.440 --> 0:04:20.920 on a ledger somewhere as being legitimate instead of being 0:04:20.920 --> 0:04:24.679 a return. So there were multiple instances of Oracle having 0:04:24.720 --> 0:04:28.320 sales on the books that did not actually exist in 0:04:28.360 --> 0:04:31.120 the real world, and so the numbers were not matching up. 0:04:31.480 --> 0:04:35.200 The reported revenues and the actual profit were way out 0:04:35.240 --> 0:04:37.640 of alignment. You would look at the sales and say, well, 0:04:37.680 --> 0:04:41.360 according to this, we made you know, fifty million dollars 0:04:41.360 --> 0:04:44.400 in sales, but when we look at the actual profits, 0:04:44.480 --> 0:04:47.760 they're very, very low. So there's a huge disconnect here 0:04:47.800 --> 0:04:52.520 because either our expenses went out of control or the 0:04:52.600 --> 0:04:56.360 revenues that we've uh indicated in this sheet are not 0:04:56.520 --> 0:05:00.760 really accurate. So some shareholders were noticing these problems as 0:05:00.760 --> 0:05:04.479 early as March nine, and they began to file lawsuits 0:05:04.520 --> 0:05:08.200 against Oracle, some of which became class action lawsuits. So 0:05:08.279 --> 0:05:12.599 how could this have happened without it being purposeful? Well, 0:05:12.640 --> 0:05:16.000 the sales environment at Oracle in the late eighties and 0:05:16.040 --> 0:05:21.640 early nineties was incredibly aggressive, something that Larry Ellison, one 0:05:21.680 --> 0:05:25.560 of the co founders of Oracle, had himself encouraged. Now 0:05:25.600 --> 0:05:28.599 according to a book written by Karen Southwick, it's a 0:05:28.640 --> 0:05:32.880 book titled Everyone Else Must Fail. The Unvarnished Truth about 0:05:32.880 --> 0:05:37.600 Oracle and Larry Ellison, sales at Oracle depended upon representatives 0:05:37.640 --> 0:05:42.200 making aggressive quotas, both to earn sweet commissions and to 0:05:42.279 --> 0:05:45.599 avoid being at the bottom of a widely circulated list. 0:05:46.040 --> 0:05:50.120 So those commissions were a big incentive driver. If you 0:05:50.200 --> 0:05:53.800 hit your quota, you would get a certain percentage of 0:05:53.839 --> 0:05:57.760 those sales on commission. If you went above your quota, 0:05:57.880 --> 0:06:00.480 if you sold more than what your quota was asking for, 0:06:00.680 --> 0:06:03.760 you got an even bigger commission. For all additional sales. 0:06:04.200 --> 0:06:06.480 So if you made three million dollars in sales, you 0:06:06.520 --> 0:06:09.719 would get a decent commission. And if you did another 0:06:09.839 --> 0:06:12.200 million dollars of sales on top of that, on top 0:06:12.240 --> 0:06:14.640 of your quota, you would make a bigger commission and 0:06:14.640 --> 0:06:17.560 actually make more money off of that fourth million than 0:06:17.600 --> 0:06:20.160 you did off the first three million combined. So there 0:06:20.200 --> 0:06:22.400 was a real incentive to go out there and very 0:06:22.440 --> 0:06:26.560 aggressively try to sell Oracles products. On top of that, 0:06:26.880 --> 0:06:29.360 there was this list I was telling you about. Well, 0:06:29.400 --> 0:06:33.679 the sales team was originally led by a guy named 0:06:33.760 --> 0:06:38.560 Mike sea Scholls, who headed sales until nineteen six. That's 0:06:38.560 --> 0:06:42.680 when Larry Ellison fired him to replace him with Gary Kennedy. Now, 0:06:42.760 --> 0:06:46.520 Gary Kennedy had previously been a direct report to Mike 0:06:46.680 --> 0:06:50.240 sea Schell, so he was uh under Mike sea Schell 0:06:50.320 --> 0:06:55.840 in the hierarchy. But Kennedy was an incredible salesperson, like 0:06:55.880 --> 0:06:59.119 he was just out selling Sea Schell quarter after quarters. 0:06:59.160 --> 0:07:02.480 So eventually Ellis said, why do I have you working 0:07:02.520 --> 0:07:06.119 under this other guy. You're clearly outperforming him. You should 0:07:06.160 --> 0:07:09.600 have his job. So he fires Mike Siechel and then 0:07:09.600 --> 0:07:14.080 promotes Gary Kennedy to Siechell's job. Now, Kennedy would create 0:07:14.080 --> 0:07:18.040 a list every quarter and he would rank all the 0:07:18.120 --> 0:07:21.400 salespeople in his department according to how well they met 0:07:21.440 --> 0:07:24.679 their respective quotas. Being at the bottom of the list 0:07:25.320 --> 0:07:27.840 was really not good, and if you showed up more 0:07:27.880 --> 0:07:30.400 than a couple of times, you were likely on the 0:07:30.400 --> 0:07:33.520 way out now. According to Anneka seal A, who was 0:07:33.560 --> 0:07:36.760 the twelve person ever hired at Oracle, she was a 0:07:36.760 --> 0:07:40.240 salesperson there, She said that people would tend to leave 0:07:40.320 --> 0:07:43.800 on their own before they were asked to go or 0:07:43.920 --> 0:07:46.160 they were fired, because if they showed up at the 0:07:46.160 --> 0:07:48.240 bottom of the list a few times, their morale was 0:07:48.320 --> 0:07:53.760 shot and they would essentially quietly quit and leave the company. 0:07:54.040 --> 0:07:56.960 Kennedy's second in command was a guy named Craig Ramsey, 0:07:57.040 --> 0:08:00.160 who later said he felt that this particular strat g 0:08:00.480 --> 0:08:04.080 backfired on the company and that ranking people like that 0:08:04.200 --> 0:08:07.080 in a way to try and reward top performers was 0:08:07.120 --> 0:08:10.600 actually really just punishing the people at the bottom of 0:08:10.640 --> 0:08:14.160 the list beyond measure. It was discouraging them, and it 0:08:14.240 --> 0:08:17.760 was sabotaging their efforts to do better moving forward, because 0:08:17.800 --> 0:08:19.840 you would freak out so much about being at the 0:08:19.880 --> 0:08:22.720 bottom of the list. You would end up creating a 0:08:22.720 --> 0:08:26.160 self fulfilling prophecy of failure, and you would end up 0:08:26.160 --> 0:08:29.920 failing out of Oracle. Not necessarily getting fired, but you 0:08:29.960 --> 0:08:33.000 would be so shaken by the experience because there's so 0:08:33.080 --> 0:08:35.840 much pressure on you to perform, that you were more 0:08:35.920 --> 0:08:38.640 likely to just leave the company. The point I want 0:08:38.640 --> 0:08:40.640 to make here is that the sales environment at Oracle 0:08:40.840 --> 0:08:44.600 was incredibly competitive and stressful, which may explain how so 0:08:44.640 --> 0:08:48.400 many errors were happening. People were trying to hit those numbers, 0:08:48.760 --> 0:08:51.240 and they were doing this the best they could. Like 0:08:51.400 --> 0:08:54.560 they would get a promise to purchase products they would 0:08:54.600 --> 0:08:57.960 put as a sale, so they were essentially robbing future 0:08:58.360 --> 0:09:04.280 figures to feed into present day figures. So a sale 0:09:04.520 --> 0:09:07.679 for tomorrow would get recorded today, Now that would mean 0:09:07.720 --> 0:09:11.480 the next day, when tomorrow comes, you suddenly are down 0:09:11.559 --> 0:09:14.360 one sale. Now now you're looking ahead of the next day. 0:09:14.400 --> 0:09:19.360 So it was this constant game of trying to massage 0:09:19.360 --> 0:09:22.280 your numbers by looking at all the prospects you had 0:09:22.360 --> 0:09:25.960 moving forward and incorporating that into the present day. But 0:09:26.160 --> 0:09:30.120 it was an unsustainable approach, and ultimately it started to 0:09:30.120 --> 0:09:32.800 get people's attention and people begin to ask what exactly 0:09:32.880 --> 0:09:39.080 is going on here. On August nine, Oracle disclosed that 0:09:39.200 --> 0:09:42.840 it had miscalculated revenues for five quarters, with the most 0:09:42.880 --> 0:09:45.840 recent quarter ending on May thirty one, nine nine, and 0:09:45.880 --> 0:09:48.800 they had to restate their revenues to correct the matter, 0:09:49.360 --> 0:09:53.160 which caused the company's stock value to drop quite a 0:09:53.200 --> 0:09:56.200 bit in response. Uh the market lost a lot of 0:09:56.200 --> 0:10:00.160 confidence in Oracle because restating your revenues something that you 0:10:00.240 --> 0:10:03.960 had supposedly been disclosing quarter after quarter, and then saying, 0:10:04.400 --> 0:10:06.440 you know what, turns out those numbers we gave you 0:10:06.520 --> 0:10:09.920 last year aren't right. That's not great. A bit later 0:10:09.960 --> 0:10:12.800 in nineteen ninety, Oracle announced that the first quarter of 0:10:12.880 --> 0:10:17.320 nineteen ninety one, which technically ended on August thirty first, 0:10:17.440 --> 0:10:22.160 nineteen ninety represented the company's first quarterly loss in revenue 0:10:22.280 --> 0:10:26.160 in its history. Oracles fiscal years, by the way, start 0:10:26.240 --> 0:10:29.200 in June and they end in May, and the company 0:10:29.240 --> 0:10:31.600 refers to the fiscal years by the end of year, 0:10:31.880 --> 0:10:35.120 not the start year. So fiscal year nineteen ninety one 0:10:35.160 --> 0:10:39.520 for Oracle began in June nineteen ninety and ended in May. 0:10:39.800 --> 0:10:43.720 The end of May, the company reported a net loss 0:10:43.840 --> 0:10:46.960 of thirty six million dollars in that first quarter of 0:10:47.000 --> 0:10:50.800 fiscal year nineteen ninety one. A year earlier, the company 0:10:50.800 --> 0:10:54.120 had reported earning eleven point seven million, so they went 0:10:54.160 --> 0:10:57.840 from a profit of eleven point seven to a loss 0:10:57.920 --> 0:11:01.880 of thirty six million. And Oracle reported this loss despite 0:11:01.880 --> 0:11:04.959 actually generating more revenue in the first quarter of nine 0:11:05.720 --> 0:11:10.200 than it had the previous year. So in ninety one, 0:11:10.640 --> 0:11:13.800 in that first quarter they made two hundred three point 0:11:13.840 --> 0:11:17.080 eight million dollars in sales. That's not profit, that's in 0:11:17.240 --> 0:11:21.079 just revenue. But in n they only made one seventy 0:11:21.080 --> 0:11:24.120 five point five million. I say only that's a huge number. 0:11:24.160 --> 0:11:28.240 But the point I'm making is that while Oracle had 0:11:28.360 --> 0:11:34.080 sold more in the company was actually experiencing a net 0:11:34.160 --> 0:11:38.559 loss in instead of a profit. So this was not 0:11:38.840 --> 0:11:42.600 great news. Oracle also announced in nineteen ninety that it 0:11:42.679 --> 0:11:45.760 was going to downsize by laying off about ten percent 0:11:45.880 --> 0:11:49.360 of its domestic workforce, and at that time, Oracle had 0:11:49.480 --> 0:11:52.920 four thousand employees in the United States. So here was 0:11:52.920 --> 0:11:55.960 a company that was dealing with a quarterly loss, a 0:11:56.080 --> 0:11:59.960 hit to stock prices, a ten percent layoff, and charges 0:12:00.120 --> 0:12:03.120 that the company had at least been negligent and sloppy, 0:12:03.200 --> 0:12:06.400 if not actually trying to mislead shareholders. So in other words, 0:12:06.720 --> 0:12:09.040 it was not a good scene. One of the guys 0:12:09.040 --> 0:12:10.880 who was laid off at that time was a fellow 0:12:10.960 --> 0:12:15.199 named Gary Kennedy. That was the the head of sales himself. 0:12:15.240 --> 0:12:17.480 That was the guy who had kind of encouraged that 0:12:17.559 --> 0:12:22.360 whole UH environment of cutthroat salesmanship, and so he was 0:12:22.440 --> 0:12:26.000 let go. He had been the tenth Oracle employee when 0:12:26.040 --> 0:12:29.079 he started back in nineteen eighty two, but the accounting 0:12:29.080 --> 0:12:32.160 disaster was one he could not bounce back from and 0:12:32.200 --> 0:12:36.200 he got his walking papers in. Another person who was 0:12:36.240 --> 0:12:39.240 important in the sales department was a guy named Tom Siebel, 0:12:39.640 --> 0:12:43.160 who Gary Kennedy had recruited into Oracle in nineteen eighty four. 0:12:43.320 --> 0:12:47.000 Siebel had a reputation for being an extremely effective salesman, 0:12:47.320 --> 0:12:51.360 and he had reportedly approached Larry Ellison about creating a 0:12:51.440 --> 0:12:55.160 sales automation product, but Ellison was not interested in hearing 0:12:55.200 --> 0:12:58.240 about it, so unlike Kennedy, Siebel actually left on his 0:12:58.240 --> 0:13:02.000 own accord. He quitted the company, and this was after 0:13:02.040 --> 0:13:05.679 Ellison had turned down his idea for this this UH, 0:13:05.840 --> 0:13:08.840 this sales automation tool and so he went on to 0:13:08.920 --> 0:13:12.880 found a new company called c BL Systems, which ended 0:13:12.920 --> 0:13:16.360 up going into direct competition with Oracle. This will become 0:13:16.400 --> 0:13:19.400 a familiar theme. One of the most interesting things I 0:13:19.520 --> 0:13:24.120 find about Oracle's history is that Larry Ellison has this 0:13:24.720 --> 0:13:30.520 history of alienating some of his top executives. Whether it's 0:13:30.559 --> 0:13:33.120 because they were not a good fit for Oracle, or 0:13:33.160 --> 0:13:36.840 because of personality conflicts, or just because of who Ellison 0:13:37.000 --> 0:13:40.160 is as a person I cannot speak to, but it 0:13:40.320 --> 0:13:42.960 is interesting to see how many of them left Oracle 0:13:43.360 --> 0:13:46.160 to go and either join another company or found a 0:13:46.200 --> 0:13:50.560 company that would go into direct competition with Oracle. It's 0:13:50.600 --> 0:13:54.120 almost as if saying Larry Ellison has upset me so 0:13:54.240 --> 0:13:56.160 much that I need to try and take him down 0:13:56.160 --> 0:13:59.800 a notch. That's probably be putting words into other people's mouths, 0:13:59.800 --> 0:14:02.360 But that's the implication I get, because the story happens 0:14:02.480 --> 0:14:07.760 over and over again. The following year was more of 0:14:07.760 --> 0:14:11.160 the same, with more instances of bad accounting piling up. 0:14:11.240 --> 0:14:15.080 In fact, Oracle would have to restate its earnings again 0:14:15.320 --> 0:14:19.160 for the fiscal year ending May thirty first nineteen, So 0:14:19.240 --> 0:14:21.440 for the year ending nineteen and the year ending nine 0:14:22.240 --> 0:14:25.040 they had to restate their revenues. Two years in Aurow 0:14:25.200 --> 0:14:28.320 not good. It was rumored that the board of directors 0:14:28.640 --> 0:14:32.960 was even considering firing Larry Ellison. But the board was 0:14:33.040 --> 0:14:36.000 pretty small. In fact, there are only four people sitting 0:14:36.040 --> 0:14:38.520 on it at the beginning of all this mess. There 0:14:38.600 --> 0:14:41.480 was Bob Minor, one of the co founders of Oracle. 0:14:41.640 --> 0:14:45.320 There was Don Lucas, and there was Arnold Silverman, who 0:14:45.400 --> 0:14:48.120 would leave the board during this time and would be 0:14:48.160 --> 0:14:51.480 replaced by a guy named Joe Costello. Joe Costello was 0:14:51.480 --> 0:14:56.120 brought in specifically as the outsider board member, the idea 0:14:56.200 --> 0:14:57.800 that this was a guy who could stand up to 0:14:57.880 --> 0:15:00.720 Larry Ellison because he didn't have any fear of the man. 0:15:00.800 --> 0:15:03.520 He didn't have any uh he wasn't beholden to him 0:15:03.520 --> 0:15:06.960 at all, and so Costello and Ellison would end up 0:15:07.000 --> 0:15:10.520 facing off against each other quite a few times. Ellison 0:15:10.560 --> 0:15:14.120 reportedly liked keeping the board small on purpose in order 0:15:14.160 --> 0:15:17.440 to make it a little bit easier to control them. 0:15:17.440 --> 0:15:20.280 Ellison was not austed, but one thing was clear. The 0:15:20.280 --> 0:15:24.520 company had a distinct lack of internal controls and they 0:15:24.600 --> 0:15:26.800 needed to fix that. They had to find a way 0:15:26.840 --> 0:15:29.760 to catch and prevent these types of problems moving forward, 0:15:30.120 --> 0:15:33.760 something had to be done, and I'll talk more about 0:15:33.760 --> 0:15:37.280 what was done in just a minute, but first let's 0:15:37.280 --> 0:15:46.760 take a moment to thank our sponsor. But one of 0:15:46.760 --> 0:15:49.600 the things that was done in response to all of 0:15:49.640 --> 0:15:54.080 this controversy was another high profile firing, and that would 0:15:54.080 --> 0:15:57.520 be of Jeff Walker, who was the chief financial officer 0:15:57.600 --> 0:16:00.280 for Oracle. He was shown the door. Now, he had 0:16:00.320 --> 0:16:02.880 been with Oracle since nineteen eighty five, but he had 0:16:02.960 --> 0:16:05.440 started out off as a software developer. He was not 0:16:06.240 --> 0:16:11.520 a financial officer by trade. Uh And in fact, Larry 0:16:11.520 --> 0:16:15.920 Ellison had apparently said on multiple occasions that you didn't 0:16:15.960 --> 0:16:20.040 need to have experts in finances, you were a bean counter. 0:16:21.120 --> 0:16:24.720 And so there were a lot of interesting reports about 0:16:24.760 --> 0:16:27.600 why Larry Ellison was so hot on having Jeff Walker 0:16:27.600 --> 0:16:30.960 as chief financial officer. A lot of the reports suggested 0:16:31.000 --> 0:16:35.400 that Ellison wanted a person that was really easy to influence, 0:16:36.280 --> 0:16:39.400 so that he could end up quote unquote controlling Walker 0:16:40.000 --> 0:16:43.480 and not have someone who was more independently minded and 0:16:43.520 --> 0:16:47.120 have firmer ideas of how the financials should be handled 0:16:47.160 --> 0:16:50.720 for his company. Um, which says a lot I think, 0:16:51.280 --> 0:16:54.080 but I don't know how true. Those accusations are they 0:16:54.080 --> 0:16:57.000 could just be people who are bitter about Oracle in 0:16:57.080 --> 0:17:01.200 general who are casting as versions. I don't know, but 0:17:02.320 --> 0:17:05.520 the general story was that Ellison wanted Jeff Walker in 0:17:05.520 --> 0:17:08.439 that position because it was someone else that he could influence. 0:17:09.400 --> 0:17:12.359 Ellison would defend Walker to the rest of the board 0:17:12.520 --> 0:17:15.320 while they were all debating on who should replace Walker 0:17:15.359 --> 0:17:18.040 as CFO, so Ellison was saying, no, we shouldn't get 0:17:18.080 --> 0:17:21.199 rid of him, we should keep him. Costello, however, was 0:17:21.280 --> 0:17:24.080 on the opposite side of this argument. Remember Joe Costello 0:17:24.119 --> 0:17:27.080 had been brought onto the board during the tail end 0:17:27.119 --> 0:17:29.360 of all this mess, and he was saying, no, we've 0:17:29.400 --> 0:17:33.160 got to get somebody who has a background in uh 0:17:33.200 --> 0:17:37.080 in leading a financial department to become the chief financial officer. 0:17:37.200 --> 0:17:42.200 That's the only responsible result, that's the only responsible response. Rather, 0:17:42.320 --> 0:17:45.199 we could have to this. So he said, we're in 0:17:45.280 --> 0:17:47.239 dire need of a financial expert in the role. We're 0:17:47.280 --> 0:17:50.439 gonna look outside the company and find somebody. Ellison was 0:17:50.480 --> 0:17:52.639 dismissive of this idea. He said, you don't have to 0:17:52.640 --> 0:17:55.960 be an expert. It's just just numbers. It's easy. The 0:17:56.000 --> 0:17:59.120 board persisted, and eventually Ellison would back off kind of. 0:17:59.359 --> 0:18:01.760 After the fall out, there was a lot of blaming 0:18:01.840 --> 0:18:06.359 going around at Oracle. Ellison largely blamed Gary Kennedy and 0:18:06.400 --> 0:18:09.040 said his sales strategies were the reason for all the 0:18:09.119 --> 0:18:13.479 accounting discrepancies. Kennedy and Siebel, who had both left Oracle 0:18:13.520 --> 0:18:16.439 at that point, said that Ellison's attitude of anything goes 0:18:16.560 --> 0:18:20.200 was ultimately to blame. That Ellison set the tone that 0:18:20.240 --> 0:18:24.960 he said essentially everything is fair game until you get caught. 0:18:25.160 --> 0:18:27.359 So if you're not caught, you can pretty much do 0:18:27.400 --> 0:18:29.240 whatever you need to do to get the results you 0:18:29.240 --> 0:18:32.959 want to get. That's what they say. Larry Ellison's philosophy 0:18:33.080 --> 0:18:35.800 was One move the company made to try and right 0:18:35.880 --> 0:18:39.240 the wrongs was to make a new hire to replace Walker, 0:18:39.640 --> 0:18:44.120 and Oracle would eventually reach out to Jeff Henley. Henley 0:18:44.240 --> 0:18:47.120 had served as the chief financial officer of the Pacific 0:18:47.160 --> 0:18:50.280 Holding Company. That was a holding company that had a 0:18:50.320 --> 0:18:54.880 life insurance company underneath it, as well as investment strategy company, 0:18:55.320 --> 0:18:58.040 brokerage firms, that kind of thing, and according to Costello, 0:18:58.320 --> 0:19:02.199 Ellison initially try to cut the offer the board was 0:19:02.240 --> 0:19:06.560 going to extend to Henley. Ellison's like, no, this guy 0:19:06.600 --> 0:19:08.960 doesn't need that much cut it in half. But the 0:19:09.000 --> 0:19:11.840 rest of the board stood up to Ellison. They said, no, 0:19:12.440 --> 0:19:14.960 he really does need this this package in order to 0:19:14.960 --> 0:19:17.119 bring him on board to Oracle. We're never going to 0:19:17.200 --> 0:19:20.160 hire him away otherwise. And it became kind of a 0:19:20.200 --> 0:19:22.320 battle between Ellison and the rest of the board. Now, 0:19:22.359 --> 0:19:26.160 Ellison was a majority, well at least not a majority shareholder, 0:19:26.200 --> 0:19:30.200 but a major shareholder in Oracle. He had a huge 0:19:30.240 --> 0:19:33.600 amount of cloud because he owned so much of the company. 0:19:33.880 --> 0:19:38.280 But Costello would not back down, and he kept telling Ellison, no, 0:19:38.480 --> 0:19:43.960 we've got to absolutely extend this package. And eventually, uh, 0:19:44.000 --> 0:19:48.600 Ellison would back down because Costello said, listen, if you 0:19:48.760 --> 0:19:51.879 don't agree to this, the rest of the board is 0:19:51.920 --> 0:19:53.840 going to have a discussion about whether or not you're 0:19:53.880 --> 0:19:57.160 actually fit to lead this company, and you could find 0:19:57.160 --> 0:20:00.920 yourself out of a job. And at that point Ellison 0:20:01.040 --> 0:20:07.359 back down and agreed to offer the employment package to Henley, 0:20:07.440 --> 0:20:10.960 which was pretty attractive. It included half a million shares 0:20:11.200 --> 0:20:14.800 in the company just to start off with. Now, Henley 0:20:14.840 --> 0:20:17.960 began to whip the company into shape right away from 0:20:17.960 --> 0:20:22.000 a financial responsibility standpoint. He cleaned up the company's practices, 0:20:22.280 --> 0:20:26.200 He established controls to prevent another disaster like the two 0:20:26.200 --> 0:20:29.160 previous fiscal years had been. He also had to figure 0:20:29.200 --> 0:20:32.360 out how to get an inflow of cash into Oracle 0:20:32.680 --> 0:20:35.640 to keep the business running because they had a hundred 0:20:35.680 --> 0:20:41.280 seventy million dollars in outstanding loans and they needed collateral. Well, first, 0:20:41.359 --> 0:20:44.639 they began to put up its receivables as collateral, but 0:20:44.880 --> 0:20:48.480 the problem was the receivables weren't entirely reliable as the 0:20:48.520 --> 0:20:52.359 previous two years had shown, so they needed to find 0:20:52.560 --> 0:20:55.520 some other means of doing this because again Oracle had 0:20:55.560 --> 0:20:59.359 been selling future products for present day cash, which is 0:20:59.400 --> 0:21:02.560 really just robbing the future to pay the present. So 0:21:03.040 --> 0:21:06.280 ultimately Oracle was able to get some money from Nipon 0:21:06.480 --> 0:21:10.320 Steel that's a Japanese steel company that was really interested 0:21:10.359 --> 0:21:13.879 in making a huge investment in Oracle in return for 0:21:14.000 --> 0:21:18.520 a essentially a majority share in Oracle Japan that was 0:21:18.560 --> 0:21:21.520 going to be the the branch that Oracle was opening 0:21:21.520 --> 0:21:25.920 in Japan. Uh Ellison initially said no to the deal 0:21:26.080 --> 0:21:30.000 because it was for a a large personage like more 0:21:30.000 --> 0:21:34.440 than of of Oracle Japan, and Ellison did not want 0:21:34.520 --> 0:21:37.760 that to become an issue. And so while the company 0:21:37.840 --> 0:21:41.200 needed the money. He said, no, I'm not comfortable doing this. 0:21:41.440 --> 0:21:45.320 So they then renegotiated a plan and came back with 0:21:45.560 --> 0:21:50.000 an eighty million dollar loan to Oracle and steak in 0:21:50.040 --> 0:21:53.320 Oracle Japan on behalf of Nipon Steel, and that was 0:21:53.359 --> 0:21:56.920 the agreement they actually were able to come to terms 0:21:57.000 --> 0:22:01.040 on and UH. That meant that Oracle could stay in business. 0:22:01.040 --> 0:22:04.119 And in fact, people have since said this was a 0:22:04.160 --> 0:22:07.280 really wise decision on Ellison's part because he was able 0:22:07.280 --> 0:22:10.919 to maintain control of this company and not hand it 0:22:11.000 --> 0:22:14.080 over UH. And it must have been really hard to 0:22:14.119 --> 0:22:17.840 do because Oracle was so desperately in need of cash, 0:22:18.000 --> 0:22:21.400 but he did not want to invite disaster. Henley would 0:22:21.440 --> 0:22:24.640 serve as the CFO for Oracle until two thousand four 0:22:24.760 --> 0:22:26.879 when he would become the chairman for the company, and 0:22:26.920 --> 0:22:29.760 he remained in that role until two thousand fourteen. So 0:22:29.800 --> 0:22:32.159 I'll talk more about what happened in two thousand and 0:22:32.200 --> 0:22:37.119 fourteen in the next episode. Again, it gets pretty crazy, 0:22:37.160 --> 0:22:41.800 but then all the executive moves in Oracle get pretty crazy. 0:22:42.000 --> 0:22:44.959 Oracle reached out to Raymond J. Lane, who had started 0:22:45.040 --> 0:22:48.359 his career as a salesman for IBM in the nineteen sixties. 0:22:48.600 --> 0:22:52.159 He had also worked under future presidential hopeful Ross Perot 0:22:52.400 --> 0:22:56.719 at Electronic Data Systems and then for the consulting firm Booze. 0:22:56.760 --> 0:23:00.560 Allen Hamilton's Oracle brought him on to head the sales 0:23:00.560 --> 0:23:04.280 and marketing efforts at Oracle, and in June he would 0:23:04.320 --> 0:23:07.800 be named the president of Oracle USA, so the domestic 0:23:07.840 --> 0:23:10.680 branch of the company. Four years later he would become 0:23:10.720 --> 0:23:14.040 president and CEO of the whole Dann company. And he 0:23:14.080 --> 0:23:16.879 gets a lot of credit for helping turn Oracles sales 0:23:16.920 --> 0:23:20.359 efforts around in the nineteen nineties, and he would serve 0:23:20.480 --> 0:23:22.960 as president of the company until the year two thousand, 0:23:23.240 --> 0:23:26.679 when he would announce his resignation suddenly. And more on 0:23:26.720 --> 0:23:29.440 that in a bit, because it gets real juicy. At 0:23:29.480 --> 0:23:33.040 this time, Oracle's international business was actually doing pretty well, 0:23:33.080 --> 0:23:35.800 so while things at home were a little rough, internationally 0:23:36.000 --> 0:23:38.320 it was a different story and that helped balance out 0:23:38.359 --> 0:23:40.720 the problems that the company was facing in the United States, 0:23:41.040 --> 0:23:44.680 and work continued on the latest version of Oracle database software. 0:23:45.040 --> 0:23:47.560