Speaker 1: Get in touch with technology with tech Stuff from how
Speaker 1: stuff works dot com. Hey there, and welcome to tech Stuff.
Speaker 1: I'm your host, Jonathan Strickland. I'm an executive producer with
Speaker 1: how Stuff Works and I love all things tech. And
Speaker 1: in the last episode we were talking about the Oracle story.
Speaker 1: We're going to continue that with this episode. We will
Speaker 1: not finish the Oracle story with this episode because the
Speaker 1: company has been around for a while and it's there's
Speaker 1: been a lot of things that have happened with Oracle,
Speaker 1: both good and bad, and so we're going to really
Speaker 1: dive into some of the more tumultuous years at Oracle.
Speaker 1: The the period of the nineties were really really big
Speaker 1: for Oracle's history, very important years, years where Oracle could
Speaker 1: have gone away if things had turned out slightly differently.
Speaker 1: And also just as a reminder that we're going to
Speaker 1: published tech Stuff more frequently for a little while, at
Speaker 1: least kind of doing an experiment, you guys are going
Speaker 1: to get episodes on a much more frequent basis. They
Speaker 1: might be a little shorter, but you're going to be
Speaker 1: getting them a lot more frequently. So we're excited about this.
Speaker 1: I can't wait to really experiment with it and see
Speaker 1: how it works and to hear your guys feedback. Looking
Speaker 1: forward to all that. But let's jump into Oracle story
Speaker 1: Part two. Now. In that last episode, I mentioned that
Speaker 1: Oracle had made a bit of a boo boo in
Speaker 1: n which is an understatement. It was a problem that
Speaker 1: had some people wondering if the company that had been
Speaker 1: on a meteoric rise was going to be on the
Speaker 1: verge of collapse. So what was going on? Well, it
Speaker 1: turned out that the company had been regularly misreporting revenues
Speaker 1: for the fiscal year that ended on May thirty one,
Speaker 1: for at least three quarters, because the first quarter of
Speaker 1: that year apparently there were no problems, but for at
Speaker 1: least three quarters the company had made errors, which led
Speaker 1: some people this aspect that people were purposefully misrepresenting their
Speaker 1: earnings in an effort to drive up Oracle stock prices. Now,
Speaker 1: that was a charge that executives at Oracle flatly denied.
Speaker 1: They said this was not intentional. It was not at
Speaker 1: all a case of us trying to inflate the stock price.
Speaker 1: But what was going on was definitely a little hinky.
Speaker 1: There were instances of the company recording orders as actual sales,
Speaker 1: So imagine that you walk up you're a salesman and
Speaker 1: or a salesperson, I should say you're a salesperson. You
Speaker 1: walk up to a potential client, you have a discussion
Speaker 1: with that client, and you have a handshake that says
Speaker 1: the client's really gonna think about purchasing your product, and
Speaker 1: you go back and you record that as an actual sale. Well,
Speaker 1: that would be disingenuous because the client has not really
Speaker 1: put any money forward, they haven't agreed to anything, so
Speaker 1: for you to call that a sale to boost your
Speaker 1: numbers would be unethical. Part of the allegation were that
Speaker 1: that was what was going on with Oracle, although Oracle
Speaker 1: said no, it wasn't intentional. It was that we had these, uh,
Speaker 1: these promises to purchase our products that were being counted
Speaker 1: as sales because it was all taken in good faith,
Speaker 1: but no sale had yet taken place. And there were
Speaker 1: other examples of clients apparently being double billed, such as
Speaker 1: when a client would pay for an upgrade and Oracle
Speaker 1: would issue a new invoice for support services without canceling
Speaker 1: the old support services invoice from before the upgrade, So
Speaker 1: essentially this client is being invoiced twice for support services.
Speaker 1: Now they shouldn't have to do that, because while you
Speaker 1: are upgrading and you have to pay for the upgrade,
Speaker 1: the support services should remain pretty much steady. So you
Speaker 1: would cancel the old invoice, use the new invoice to
Speaker 1: indicate this is for the upgrade services. But you wouldn't
Speaker 1: build the client twice. You wouldn't continue to give them
Speaker 1: support for both the old version and the new version,
Speaker 1: so that was an issue. There are also cases of
Speaker 1: clients who had returned products to Oracle for a refund,
Speaker 1: and the company just never canceled out the sale in
Speaker 1: their own records, so while they were returning money to
Speaker 1: the clients in their records, that sale was still existing
Speaker 1: on a ledger somewhere as being legitimate instead of being
Speaker 1: a return. So there were multiple instances of Oracle having
Speaker 1: sales on the books that did not actually exist in
Speaker 1: the real world, and so the numbers were not matching up.
Speaker 1: The reported revenues and the actual profit were way out
Speaker 1: of alignment. You would look at the sales and say, well,
Speaker 1: according to this, we made you know, fifty million dollars
Speaker 1: in sales, but when we look at the actual profits,
Speaker 1: they're very, very low. So there's a huge disconnect here
Speaker 1: because either our expenses went out of control or the
Speaker 1: revenues that we've uh indicated in this sheet are not
Speaker 1: really accurate. So some shareholders were noticing these problems as
Speaker 1: early as March nine, and they began to file lawsuits
Speaker 1: against Oracle, some of which became class action lawsuits. So
Speaker 1: how could this have happened without it being purposeful? Well,
Speaker 1: the sales environment at Oracle in the late eighties and
Speaker 1: early nineties was incredibly aggressive, something that Larry Ellison, one
Speaker 1: of the co founders of Oracle, had himself encouraged. Now
Speaker 1: according to a book written by Karen Southwick, it's a
Speaker 1: book titled Everyone Else Must Fail. The Unvarnished Truth about
Speaker 1: Oracle and Larry Ellison, sales at Oracle depended upon representatives
Speaker 1: making aggressive quotas, both to earn sweet commissions and to
Speaker 1: avoid being at the bottom of a widely circulated list.
Speaker 1: So those commissions were a big incentive driver. If you
Speaker 1: hit your quota, you would get a certain percentage of
Speaker 1: those sales on commission. If you went above your quota,
Speaker 1: if you sold more than what your quota was asking for,
Speaker 1: you got an even bigger commission. For all additional sales.
Speaker 1: So if you made three million dollars in sales, you
Speaker 1: would get a decent commission. And if you did another
Speaker 1: million dollars of sales on top of that, on top
Speaker 1: of your quota, you would make a bigger commission and
Speaker 1: actually make more money off of that fourth million than
Speaker 1: you did off the first three million combined. So there
Speaker 1: was a real incentive to go out there and very
Speaker 1: aggressively try to sell Oracles products. On top of that,
Speaker 1: there was this list I was telling you about. Well,
Speaker 1: the sales team was originally led by a guy named
Speaker 1: Mike sea Scholls, who headed sales until nineteen six. That's
Speaker 1: when Larry Ellison fired him to replace him with Gary Kennedy. Now,
Speaker 1: Gary Kennedy had previously been a direct report to Mike
Speaker 1: sea Schell, so he was uh under Mike sea Schell
Speaker 1: in the hierarchy. But Kennedy was an incredible salesperson, like
Speaker 1: he was just out selling Sea Schell quarter after quarters.
Speaker 1: So eventually Ellis said, why do I have you working
Speaker 1: under this other guy. You're clearly outperforming him. You should
Speaker 1: have his job. So he fires Mike Siechel and then
Speaker 1: promotes Gary Kennedy to Siechell's job. Now, Kennedy would create
Speaker 1: a list every quarter and he would rank all the
Speaker 1: salespeople in his department according to how well they met
Speaker 1: their respective quotas. Being at the bottom of the list
Speaker 1: was really not good, and if you showed up more
Speaker 1: than a couple of times, you were likely on the
Speaker 1: way out now. According to Anneka seal A, who was
Speaker 1: the twelve person ever hired at Oracle, she was a
Speaker 1: salesperson there, She said that people would tend to leave
Speaker 1: on their own before they were asked to go or
Speaker 1: they were fired, because if they showed up at the
Speaker 1: bottom of the list a few times, their morale was
Speaker 1: shot and they would essentially quietly quit and leave the company.
Speaker 1: Kennedy's second in command was a guy named Craig Ramsey,
Speaker 1: who later said he felt that this particular strat g
Speaker 1: backfired on the company and that ranking people like that
Speaker 1: in a way to try and reward top performers was
Speaker 1: actually really just punishing the people at the bottom of
Speaker 1: the list beyond measure. It was discouraging them, and it
Speaker 1: was sabotaging their efforts to do better moving forward, because
Speaker 1: you would freak out so much about being at the
Speaker 1: bottom of the list. You would end up creating a
Speaker 1: self fulfilling prophecy of failure, and you would end up
Speaker 1: failing out of Oracle. Not necessarily getting fired, but you
Speaker 1: would be so shaken by the experience because there's so
Speaker 1: much pressure on you to perform, that you were more
Speaker 1: likely to just leave the company. The point I want
Speaker 1: to make here is that the sales environment at Oracle
Speaker 1: was incredibly competitive and stressful, which may explain how so
Speaker 1: many errors were happening. People were trying to hit those numbers,
Speaker 1: and they were doing this the best they could. Like
Speaker 1: they would get a promise to purchase products they would
Speaker 1: put as a sale, so they were essentially robbing future
Speaker 1: figures to feed into present day figures. So a sale
Speaker 1: for tomorrow would get recorded today, Now that would mean
Speaker 1: the next day, when tomorrow comes, you suddenly are down
Speaker 1: one sale. Now now you're looking ahead of the next day.
Speaker 1: So it was this constant game of trying to massage
Speaker 1: your numbers by looking at all the prospects you had
Speaker 1: moving forward and incorporating that into the present day. But
Speaker 1: it was an unsustainable approach, and ultimately it started to
Speaker 1: get people's attention and people begin to ask what exactly
Speaker 1: is going on here. On August nine, Oracle disclosed that
Speaker 1: it had miscalculated revenues for five quarters, with the most
Speaker 1: recent quarter ending on May thirty one, nine nine, and
Speaker 1: they had to restate their revenues to correct the matter,
Speaker 1: which caused the company's stock value to drop quite a
Speaker 1: bit in response. Uh the market lost a lot of
Speaker 1: confidence in Oracle because restating your revenues something that you
Speaker 1: had supposedly been disclosing quarter after quarter, and then saying,
Speaker 1: you know what, turns out those numbers we gave you
Speaker 1: last year aren't right. That's not great. A bit later
Speaker 1: in nineteen ninety, Oracle announced that the first quarter of
Speaker 1: nineteen ninety one, which technically ended on August thirty first,
Speaker 1: nineteen ninety represented the company's first quarterly loss in revenue
Speaker 1: in its history. Oracles fiscal years, by the way, start
Speaker 1: in June and they end in May, and the company
Speaker 1: refers to the fiscal years by the end of year,
Speaker 1: not the start year. So fiscal year nineteen ninety one
Speaker 1: for Oracle began in June nineteen ninety and ended in May.
Speaker 1: The end of May, the company reported a net loss
Speaker 1: of thirty six million dollars in that first quarter of
Speaker 1: fiscal year nineteen ninety one. A year earlier, the company
Speaker 1: had reported earning eleven point seven million, so they went
Speaker 1: from a profit of eleven point seven to a loss
Speaker 1: of thirty six million. And Oracle reported this loss despite
Speaker 1: actually generating more revenue in the first quarter of nine
Speaker 1: than it had the previous year. So in ninety one,
Speaker 1: in that first quarter they made two hundred three point
Speaker 1: eight million dollars in sales. That's not profit, that's in
Speaker 1: just revenue. But in n they only made one seventy
Speaker 1: five point five million. I say only that's a huge number.
Speaker 1: But the point I'm making is that while Oracle had
Speaker 1: sold more in the company was actually experiencing a net
Speaker 1: loss in instead of a profit. So this was not
Speaker 1: great news. Oracle also announced in nineteen ninety that it
Speaker 1: was going to downsize by laying off about ten percent
Speaker 1: of its domestic workforce, and at that time, Oracle had
Speaker 1: four thousand employees in the United States. So here was
Speaker 1: a company that was dealing with a quarterly loss, a
Speaker 1: hit to stock prices, a ten percent layoff, and charges
Speaker 1: that the company had at least been negligent and sloppy,
Speaker 1: if not actually trying to mislead shareholders. So in other words,
Speaker 1: it was not a good scene. One of the guys
Speaker 1: who was laid off at that time was a fellow
Speaker 1: named Gary Kennedy. That was the the head of sales himself.
Speaker 1: That was the guy who had kind of encouraged that
Speaker 1: whole UH environment of cutthroat salesmanship, and so he was
Speaker 1: let go. He had been the tenth Oracle employee when
Speaker 1: he started back in nineteen eighty two, but the accounting
Speaker 1: disaster was one he could not bounce back from and
Speaker 1: he got his walking papers in. Another person who was
Speaker 1: important in the sales department was a guy named Tom Siebel,
Speaker 1: who Gary Kennedy had recruited into Oracle in nineteen eighty four.
Speaker 1: Siebel had a reputation for being an extremely effective salesman,
Speaker 1: and he had reportedly approached Larry Ellison about creating a
Speaker 1: sales automation product, but Ellison was not interested in hearing
Speaker 1: about it, so unlike Kennedy, Siebel actually left on his
Speaker 1: own accord. He quitted the company, and this was after
Speaker 1: Ellison had turned down his idea for this this UH,
Speaker 1: this sales automation tool and so he went on to
Speaker 1: found a new company called c BL Systems, which ended
Speaker 1: up going into direct competition with Oracle. This will become
Speaker 1: a familiar theme. One of the most interesting things I
Speaker 1: find about Oracle's history is that Larry Ellison has this
Speaker 1: history of alienating some of his top executives. Whether it's
Speaker 1: because they were not a good fit for Oracle, or
Speaker 1: because of personality conflicts, or just because of who Ellison
Speaker 1: is as a person I cannot speak to, but it
Speaker 1: is interesting to see how many of them left Oracle
Speaker 1: to go and either join another company or found a
Speaker 1: company that would go into direct competition with Oracle. It's
Speaker 1: almost as if saying Larry Ellison has upset me so
Speaker 1: much that I need to try and take him down
Speaker 1: a notch. That's probably be putting words into other people's mouths,
Speaker 1: But that's the implication I get, because the story happens
Speaker 1: over and over again. The following year was more of
Speaker 1: the same, with more instances of bad accounting piling up.
Speaker 1: In fact, Oracle would have to restate its earnings again
Speaker 1: for the fiscal year ending May thirty first nineteen, So
Speaker 1: for the year ending nineteen and the year ending nine
Speaker 1: they had to restate their revenues. Two years in Aurow
Speaker 1: not good. It was rumored that the board of directors
Speaker 1: was even considering firing Larry Ellison. But the board was
Speaker 1: pretty small. In fact, there are only four people sitting
Speaker 1: on it at the beginning of all this mess. There
Speaker 1: was Bob Minor, one of the co founders of Oracle.
Speaker 1: There was Don Lucas, and there was Arnold Silverman, who
Speaker 1: would leave the board during this time and would be
Speaker 1: replaced by a guy named Joe Costello. Joe Costello was
Speaker 1: brought in specifically as the outsider board member, the idea
Speaker 1: that this was a guy who could stand up to
Speaker 1: Larry Ellison because he didn't have any fear of the man.
Speaker 1: He didn't have any uh he wasn't beholden to him
Speaker 1: at all, and so Costello and Ellison would end up
Speaker 1: facing off against each other quite a few times. Ellison
Speaker 1: reportedly liked keeping the board small on purpose in order
Speaker 1: to make it a little bit easier to control them.
Speaker 1: Ellison was not austed, but one thing was clear. The
Speaker 1: company had a distinct lack of internal controls and they
Speaker 1: needed to fix that. They had to find a way
Speaker 1: to catch and prevent these types of problems moving forward,
Speaker 1: something had to be done, and I'll talk more about
Speaker 1: what was done in just a minute, but first let's
Speaker 1: take a moment to thank our sponsor. But one of
Speaker 1: the things that was done in response to all of
Speaker 1: this controversy was another high profile firing, and that would
Speaker 1: be of Jeff Walker, who was the chief financial officer
Speaker 1: for Oracle. He was shown the door. Now, he had
Speaker 1: been with Oracle since nineteen eighty five, but he had
Speaker 1: started out off as a software developer. He was not
Speaker 1: a financial officer by trade. Uh And in fact, Larry
Speaker 1: Ellison had apparently said on multiple occasions that you didn't
Speaker 1: need to have experts in finances, you were a bean counter.
Speaker 1: And so there were a lot of interesting reports about
Speaker 1: why Larry Ellison was so hot on having Jeff Walker
Speaker 1: as chief financial officer. A lot of the reports suggested
Speaker 1: that Ellison wanted a person that was really easy to influence,
Speaker 1: so that he could end up quote unquote controlling Walker
Speaker 1: and not have someone who was more independently minded and
Speaker 1: have firmer ideas of how the financials should be handled
Speaker 1: for his company. Um, which says a lot I think,
Speaker 1: but I don't know how true. Those accusations are they
Speaker 1: could just be people who are bitter about Oracle in
Speaker 1: general who are casting as versions. I don't know, but
Speaker 1: the general story was that Ellison wanted Jeff Walker in
Speaker 1: that position because it was someone else that he could influence.
Speaker 1: Ellison would defend Walker to the rest of the board
Speaker 1: while they were all debating on who should replace Walker
Speaker 1: as CFO, so Ellison was saying, no, we shouldn't get
Speaker 1: rid of him, we should keep him. Costello, however, was
Speaker 1: on the opposite side of this argument. Remember Joe Costello
Speaker 1: had been brought onto the board during the tail end
Speaker 1: of all this mess, and he was saying, no, we've
Speaker 1: got to get somebody who has a background in uh
Speaker 1: in leading a financial department to become the chief financial officer.
Speaker 1: That's the only responsible result, that's the only responsible response. Rather,
Speaker 1: we could have to this. So he said, we're in
Speaker 1: dire need of a financial expert in the role. We're
Speaker 1: gonna look outside the company and find somebody. Ellison was
Speaker 1: dismissive of this idea. He said, you don't have to
Speaker 1: be an expert. It's just just numbers. It's easy. The
Speaker 1: board persisted, and eventually Ellison would back off kind of.
Speaker 1: After the fall out, there was a lot of blaming
Speaker 1: going around at Oracle. Ellison largely blamed Gary Kennedy and
Speaker 1: said his sales strategies were the reason for all the
Speaker 1: accounting discrepancies. Kennedy and Siebel, who had both left Oracle
Speaker 1: at that point, said that Ellison's attitude of anything goes
Speaker 1: was ultimately to blame. That Ellison set the tone that
Speaker 1: he said essentially everything is fair game until you get caught.
Speaker 1: So if you're not caught, you can pretty much do
Speaker 1: whatever you need to do to get the results you
Speaker 1: want to get. That's what they say. Larry Ellison's philosophy
Speaker 1: was One move the company made to try and right
Speaker 1: the wrongs was to make a new hire to replace Walker,
Speaker 1: and Oracle would eventually reach out to Jeff Henley. Henley
Speaker 1: had served as the chief financial officer of the Pacific
Speaker 1: Holding Company. That was a holding company that had a
Speaker 1: life insurance company underneath it, as well as investment strategy company,
Speaker 1: brokerage firms, that kind of thing, and according to Costello,
Speaker 1: Ellison initially try to cut the offer the board was
Speaker 1: going to extend to Henley. Ellison's like, no, this guy
Speaker 1: doesn't need that much cut it in half. But the
Speaker 1: rest of the board stood up to Ellison. They said, no,
Speaker 1: he really does need this this package in order to
Speaker 1: bring him on board to Oracle. We're never going to
Speaker 1: hire him away otherwise. And it became kind of a
Speaker 1: battle between Ellison and the rest of the board. Now,
Speaker 1: Ellison was a majority, well at least not a majority shareholder,
Speaker 1: but a major shareholder in Oracle. He had a huge
Speaker 1: amount of cloud because he owned so much of the company.
Speaker 1: But Costello would not back down, and he kept telling Ellison, no,
Speaker 1: we've got to absolutely extend this package. And eventually, uh,
Speaker 1: Ellison would back down because Costello said, listen, if you
Speaker 1: don't agree to this, the rest of the board is
Speaker 1: going to have a discussion about whether or not you're
Speaker 1: actually fit to lead this company, and you could find
Speaker 1: yourself out of a job. And at that point Ellison
Speaker 1: back down and agreed to offer the employment package to Henley,
Speaker 1: which was pretty attractive. It included half a million shares
Speaker 1: in the company just to start off with. Now, Henley
Speaker 1: began to whip the company into shape right away from
Speaker 1: a financial responsibility standpoint. He cleaned up the company's practices,
Speaker 1: He established controls to prevent another disaster like the two
Speaker 1: previous fiscal years had been. He also had to figure
Speaker 1: out how to get an inflow of cash into Oracle
Speaker 1: to keep the business running because they had a hundred
Speaker 1: seventy million dollars in outstanding loans and they needed collateral. Well, first,
Speaker 1: they began to put up its receivables as collateral, but
Speaker 1: the problem was the receivables weren't entirely reliable as the
Speaker 1: previous two years had shown, so they needed to find
Speaker 1: some other means of doing this because again Oracle had
Speaker 1: been selling future products for present day cash, which is
Speaker 1: really just robbing the future to pay the present. So
Speaker 1: ultimately Oracle was able to get some money from Nipon
Speaker 1: Steel that's a Japanese steel company that was really interested
Speaker 1: in making a huge investment in Oracle in return for
Speaker 1: a essentially a majority share in Oracle Japan that was
Speaker 1: going to be the the branch that Oracle was opening
Speaker 1: in Japan. Uh Ellison initially said no to the deal
Speaker 1: because it was for a a large personage like more
Speaker 1: than of of Oracle Japan, and Ellison did not want
Speaker 1: that to become an issue. And so while the company
Speaker 1: needed the money. He said, no, I'm not comfortable doing this.
Speaker 1: So they then renegotiated a plan and came back with
Speaker 1: an eighty million dollar loan to Oracle and steak in
Speaker 1: Oracle Japan on behalf of Nipon Steel, and that was
Speaker 1: the agreement they actually were able to come to terms
Speaker 1: on and UH. That meant that Oracle could stay in business.
Speaker 1: And in fact, people have since said this was a
Speaker 1: really wise decision on Ellison's part because he was able
Speaker 1: to maintain control of this company and not hand it
Speaker 1: over UH. And it must have been really hard to
Speaker 1: do because Oracle was so desperately in need of cash,
Speaker 1: but he did not want to invite disaster. Henley would
Speaker 1: serve as the CFO for Oracle until two thousand four
Speaker 1: when he would become the chairman for the company, and
Speaker 1: he remained in that role until two thousand fourteen. So
Speaker 1: I'll talk more about what happened in two thousand and
Speaker 1: fourteen in the next episode. Again, it gets pretty crazy,
Speaker 1: but then all the executive moves in Oracle get pretty crazy.
Speaker 1: Oracle reached out to Raymond J. Lane, who had started
Speaker 1: his career as a salesman for IBM in the nineteen sixties.
Speaker 1: He had also worked under future presidential hopeful Ross Perot
Speaker 1: at Electronic Data Systems and then for the consulting firm Booze.
Speaker 1: Allen Hamilton's Oracle brought him on to head the sales
Speaker 1: and marketing efforts at Oracle, and in June he would
Speaker 1: be named the president of Oracle USA, so the domestic
Speaker 1: branch of the company. Four years later he would become
Speaker 1: president and CEO of the whole Dann company. And he
Speaker 1: gets a lot of credit for helping turn Oracles sales
Speaker 1: efforts around in the nineteen nineties, and he would serve
Speaker 1: as president of the company until the year two thousand,
Speaker 1: when he would announce his resignation suddenly. And more on
Speaker 1: that in a bit, because it gets real juicy. At
Speaker 1: this time, Oracle's international business was actually doing pretty well,
Speaker 1: so while things at home were a little rough, internationally
Speaker 1: it was a different story and that helped balance out
Speaker 1: the problems that the company was facing in the United States,
Speaker 1: and work continued on the latest version of Oracle database software.
Speaker 1: Some analysts had pointed out that Oracle was starting to
Speaker 1: fall behind on its promised release schedule. It's also good
Speaker 1: to point out that By the time Gary Kennedy left
Speaker 1: the company in n Oracle was selling about a billion
Speaker 1: dollars worth of products sales. But with the addition of
Speaker 1: Henley and Lane to Oracle's executive leadership team and with Ellison,
Speaker 1: they essentially became the leaders of Oracle, the stage was
Speaker 1: set for that number to increase tenfold. Bob Minor, one
Speaker 1: of the co founders of the company, left his role
Speaker 1: as head of product and development at Oracle to become
Speaker 1: the leader of a spinoff unit focusing on advanced technologies.
Speaker 1: He did this in nineteen two, but the following year
Speaker 1: he sadly passed away due to lung cancer caused by
Speaker 1: exposure to asbestos. He was fifty two years old and
Speaker 1: the uh the one co founder to have passed away.
Speaker 1: In nineteen three, the company tried to put its accounting
Speaker 1: fiasco behind it by settling shareholder class action lawsuits and
Speaker 1: paying a fine that was the result of a complaint
Speaker 1: from the Security and Exchange Commission, or SEC. The The
Speaker 1: class action lawsuits cost Oracle about twenty four million dollars
Speaker 1: to settle, and the SEC fine was more like a
Speaker 1: hundred thousand dollars. Henley himself said that that signaled the
Speaker 1: beginning of a new era with financial controls and a
Speaker 1: more responsible sales strategy, and Oracle began to recover from
Speaker 1: its previously precarious position, which is some great alliteration right there,
Speaker 1: Analysts agreed. Timothy McCullum, who worked for the company Dean Witter,
Speaker 1: which is a stock brokerage in securities firm, told The
Speaker 1: New York Times that Oracle had brought itself back from
Speaker 1: the precipice and was in a good position to grow again.
Speaker 1: And that's exactly what the company did. They made a
Speaker 1: merger move to streamlined business. This was kind of a
Speaker 1: merger in name. There was a holding company called Oracle
Speaker 1: Systems Corporation, and then there was the actual operating company
Speaker 1: that was called Oracle Corporation. So you kind of had
Speaker 1: a holding company that was sort of a parent that
Speaker 1: didn't really do anything. It just was there for financial purposes,
Speaker 1: and then you had the operating company, this was the
Speaker 1: actual company that did stuff. The merger was a corporate
Speaker 1: move to kind of reincorporate the entire entity, to make
Speaker 1: it one corporation again and reincorporate it in the state
Speaker 1: of Delaware. And I've I've talked about in previous episodes
Speaker 1: why Companies incorporated in Delaware. It's kind of interesting you
Speaker 1: should look into that Oracle depended upon version seven of
Speaker 1: its software for a few years. The company had introduced
Speaker 1: Oracle Version seven in the summer of nineteen two, and
Speaker 1: the following years saw Oracle update this version several times,
Speaker 1: with seven point three shipping in nineteen nineties six. The
Speaker 1: new features got pretty futuristic for the mid nineteen nineties,
Speaker 1: including support for biometric authentication and support for video and
Speaker 1: audio data management. Now I've got a lot more to
Speaker 1: say about what happened in the mid nineteen nineties to
Speaker 1: late nineteen nineties at Oracle, but before I do that,
Speaker 1: let's take another quick break to thank our sponsor. In ninete, E. Garnett,
Speaker 1: who was a marketing executive at Oracle, had a falling
Speaker 1: out with Ellison. It seems like a common theme throughout
Speaker 1: the history of Oracle. The two had made plans to
Speaker 1: create an interactive TV venture, but then, according to Garnett,
Speaker 1: Ellison called him into his office, canceled the project, and
Speaker 1: then fired Garnett. So Garnett went out and founded a
Speaker 1: venture capitalist investment company, and then he became the acting
Speaker 1: CEO of a small database company called Ingress or Inger's
Speaker 1: if you prefer I, N G R E S only
Speaker 1: one S. So Garnett ended up hiring several former Oracle
Speaker 1: executives and developers for this company. So it seems like
Speaker 1: Ellison was continuing his pattern of alienating people to the
Speaker 1: point where they would go and join other companies to
Speaker 1: compete against Oracle, at least that's what it looks like
Speaker 1: on casual plans. In n Ellison made another trademarked flamboyant
Speaker 1: prediction at a technology conference in Paris when he proclaimed
Speaker 1: that the Internet would make Microsoft irrelevant and kill the company. Now,
Speaker 1: to be fair, Microsoft has definitely had to pivot with
Speaker 1: its software offerings because we have seen a slow migration
Speaker 1: away from native software, but the company still is in
Speaker 1: decent shape. In Ed Oates, co founder of Oracle, would
Speaker 1: retire from the company. He had originally told Ellison that
Speaker 1: he had planned to quit if the company ever grew
Speaker 1: to ten thousand employees, but he actually stuck around a
Speaker 1: bit longer. He resigned once the company had grown to
Speaker 1: about twenty thousand employees. He went on to buy a
Speaker 1: business that provided home theater equipment and installation for wealthy clients.
Speaker 1: Some of those folks included Larry Ellison and Steve Jobs. Later,
Speaker 1: he became a board member of a couple of different
Speaker 1: companies and organizations, and also a guitarist in a band
Speaker 1: called Chocked In n Oracle eight database premiered at this time,
Speaker 1: Larry Ellison felt like the next big move in computers
Speaker 1: is a trend toward a network computer model. Now, if
Speaker 1: you listen to my episodes on cloud computing, you might
Speaker 1: remember I talked a bit about mainframe computers and how
Speaker 1: you would access those computers through a dumb computer terminal.
Speaker 1: Now that's not a comment on a terminal's usefulness, but
Speaker 1: rather the fact that the terminal itself didn't have any
Speaker 1: computing power. It was just an interface to access the
Speaker 1: main frame. Ellison felt that the future of computing could
Speaker 1: be related to that past version. So I'll explain more
Speaker 1: in just a second. A network computer is sort of
Speaker 1: like those dumb terminals for mainframes. You have a computer
Speaker 1: that can connect to a server over a network connection
Speaker 1: such as the Internet. The server does all the actual work,
Speaker 1: so all the programs, all the storage, all of that.
Speaker 1: It lives on the server, the network computer just becomes
Speaker 1: your way of accessing it. Again, is a lightweight interface
Speaker 1: to get access to that software and that information. Ellison
Speaker 1: was sure that was the future of computing, which would
Speaker 1: also mean people would move away from using microcomputers that
Speaker 1: relied on native software on their machines, which would mean
Speaker 1: Oracle could become the largest software company in the world,
Speaker 1: finally toppling its arch rival that would be Microsoft. But
Speaker 1: while you could argue Ellison was on the right track,
Speaker 1: his predictions were a bit premature. Software sales did not
Speaker 1: slow down, Oracle did not become the dominant player in
Speaker 1: the software space, and cloud computing applications would remain a
Speaker 1: few years off before they became a viable industry. Even so,
Speaker 1: Ellison was onto something. He was just way ahead of
Speaker 1: his time on this one. In Oracle updated its product
Speaker 1: to Oracle eight I lowercase I, which had support for
Speaker 1: Java and HTTP technologies, meaning it was Web compatible. That
Speaker 1: same year, Evan Goldberg, who had previously been an employee
Speaker 1: at Oracle, contacted Larry Ellison about a web enabled customer
Speaker 1: relationship management product. Ellis and urged Goldberg to work on
Speaker 1: accounting software first, making it a web accessible product people
Speaker 1: would subscribe to rather than purchase outright, and so Goldberg
Speaker 1: did that and he launched net Ledger, which later became
Speaker 1: net sweet. I mentioned that in that previous episode about
Speaker 1: net suite, so this is when that happened. Also, just
Speaker 1: a little bit later, Mark Bennieoff, who had been working
Speaker 1: for Oracle for a few years, would leave the company
Speaker 1: to found Salesforce dot Com, which also got some help
Speaker 1: both in the form of advice and financial support from
Speaker 1: Larry Ellison and Salesforce and net Suite would go on
Speaker 1: into the software as a service game, an area that
Speaker 1: Ellison really wanted to break into as well. Something else
Speaker 1: that was happening around this time was a near death experience.
Speaker 1: Larry Ellison was participating in a yacht race off the
Speaker 1: coast of Australia and during the race they encountered a storm,
Speaker 1: which was not unusual for the area around Tasmania that
Speaker 1: they were in at the time, but the storm actually
Speaker 1: developed into a full blown hurricane. Out of the fifteen
Speaker 1: yachts that were in the race, only forty four were
Speaker 1: able to complete the course, and six sailors from various yachts,
Speaker 1: none of them Ellison's lost their lives in the storm
Speaker 1: they drowned. Ellison himself had to hand over control of
Speaker 1: his yacht to one of the more experienced sailors on
Speaker 1: the member on his his crew team, and he said
Speaker 1: that the whole experience gave him a new appreciation for life,
Speaker 1: and it also seemed to inspire him to take a
Speaker 1: more direct control of Oracle, which of course led to
Speaker 1: some more conflict. In two thousand, ray Lane would resign
Speaker 1: as president. So remember Lane was the guy who was
Speaker 1: brought in to shape up the sales and marketing efforts
Speaker 1: of Oracle, and Henley had joined a little bit earlier
Speaker 1: to work and fix the financial controls of the company. Lane,
Speaker 1: Henley and Ellison were the trio who made the instrumental
Speaker 1: decisions regarding Oracle's direction. So what the heck caused Raymond
Speaker 1: Lane to resign? Well, if first there was no comment
Speaker 1: from Lane. Ellison's public statement was that the resignation was
Speaker 1: part of a planned transition, But later he would kind
Speaker 1: of qualify that statement. He said, well, by planned, I
Speaker 1: mean I had planned to call Lane while Lane was
Speaker 1: on vacation with his family and planned to announce the
Speaker 1: resignation for the following Wednesday, which does not really seem
Speaker 1: like much of a transition plan to me, but there
Speaker 1: you go. Lane later had a lot more to say
Speaker 1: about his resignation. Now, according to him, Ellison had been
Speaker 1: steadily removing responsibilities from the role of president, and ultimately
Speaker 1: Ellison wanted to take the title of president away from
Speaker 1: Lane and fold the title in with CEO. Now, that
Speaker 1: would leave Lane without a real role at the company,
Speaker 1: and it would effectively strip him of all his power.
Speaker 1: So when Lane asked Ellison, why do you want to
Speaker 1: do this, Ellison said that he felt having a president
Speaker 1: and a CEO meant that there were two people with authority,
Speaker 1: and that would cause confusion about who is in charge.
Speaker 1: This particular explanation I find absolutely hilarious considering what happens
Speaker 1: later in oracles history, but I don't want to jump
Speaker 1: ahead of myself. Many executives would say that Ellison found
Speaker 1: the notion of anyone having remotely the same amount of
Speaker 1: influence that he had over an oracle to be untenable,
Speaker 1: and that that was the reason Ellison eventually uh confronted
Speaker 1: Lane over the phone. He didn't confront face to face.
Speaker 1: He called him while Lane was on vacation, so Lane
Speaker 1: decided that he would resign rather than go through the
Speaker 1: process of having all of his responsibilities stripped away from
Speaker 1: him and the title taken away from him. He was
Speaker 1: just two and a half weeks away from having several
Speaker 1: millions of dollars worth of shares in the company vest,
Speaker 1: and that was kind of a slap in the face.
Speaker 1: It was enough for him to potentially consider going into
Speaker 1: litigation against Oracle. In fact, a lot of executives have
Speaker 1: sued Oracle after being fired, with the suspicion that the reason,
Speaker 1: or at least the timing of their firing was to
Speaker 1: prevent them having more shares in the company vest at
Speaker 1: a certain point. But Lane did not go after a lawsuit.
Speaker 1: He did eventually get those shares, However, he didn't return
Speaker 1: to Oracle's offices either. A secretary instead would forward all
Speaker 1: his belongings to his home, so he was pretty much
Speaker 1: just done with Oracle at that point. Now, a few
Speaker 1: months after Lane's departure, another executive named Gary Bloom handed
Speaker 1: in his resignation. Bloom had been an executive vice president
Speaker 1: of database Development Activities and he had really hoped to
Speaker 1: get the role of president and maybe even eventually CEO.
Speaker 1: He had aspirations of leading Oracle, but Bloom was starting
Speaker 1: to find that it was difficult to get any face
Speaker 1: time with Ellison, who was relying more heavily upon an
Speaker 1: executive that he had hired recently named Software Cats. Software
Speaker 1: Cats had joined Oracle in the late nineties, and she
Speaker 1: was well on her way to becoming a huge influence
Speaker 1: in that company. Ellison would frequently communicate to others in
Speaker 1: Oracle through Cats. He would tell Software Cats what he thought,
Speaker 1: and then she would go on and talk to the
Speaker 1: various people who were uh involved with whatever it was
Speaker 1: Ellison wanted to talk about. Bloom was really frustrated they
Speaker 1: wasn't getting anywhere, and he was suspicious that he was
Speaker 1: never going to get to the top leadership position at
Speaker 1: the company, so he ended up leaving Oracle to become
Speaker 1: the head of another company called Veritas Now. That same year,
Speaker 1: there was a few other shake ups for Oracle. The
Speaker 1: company released an integrated application suite called eleven I, but
Speaker 1: it was really buggy, so that made customers pretty upset,
Speaker 1: and the stock share price fell fourteen percent in the
Speaker 1: wake of ray Lane's departure. But Oracle story does not
Speaker 1: end there. There's a bit more to tell and I
Speaker 1: will go into it when we get to the Oracle
Speaker 1: story part three. In the meantime, if you guys have
Speaker 1: suggestions for future episodes of tech Stuff, please let me
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