Speaker 1: Get in touch with technology with tech Stuff from how
Speaker 1: stuff works dot com. Hey Lere, 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: at the end of our last episode, we left off
Speaker 1: with Oracle in the year two thousand, Larry Ellison, a
Speaker 1: co founder of the company, had just decided to consolidate power,
Speaker 1: and according to former Oracle president Raymond Lane, stripped him
Speaker 1: of all authority from the role of president in order
Speaker 1: to convince Lane to resign. So that's what Lane did,
Speaker 1: and Oracle stock took a little bump and reviews. The
Speaker 1: most recent software for Oracle at the time, We're mixed
Speaker 1: at best. Oracle had also failed to capitalize on Larry
Speaker 1: Ellison's grand plan to transform computing by boarding everything over
Speaker 1: to a web based approach. He had hoped to introduced
Speaker 1: network computers, which were essentially stripped down PCs that have
Speaker 1: very few bells and whistles. They didn't even have a
Speaker 1: hard drive, which would have brought the price down to
Speaker 1: about five dollars per unit, so that would be the
Speaker 1: attractive factor there. All the software and storage that you
Speaker 1: would need for your Your computer would actually be accessed
Speaker 1: over the Internet, so all you had to have was
Speaker 1: a persistent Internet connection. Again, this is sort of like
Speaker 1: going back to the old mainframe days where you would
Speaker 1: use a dumb computer terminal to access the power of
Speaker 1: the main frame, except instead of a mainframe, your accessing
Speaker 1: servers on the Internet. He was ahead of the curve
Speaker 1: on that one, and the experience uh that Oracle actually
Speaker 1: delivered ended up falling short of the promises that he
Speaker 1: had been making, something he actually apologized for at the
Speaker 1: press conference in and it took a few years, but
Speaker 1: later on we would actually see computers similar to the
Speaker 1: network computer concept hit the market, with stuff like chromebooks,
Speaker 1: for example. This was also right around the time that
Speaker 1: the dot com bubble was collapsing. Startup companies that seemed
Speaker 1: to be destined for greatness were fizzling out left and right.
Speaker 1: Oracle was better established and wasn't solely reliant upon web
Speaker 1: oriented businesses, and it was able to get through the turmoil,
Speaker 1: as did both net Suite and salesforce dot Com, which
Speaker 1: were two web based ventures that had been launched by
Speaker 1: former Oracle employees. They were also two ventures that Larry
Speaker 1: Ellison had helped fund a couple of years earlier. So
Speaker 1: all three of those managed to get through the dot
Speaker 1: com bubble collapse, but a lot of other companies weren't
Speaker 1: so fortunate. Oh and there was another thing that happened
Speaker 1: in two thousand. There was an event called trash Gate.
Speaker 1: At least later on it was dubbed that. Let me
Speaker 1: set the grounds for this because it's kind of a
Speaker 1: juicy scandal. So Oracle's arch enemy in the market was
Speaker 1: always Microsoft. Microsoft was the number one largest software company
Speaker 1: in the world, and Ellison always wanted Oracle to overtake it,
Speaker 1: and he was always pushing for that to to take
Speaker 1: that spot away from Bill Gates's company. Not at the time,
Speaker 1: Microsoft was in the middle of a massive antitrust lawsuit.
Speaker 1: I'll probably do an episode at some point to really
Speaker 1: dive into that lawsuit in detail and explain what what
Speaker 1: was happening and why it was important. But anyway, the
Speaker 1: important thing was that Microsoft was financially funding several groups
Speaker 1: that were lobbying on the company's behalf, and Oracle wanted
Speaker 1: to do some investigation here and try to kind of
Speaker 1: uh counteract these groups influence on the outcome of this
Speaker 1: antitrust lawsuits, so they hired an investigative firm to look
Speaker 1: into those groups, and the efforts went so far as
Speaker 1: to offer up essentially a reward for handing over the
Speaker 1: contents of waste paper baskets to see if there were
Speaker 1: any evidence there the groups were working to influence the
Speaker 1: outcome of the case, thus the term trash gate. Now
Speaker 1: that didn't reflect well on either Microsoft or Oracle. Oracles
Speaker 1: accusations that Microsoft was using these groups in a way
Speaker 1: to try and get a better outcome for this antitrust lawsuit,
Speaker 1: that's not great. But then Oracle also wallowing in the
Speaker 1: garbage of another company in order to look for evidence,
Speaker 1: some dirt to dig up on them. That didn't look
Speaker 1: great either. Ellison would argue that the actions were entirely legal.
Speaker 1: Maybe not ethical, but they were legal, although you could
Speaker 1: argue that nobody really came out of that looking too great.
Speaker 1: But despite all of these things, despite the controversy, despite
Speaker 1: the bump in the stock price, despite all of that,
Speaker 1: the company was still in a strong position, much better
Speaker 1: than it had been a decade earlier in the early
Speaker 1: nine nineties when things were not so certain. So let's
Speaker 1: learn about what has happened with Oracle since two thousand
Speaker 1: and where it is today. One other thing that I
Speaker 1: have to cover that did happen in two thousand was
Speaker 1: that Oracle partnered with a Texas based company called Entrust
Speaker 1: Technologies Incorporated on a project named Oracle Advanced Security. Now.
Speaker 1: This was meant to combine database technology with strong encryption
Speaker 1: and authentication tools to better protect data from hackers. The
Speaker 1: project would become an add on feature for Oracle Database
Speaker 1: Enterprise Edition. Today's version of this includes the ability for
Speaker 1: administrators to mask specific parts of a database so that
Speaker 1: only authorized users can view those sections. Unauthorized users won't
Speaker 1: be able to see those sections, but they would still
Speaker 1: be able to see other ones, which comes in handy
Speaker 1: if you want people to work with databases that contain
Speaker 1: sense the material that they really shouldn't see. They can
Speaker 1: still do their work in the sections of the database
Speaker 1: they are authorized to use, and the bits they're not
Speaker 1: supposed to see will just remain hidden from view. So
Speaker 1: you can imagine how this would be handy if you
Speaker 1: were working with a database that contained payroll information, for example.
Speaker 1: And at the end of two thousand, despite that drop
Speaker 1: in stock, the company finished the fiscal years strong with
Speaker 1: ten point to billion dollars in revenue and earnings at
Speaker 1: six point three billion dollars. That's the highest in its
Speaker 1: history at that point. Now, according to Larry Ellison, Oracle
Speaker 1: was able to save a billion dollars in costs by
Speaker 1: using the company's own Oracle E business suite. So he
Speaker 1: was taking the opportunity to point at Oracle's earnings and say,
Speaker 1: the reason, or one of the reasons this number is
Speaker 1: so high is because we use our own products, so
Speaker 1: you should too, using the company's performance as a commercial
Speaker 1: for the company's project products. Rather, two thousand one would
Speaker 1: have even more in revenue, though earnings would actually drop
Speaker 1: to two point six billion, Still not a bad chunk
Speaker 1: of change. I would happily take two point six billion
Speaker 1: dollars if someone wants to hand it out. Ellison also
Speaker 1: announced the Oracle nine Eyed database. That was a suite
Speaker 1: that included the Oracle Real Application Clusters or Oracle R
Speaker 1: a C, which is sort of a type of grid computing. Now,
Speaker 1: I mentioned grid computing in some recent episodes, but let
Speaker 1: me give you a quick rundown on what that means
Speaker 1: in case you're not familiar. First, let's start with a
Speaker 1: basic computer, a single computer. It has a single core processor.
Speaker 1: Now that architecture works for basic computer problems, but it
Speaker 1: has limitations. The single core essentially works on problems one
Speaker 1: operation at a time. Now, you can make this type
Speaker 1: of computer really fast by beefing up the clock speed
Speaker 1: on the processor so it can run more operations in
Speaker 1: the same amount of time. It's just running each operation
Speaker 1: more quickly than it was before. But for sufficiently complex problems,
Speaker 1: this will only speed things up a little bit. Now
Speaker 1: you also have multi core processors. This is like having
Speaker 1: a computer that has a couple of different brains, or
Speaker 1: maybe it has a brain that can multitask and solve
Speaker 1: more than one set of problems at a time. Multi
Speaker 1: core processors are great for what we call parallel problems,
Speaker 1: sometimes embarrassingly parallel problems. It's actually a technical term. Now,
Speaker 1: these are a category of computer problems that can be
Speaker 1: divided into parallel tasks that may be solved at the
Speaker 1: same time before you get to your ultimate resolution of
Speaker 1: the problem. So, in other words, it doesn't have to
Speaker 1: be done sequentially. You can split it up into different
Speaker 1: parts of the problem. Not all problems fall into that category.
Speaker 1: By the way, but a lot of them do. And
Speaker 1: a multi core processor may be able to solve certain
Speaker 1: computational problems faster than a single core processor, even if
Speaker 1: the single core processor has a significantly higher clock speed
Speaker 1: than the multi core processor does. And I've used this
Speaker 1: example before, but let's stick with it because I think
Speaker 1: it works pretty well. Imagine that you've got a classroom.
Speaker 1: It's filled with math students, and there are eleven students
Speaker 1: there total. One of those math students is a true genius.
Speaker 1: She can solve any math problem faster than anyone else
Speaker 1: in the class. Now, the other ten are good students,
Speaker 1: but they take a little longer to get the right
Speaker 1: answer for any given problem them. One day, the teacher
Speaker 1: hands out a pop quiz. The genius gets ten math
Speaker 1: problems to solve. The other ten students get one problem each.
Speaker 1: So student one gets problem one, Student two gets problem
Speaker 1: to the question is who will finish first? Chances are
Speaker 1: the ten individual students will finish first because each only
Speaker 1: has to get one answer, while our genius has to
Speaker 1: finish all ten of the questions. So while she may
Speaker 1: be faster on an individual basis, when she tackles a
Speaker 1: problem that can be solved in parallel, the other students
Speaker 1: have an advantage. So that's the same idea with multi
Speaker 1: core processors. Now let's go back to grid computing. Grid
Speaker 1: computing is a lot like multi core processors, except instead
Speaker 1: of cores in a processor, we're talking about individual computers.
Speaker 1: This is a network of computers that can take on
Speaker 1: a computational load. With Oracle software, the idea was that
Speaker 1: a grid of computers could handle the tasks of a
Speaker 1: more powerful machine, so you could use low cost computers
Speaker 1: that would work together to act like it was a
Speaker 1: powerful database server, which would bring operational costs down, and
Speaker 1: it becomes easy to scale up because you just add
Speaker 1: more low cost machines to the grid. This became a
Speaker 1: popular feature, and upon launch, it was the only database
Speaker 1: software that could work in computer clusters running on Unix
Speaker 1: or Windows operating systems. It's a really attractive solution for
Speaker 1: a lot of database managers, and the reason for that
Speaker 1: is that if you have a breakdown, it's pretty cheap
Speaker 1: to fix stuff. Right if you're using low cost computers
Speaker 1: with relatively low cost off the shelf components. If something fails,
Speaker 1: it's easy to get a replacement part. It's easy to
Speaker 1: swap it out, and it doesn't cost a whole lot,
Speaker 1: Whereas if you're using a very expensive proprietary system, it
Speaker 1: could be incredibly costly if something fails and you may
Speaker 1: not have a redundant system to back it up. But
Speaker 1: with low cost solutions, you could actually buy essentially twice
Speaker 1: as many or maybe even three times as many machines
Speaker 1: as you need, have redundancy built in, and still overall
Speaker 1: be operating at a lower cost than you would be
Speaker 1: if you were using one of those super high end
Speaker 1: powerful computers. And so we've seen this model being adopted
Speaker 1: across multiple industries. This is the same sort of model
Speaker 1: that Google uses for its various servers, the idea of
Speaker 1: going with off the shelf components so that you can
Speaker 1: uh streamline your process. And yeah, it's not as fancy
Speaker 1: or as fast as your top of the line computers,
Speaker 1: but when you're looking working at it at a scale,
Speaker 1: it's the most most efficient method. Plus again, if you
Speaker 1: want to increase your system's capacity, you just add more
Speaker 1: computers to it. This works really well for those operations
Speaker 1: that can be worked in in parallel. Now, if you're
Speaker 1: working on something that requires just a really, really fast
Speaker 1: process sessor and it cannot be broken down into parallel tasks.
Speaker 1: This approach would not make any sense. So it really
Speaker 1: depends upon the the applications you have in mind. It
Speaker 1: doesn't work for everything. All right. That sets the ground
Speaker 1: for where we're going. Ellison made another grandiose claim in
Speaker 1: two thousand two and stated that Oracle Database software was
Speaker 1: quote unbreakable. Now, what he meant by that was that
Speaker 1: the security around it was iron clad and that the
Speaker 1: software had passed fifteen different security evaluations. And they launched
Speaker 1: a campaign where they referred to this as unbreakable software.
Speaker 1: But how did that turn out? Well, I'll tell you,
Speaker 1: but first let's take a quick break to thank our sponsor. Well,
Speaker 1: it turns out if you make such a big claim
Speaker 1: that you're security is unbreakable, you tend to inspire people
Speaker 1: to test that claim, such as a Scottish entrepreneur named
Speaker 1: David Litchfield. He's a hacker who wanted to really test
Speaker 1: this out. He had founded a company called ings Software
Speaker 1: shortly before Ellison made this big pronouncement, and he decided,
Speaker 1: you know what, I'm gonna look at this code. I'm
Speaker 1: really gonna explore and see if there are in fact,
Speaker 1: UH no vulnerabilities here if there's no way to exploit
Speaker 1: it and get access to information that I should not
Speaker 1: have access to. And Litchfield has been a a participant
Speaker 1: in the hacker community for years. He has given numerous
Speaker 1: presentations about UH software security at various conferences, including the
Speaker 1: black Hat Conference, and within twenty four hours of deciding
Speaker 1: he was going to challenge oracles claim on Unbreakable, he
Speaker 1: said he discovered thirty five flaws in Oracles code that
Speaker 1: could potential vulnerabilities. According to Lichfield, he contacted Oracle to
Speaker 1: alert them to those flaws, and he only went public
Speaker 1: with his findings after he gave the company a chance
Speaker 1: to send out software patches to fix the vulnerabilities. He said, well,
Speaker 1: that didn't happen, And when it didn't happen, I went
Speaker 1: public because I felt like it forces their hand to
Speaker 1: go and do something about it. Otherwise they might just
Speaker 1: sit on it, and then you have these vulnerabilities out
Speaker 1: in the wild. Litchfield would end up having a long
Speaker 1: adversarial relationship with Oracle. He frequently would test various builds
Speaker 1: of Oracle software and would publish vulnerabilities on a regular basis,
Speaker 1: often to the constern nation of Oracle. But to be fair,
Speaker 1: Lichfield was not necessarily advocating the exploitation of those vulnerabilities. Rather,
Speaker 1: he was calling on Oracle to treat security as a
Speaker 1: foundation for its software, rather than what he referred to
Speaker 1: as a goal keeping strategy, where you would just add
Speaker 1: in a security measure at the end of the development
Speaker 1: phase rather than from the beginning. He said, what they're
Speaker 1: doing is they're trying to paste this security approach on
Speaker 1: after they've developed everything else, and there's not always a
Speaker 1: good fit there and a miss stuff as a result.
Speaker 1: He was saying what they should do is create a
Speaker 1: secure approach from the very beginning of development and test
Speaker 1: it throughout the process to make sure that it remained intact.
Speaker 1: So that was his argument. In two thousand four, oracles
Speaker 1: chief security officer Mary Ann Davidson would write a piece
Speaker 1: for zd net that said hackers like Lichfield where a
Speaker 1: security threat to Oracle customers, and Lichfield's response was that
Speaker 1: she should resign from her position and from Oracle, because
Speaker 1: he said that that was a irresponsible response to what
Speaker 1: he had done. But I read Davidson's piece because I
Speaker 1: wanted to make sure I gave everyone a fair ground.
Speaker 1: While I was researching this to quically, I tend to
Speaker 1: side with hackers because there have been plenty of stories
Speaker 1: of companies that publish software that have critical vulnerabilities in
Speaker 1: them and then are alerted to those vulnerabilities and then
Speaker 1: appear to do very little in response to that. And
Speaker 1: thus the hackers who found the vulnerability say, it's my
Speaker 1: responsibility to make this public because that will put the
Speaker 1: pressure on the companies to actually fix the problem or
Speaker 1: else they're going to lose customers. That's the argument. The
Speaker 1: hackers have the approach of, well, if you don't do
Speaker 1: anything about it, someone's going to take advantage of it.
Speaker 1: People will get hurt in response. So the only thing
Speaker 1: I can do, since I can't fix the problem for you,
Speaker 1: is to let everyone know the problem exists, and then
Speaker 1: you have to fix it. Well, Davidson wrote a piece
Speaker 1: and I read it, and, like I said, she made
Speaker 1: some good points. She mentioned that patching of vulnerability can
Speaker 1: take a lot of time. It can take more time
Speaker 1: than a hacker might assume it takes. She said, it
Speaker 1: may only take twenty minutes to change a couple of
Speaker 1: lines of code and everything's fine. But often it takes
Speaker 1: more than that. It may be a vulnerability that only
Speaker 1: pertains to one build of the software for a particular
Speaker 1: operating system or architecture, and if you offer up software
Speaker 1: for multiple operating systems and architectures, you have to test
Speaker 1: all of them to find out where this vulnerability exists
Speaker 1: and where it may not. So it may mean that
Speaker 1: you have to take a little more extra time for that.
Speaker 1: It could take time to patch it and then time
Speaker 1: to distribute it to your customers. And she argued that
Speaker 1: hackers who published vulnerabilities are not necessarily motivating companies to
Speaker 1: fix problems, but rather jumping ahead of a fix that's
Speaker 1: on the way now. If you're being generous, you could say, well,
Speaker 1: that might be the case, and perhaps Litchfield and others
Speaker 1: of his ilk have unreasonable expectations when it comes to
Speaker 1: sending out fixes. Maybe there needs to be better communication
Speaker 1: between the hackers and the companies to say, the companies
Speaker 1: would respond with, thank you for alerting us to this problem.
Speaker 1: We will work on it. We have an estimated time
Speaker 1: of when we think we can get a patch out,
Speaker 1: and it is at X time. Maybe at that point
Speaker 1: everyone's on the same page and you don't have any
Speaker 1: itchy trigger fingers when it comes to publishing vulnerabilities. But
Speaker 1: I do think that Litchfield made a very good point
Speaker 1: in stating that companies like Oracle have a very high
Speaker 1: bar to meet when it comes to software security due
Speaker 1: to the nature of the code that they sell. If
Speaker 1: your product is meant to hold gigabytes of sensitive information,
Speaker 1: it better be as secure as you can reasonably expect
Speaker 1: it to be before you ship it, because it's a
Speaker 1: guarantee that hackers are going to start poking and prodding
Speaker 1: to find a weak spot. Davidson, by the way, would
Speaker 1: remain the chief security officer of Oracle. She still holds
Speaker 1: that position today, so she did not follow Litchfield's suggestion
Speaker 1: that she's resigned from the company. In two thousand three,
Speaker 1: Oracle launched a new product called Oracle ten G, which
Speaker 1: was a grid computing product. It really built on that
Speaker 1: applications cluster they had worked on previously, and now it
Speaker 1: was more of a distributed database approach. And the company
Speaker 1: also got involved in something else that took overheadlines, which
Speaker 1: was an attempt to scoop up a competitor. The competitor
Speaker 1: was a company called People soft. People Soft provided financial
Speaker 1: management software, some supply chain management products, some enterprise performance
Speaker 1: management software, and stuff like that. Essentially, it was in
Speaker 1: a very similar business as NetSuite, So if you listen
Speaker 1: to my net Suite podcast, you kind of getta have
Speaker 1: a handle for what sort of stuff that company offered clients.
Speaker 1: People Soft was in a similar business. On June second,
Speaker 1: two thousand three, people Soft issue to press release staying
Speaker 1: that the company was seeking to acquire a smaller software
Speaker 1: vendor called j D. Edwards that operated in the same
Speaker 1: space as people Soft, So in other words, they were
Speaker 1: going to buy up a competitor, but it was a
Speaker 1: smaller competitor. On June six of two thousand three, Oracle
Speaker 1: issued its own press release, so this was just four
Speaker 1: days later, and they stated that Oracle intended to acquire
Speaker 1: people Soft and invited the board of people Soft to
Speaker 1: enter into talks with Oracle, which ruffled some feathers over
Speaker 1: at the executive level at people Soft. Oracle prepared to
Speaker 1: hold a hostile takeover of the company. So let's talk
Speaker 1: about what that means. So you've got different ways where
Speaker 1: companies can merge together. There are acquisitions, they're mergers, These
Speaker 1: are two terms that kind of give you a slightly
Speaker 1: different uh feeling, right, Like, an acquisition sounds like a
Speaker 1: larger company buying up a smaller company and then incorporating
Speaker 1: that company into its operations in some way. A merger
Speaker 1: sounds more like two companies of similar size and status
Speaker 1: that merged together to form a new, mega powerful company
Speaker 1: pasably able to turn into Voltron. In a hostile takeover,
Speaker 1: one company goes directly to the shareholders of another company,
Speaker 1: and the whole purpose is an attempt to gain control
Speaker 1: of the second company. So in this case, Oracle would
Speaker 1: essentially go to People's Soft shareholders and say, hey, here's
Speaker 1: the deal. You've got shares in this company called people Soft.
Speaker 1: I would like to buy your shares at a slightly
Speaker 1: higher price than what they're worth on the market. And
Speaker 1: that way I can run this company once I get
Speaker 1: a majority of the shares, because as majority shareholder, I
Speaker 1: can vote to determine what the company does, and that
Speaker 1: way I bypass the leadership of people soften entirely because
Speaker 1: it's a publicly traded company and the company has to
Speaker 1: respond to shareholders. So all I have to do is
Speaker 1: get more than fifty of the shares, and if I
Speaker 1: do that, then I can force votes in people soft
Speaker 1: and it essentially becomes my company. And from there I
Speaker 1: can even move to the point where they agree to
Speaker 1: be acquired. But people soft headed defense for this, they
Speaker 1: used what was called a poison pill. Now, poison pills
Speaker 1: are a category. They're not, It's not just a single thing.
Speaker 1: Poison pills are strategies that got popular after a string
Speaker 1: of hostile takeovers happened in the nineteen eighties was a
Speaker 1: period of pretty cutthroat business practices, and after the nineteen
Speaker 1: eighties you started to see hostile takeovers kind of fade
Speaker 1: away and more mergers and acquisitions happen in the nineties,
Speaker 1: and poison pills were part of the reason for that.
Speaker 1: So typically, a poison pill is a measure that kicks
Speaker 1: in once any single shareholder acquires a particular percentage of
Speaker 1: ownership in a company. So for the purposes of this illustration,
Speaker 1: I'm just going to use the example of thirty percent,
Speaker 1: but that's a purely hypothetical example. There could be different
Speaker 1: percentages for different companies. So once that conditions met, as in,
Speaker 1: once one single shareholder gets hold of thirty percent of
Speaker 1: all the shares of a company the poison pill activates. Now,
Speaker 1: the outcome can take a couple of different forms. One
Speaker 1: common one is that the company will issue new shares
Speaker 1: which anyone apart from the entity that now has thirty
Speaker 1: of the shares can buy at a discount. So, in
Speaker 1: other words, let's say I'm trying to do a hostile
Speaker 1: takeover of Disney because somehow I'm rolling in cash and
Speaker 1: I have started to approach Disney shareholders, and I say, listen, uh,
Speaker 1: I know that stocks are trading at X amount. I'm
Speaker 1: ready to buy your shares at why which is higher
Speaker 1: than X? And so you'll make a profit on your shares.
Speaker 1: You'll make more money selling to me than you would
Speaker 1: if you sold to the market. What do you say?
Speaker 1: And once that hits, once I get of all those
Speaker 1: Disney shares, the poison pill jumps in and Disney starts
Speaker 1: to offer more shares of Disney at a lower price
Speaker 1: than normal, a discounted price, but only to everyone apart
Speaker 1: from me I have. Disney does not allow me to
Speaker 1: buy shares at that reduced price, only other people. That
Speaker 1: ends up diluting the shares, ends up making it more
Speaker 1: difficult for me to get enough shares to actually have
Speaker 1: a majority. Right by adding more shares, my thirty percent
Speaker 1: is creeping downward because they're adding more to the overall number.
Speaker 1: The price is also going down because the market valuation
Speaker 1: of Disney has to remain the same. You can issue
Speaker 1: more shares of the company, but the value of the
Speaker 1: company does not magically changed. I mean I mentioned this
Speaker 1: earlier in a previous episode. So if the value of
Speaker 1: the company is dependent upon the number of shares and
Speaker 1: the price per share, if you if you increase the
Speaker 1: number of shares, you reduce the price per share. So
Speaker 1: suddenly I have a smaller percentage, and it's worth less
Speaker 1: than it was is when I bought everything, and I'm
Speaker 1: further away from my goal of getting controlling interest in
Speaker 1: the company. That is a version of the poison pill strategy.
Speaker 1: That's just one. There are other ones. In the case
Speaker 1: of people Soft, one poison pill strategy was a refund
Speaker 1: promise the company had made to its customers, so not
Speaker 1: at shareholders. This was to people Soft customers that may
Speaker 1: or may not own shares in people Soft. The agreement
Speaker 1: was that in the event of a hostile takeover enterprise,
Speaker 1: customers would be guaranteed a refund of two to five
Speaker 1: times more than whatever the licensing fee they had to
Speaker 1: spend was to use People's Soft products. And so essentially
Speaker 1: what people Soft is saying is, hey, do you do
Speaker 1: you have a license for our stuff? However much you
Speaker 1: paid for it, You'll get paid two to five times
Speaker 1: more than that if there's a hostile takeover, which essentially
Speaker 1: puts the burden on whichever company takes people Soft over
Speaker 1: to make good on that promise, So you would start
Speaker 1: off immediately with a huge payout you would have to
Speaker 1: make to all of People's Soft customers. Oracle would sue
Speaker 1: people Soft over this poison pill, saying that the company
Speaker 1: was ignoring shareholder desires through such maneuvers, saying, hey, if
Speaker 1: shareholders want to sell to us, you shouldn't discourage it
Speaker 1: by having this other measure in place, because then you're
Speaker 1: hurting your shareholders. People's Soft response was, look, this move
Speaker 1: is good for our customers, which in the long term
Speaker 1: means it's good for our shareholders. So things got pretty ugly.
Speaker 1: The United States Department of Justice also got into the act.
Speaker 1: They filed a lawsuit against Oracle, a complaint against them anyway,
Speaker 1: and stated that if Oracle were to acquire people Soft,
Speaker 1: it would be in violation of antitrust laws. Effectively, they
Speaker 1: were saying Oracle would create a monopoly in the market.
Speaker 1: This was something else that people Soft had suggested was
Speaker 1: a possible outcome and a reason why Oracle should not
Speaker 1: be allowed to take over the company. A federal judge
Speaker 1: would later throw this case out, stating that the Deparminent
Speaker 1: of Justice had failed to make its case that they
Speaker 1: failed to give evidence that this would actually be a
Speaker 1: violation of antitrust laws. Around that same time, Oracle changed
Speaker 1: up the structure of its executive leadership. The company had
Speaker 1: the CEO and chairman roles combined before, but at this
Speaker 1: point they decided to split them up, so Ellison would
Speaker 1: remain the company's CEO and a director of the company,
Speaker 1: and Jeff Henley became the chairman of the board of directors.
Speaker 1: After about two years of ugly battles in and out
Speaker 1: of courts, Oracle eventually acquired people Soft for the princely
Speaker 1: sum of about ten point three billion dollars. Afterward, employees
Speaker 1: of the former people Soft got their first taste of
Speaker 1: how things were going to change, because Oracle laid off
Speaker 1: about half of People's Soft workforce, firing around five thousand
Speaker 1: to six thousand people, so either just less than half
Speaker 1: or just more than half, because People's had about eleven
Speaker 1: thousand people working for it when Oracle purchased it, and
Speaker 1: I saw differing accounts of exactly how many people were
Speaker 1: laid off those in the thousands, and it meant that
Speaker 1: if you worked at people Soft, there was a good
Speaker 1: chance you weren't going to be there very long, or
Speaker 1: that half the people around you we're gonna disappear pretty soon.
Speaker 1: This was part of a larger move by Oracle to
Speaker 1: reduce its workforce. At that time. The company also released
Speaker 1: a new version of its database software for free, and
Speaker 1: they called it Oracle Database ten G Express Edition. This
Speaker 1: was in two thousand five. Now. This version of Oracles
Speaker 1: database software had limitations built in specifically to encourage customers
Speaker 1: to upgrade to the products Oracle was selling while giving
Speaker 1: them a sense of what was possible using that software.
Speaker 1: So it's kind of like breaks being put on the system.
Speaker 1: They couldn't couldn't do everything that Oracles flagship software what
Speaker 1: could do, which makes sense. It was just a way
Speaker 1: of of sort of marketing to people, as well as
Speaker 1: offering up a free database solution that did in fact
Speaker 1: work for smaller scale projects. So if you were not
Speaker 1: running a big company, you could use this database software
Speaker 1: effectively all by its own. You didn't have to feel
Speaker 1: like you needed to upgrade. But for other companies it
Speaker 1: might just be a way of kind of previewing what
Speaker 1: Oracle had to offer. In September two thou five, Oracle
Speaker 1: announced that it would acquire sebl CRM Systems, Incorporated. This
Speaker 1: was the company that was founded by former Oracle sales
Speaker 1: executive Thomas Siebel in the early nineteen nineties. You might
Speaker 1: remember I mentioned him during the last episode. Seoble had
Speaker 1: left Oracle in the wake of its sales shake up
Speaker 1: after that whole issue with how sales was handling things
Speaker 1: and the incorrect reporting of revenues. The deal was valued
Speaker 1: at five point eight billion dollars, and it brought Siebel's
Speaker 1: customer relationship management software under the umbrella of Oracle. Now.
Speaker 1: The next couple of years brought your usual updates to
Speaker 1: Oracle software and a couple more acquisitions. Oracle bought Portal
Speaker 1: Software for about four forty mill and then spent an
Speaker 1: equal amount acquiring another company called Stellent. These companies sold
Speaker 1: billing and revenue management software and enterprise content management products respectively.
Speaker 1: And that would not be the end of oracles list
Speaker 1: of acquisitions. It was actually on a tear and uh,
Speaker 1: there's a lot more to talk about to kind of
Speaker 1: bring us up to date to what Oracle is doing today.
Speaker 1: But before I jump into that, let's take another quick
Speaker 1: break to thank our sponsor. In two thousand and six,
Speaker 1: Oracle made another acquisition, purchasing the performance management software company
Speaker 1: met to Solve for three point three billion dollars. Oracle
Speaker 1: continued to grow and diversify its products by incorporating the
Speaker 1: technology from previous competitors as add on features and software suites.
Speaker 1: So this reminds me a lot of the story of
Speaker 1: Comcast actually, where that company managed to compete not by
Speaker 1: necessarily creating better services and products, but by buying up
Speaker 1: competitors in various regions. In two thousand seven, Oracle filed
Speaker 1: a lawsuit of its own. This case was against a
Speaker 1: company called s A P a G. S a P
Speaker 1: is a company with headquarters in Weinheim, Germany, or Weinheim
Speaker 1: if I'm pronouncing it the proper way for for the Deutsch.
Speaker 1: Like Oracle, s a P creates enterprise software for big
Speaker 1: company clients, and it's one of Oracle's main competitors in
Speaker 1: that space. SAP, by the way, traces its origins to IBM.
Speaker 1: The founders of SAP worked for IBM before leaving to
Speaker 1: create their own business. But the lawsuit focused on a
Speaker 1: particular branch of s a P called tomorrow Now. That
Speaker 1: unit would provide customer support to Oracle customers, but at
Speaker 1: a lower rate than what Oracle charged. Now, remember, Oracle
Speaker 1: made money not just by selling software, but also by
Speaker 1: offering ongoing support for a price. So s a P
Speaker 1: was undercutting Oracle for support services for Oracle's own software. Now,
Speaker 1: that was not the issue of the lawsuit, right, that
Speaker 1: was not illegal. The central problem was that Oracle had
Speaker 1: detected thousands of illegal downloads of its software and traced
Speaker 1: them to SAP employees. SAP eventually admitted that, in fact
Speaker 1: employees had been illegally downloading Oracle software, and initially Oracle
Speaker 1: sought a reward and excess of a billion dollars, but
Speaker 1: eventually agreed to a more modest award of three fifty
Speaker 1: million dollars. Or so the litigation stretched on for several
Speaker 1: years before reaching that point, with Larry Ellison himself providing
Speaker 1: testimony in the case in twenty ten. So this was
Speaker 1: a huge, huge deal. It was a big, big problem.
Speaker 1: And uh eventually Oracle ended up coming out on the
Speaker 1: right side of that one. And and they had a
Speaker 1: legit complaint because that that software had been illegally downloaded.
Speaker 1: Even though it was in the service of something that
Speaker 1: wasn't illegal, the act of downing that software was illegal.
Speaker 1: Oracle made a few more acquisitions at that time, including
Speaker 1: Agile Software Corporation and b e A Systems. The company
Speaker 1: would state that it viewed acquisitions as sort of a
Speaker 1: risk free way to invest in research and development because
Speaker 1: those companies had spent years fine tuning their various products.
Speaker 1: So Oracle took advantage of that by bringing those companies
Speaker 1: into the fold and entering the new parts of the
Speaker 1: enterprise software industry. As a result, every time it was
Speaker 1: able to add to its list of services, it suddenly
Speaker 1: had the opportunity to market to new customers. And it
Speaker 1: didn't have to do this by starting from scratch. They
Speaker 1: didn't have to do it all internally. They would find
Speaker 1: other companies that had already done that groundwork and then
Speaker 1: purchase them and bring them in. In two thousand and ten,
Speaker 1: Oracle made another big move with its bid for Sun Microsystems.
Speaker 1: Sun was a computer company that primarily sold hardware, although
Speaker 1: it also had a software component as well. Son had
Speaker 1: been around since the early nineteen eighties, and the business
Speaker 1: was built on the back of Unix workstations. The company
Speaker 1: had previously been in talks with IBM about an acquisition,
Speaker 1: but in two thousand nine, Oracle and Son announced that
Speaker 1: the two companies intended to merge. The process continued until
Speaker 1: early ten, when the agreement became official, and many of
Speaker 1: the executives and lead developers over its Son resigned in
Speaker 1: the wake of the merger, including Tim Bray, who created
Speaker 1: Extensible Markup Language or XML, and James Gosling, who was
Speaker 1: the creator of Java. The acquisition meant that Oracle now
Speaker 1: had the rights to Java. This in turn set the
Speaker 1: stage for a lawsuit pitting Oracle against Google. At issue
Speaker 1: was Google's use of Java a p I S for
Speaker 1: its Android operating system. So you can kind of think
Speaker 1: of Java in this sense as being a bunch of
Speaker 1: different code shortcuts, right, almost like modules and developers would
Speaker 1: use these modules to help build out applications because it
Speaker 1: was faster and easier than doing it all from the
Speaker 1: ground up. So you needed certain basic functionality in your app.
Speaker 1: You would grab certain sections of Java and you would
Speaker 1: chain them together and then add in some of your
Speaker 1: own code and voila, you get your app. But it
Speaker 1: meant that you saved a lot of time because you
Speaker 1: could use these basic building blocks as part of your foundation. Well,
Speaker 1: the problem was that all of that stuff in theory
Speaker 1: at least belong to Oracle now, and the two companies,
Speaker 1: Google and Oracle couldn't come to a licensing agreement, so
Speaker 1: Oracle sued Google for copyright infringement, saying, hey, you're using
Speaker 1: our software are our product without our permission, and you're
Speaker 1: using it to build uh commercial apps and you're using
Speaker 1: it for your developers. That's without our permission. That's not cool.
Speaker 1: Google had used a programming platform and had built on
Speaker 1: top of Java functions. So while Google had its own
Speaker 1: UH developing platform, it did have underlying Java functions powering that.
Speaker 1: So in the original trial, the judge found that the
Speaker 1: Java features in question were not protected under copyright. He said, well,
Speaker 1: your argument can't hold Oracle because these are not copyrighted ideas.
Speaker 1: Oracle appealed that decision, and the Court of Appeals reversed
Speaker 1: part of that earlier decision, saying that the features were
Speaker 1: certainly copyrightable. So the first judge had made a mistake
Speaker 1: saying no, you can't copyright these, and the appeals court
Speaker 1: said no, no, those those are definitely protected by copyright.
Speaker 1: But the Court of Appeals also gave Google a bit
Speaker 1: of wiggle rooms, saying that Google might have a viable
Speaker 1: fair use defense. Remember, a fair use is this idea
Speaker 1: that you can actually use material that's under copyright under
Speaker 1: certain circumstances and meeting certain criteria. But all of that
Speaker 1: is determined within the court of law. You can't just
Speaker 1: say fair use and you've got a magic shield that
Speaker 1: protects you from lawsuits. It's rather you get sued. Then
Speaker 1: you have to make an argument that your use of
Speaker 1: the material falls under fair use, and a court has
Speaker 1: to agree with that. So this really just set up
Speaker 1: Google's potential defense. So a second trial took place, and
Speaker 1: then the jury of that trial decided that Google did
Speaker 1: uh did in fact use the material out of fair use. So,
Speaker 1: in other words, again, Oracle loses right. Google gets the
Speaker 1: exoneration by saying, well, yeah, it was copyrighted material, but
Speaker 1: the way you used it is totally fair use. Oracle
Speaker 1: would file another appeal stating that the decision that this
Speaker 1: was fair use was based on an incorrect understanding of
Speaker 1: Java and Google's Android platforms, that it was framed in
Speaker 1: such a way that sounded like Oracles uh products are
Speaker 1: meant for PCs and Google's are meant for smartphones. And
Speaker 1: they said, well, no, there's a lot more stuff in
Speaker 1: between those two things, and that's where the real problem is.
Speaker 1: So in March two thousand eighteen, the U. S. Court
Speaker 1: of Appeals for the Federal Circuit reversed this decision of
Speaker 1: the second trial, stating that Google's use of Java A
Speaker 1: p I S did not constitute fair use and that
Speaker 1: Oracle was in the right. The case has now been
Speaker 1: remanded to a lower district court to determine what damages
Speaker 1: Google owes Oracle, And so the saga continues. Meanwhile, let's
Speaker 1: jump back to because I mean, that whole story stretch
Speaker 1: from twenty to current day. It's still going. But back
Speaker 1: in the U. S. Department of Justice filed a complaint
Speaker 1: against Oracle alleging the company had committed contract fraud. The
Speaker 1: Department of Justice accused Oracle of defrauding the United States
Speaker 1: government on a General Services Administration software contract that started
Speaker 1: in nine and concluded in two thousand six. Now, according
Speaker 1: to this complaint, Oracle had agreed to offer government offices
Speaker 1: the best discounts it offered to non government customers. So,
Speaker 1: in other words, they said, whatever the lowest price is
Speaker 1: that we're offering, governments will get access to that lowest price.
Speaker 1: If it's a special that we're running, then governments will
Speaker 1: have that as the standard fee for our services, and
Speaker 1: whatever the best possible prices, the government will be able
Speaker 1: to take advantage of that. So the complain alleged that
Speaker 1: Oracle had failed to do this, and that thus government
Speaker 1: offices were overpaying for Oracle products and services. According to
Speaker 1: the agreement, that there were commercial deals with some of
Speaker 1: Oracle's customers that were below the fee that government offices
Speaker 1: were paying for those same services and same products. In
Speaker 1: two thousand eleven, Oracle agreed to pay out nearly two
Speaker 1: hundred million dollars plus interest to settle those charges, and
Speaker 1: then again in twousd ten that was the year that
Speaker 1: Ellison would bring in Mark Heard to replace Charles Phillips.
Speaker 1: Phillips had been serving as Oracles president at that time.
Speaker 1: Phillips had led the come during that period of acquisitions
Speaker 1: and became co president after only six months of working
Speaker 1: at Oracle back in two thousand three. But in a
Speaker 1: string of things happened that really put Phillips on the defense.
Speaker 1: First of all, a woman revealed that she and Phillips
Speaker 1: had been involved in an extramarital affair for eight years.
Speaker 1: Phillips had been married for thirty years, and this girl
Speaker 1: friend of his had paid thousands of dollars to put
Speaker 1: up billboard ads revealing the relationship, saying she had entered
Speaker 1: into it under the understanding that Phillips was separated from
Speaker 1: his wife, which was not the case. Phillips had later
Speaker 1: made a statement that Oracle planned to spend about seventy
Speaker 1: billion dollars and acquisitions over the next five years, which
Speaker 1: the company later denied and said, no, we don't have
Speaker 1: a budget, says side for acquisitions for the next five years.
Speaker 1: Seventy billion dollars was a number that Phillips just kind
Speaker 1: of uh invented. This is what the company was saying
Speaker 1: because shareholders were react ding in the alarm that a
Speaker 1: company was spending planning to spend seventy billion dollars over
Speaker 1: the course of five years. So both of those things,
Speaker 1: his personal life and this particular announcement gave his reputational damage,
Speaker 1: and he was out and replaced by the former CEO
Speaker 1: of Hewitt Packard, a man named Mark Heard. Now Heard
Speaker 1: himself was also the center of a scandal. He was
Speaker 1: actually ousted as CEO of HP after an actress named
Speaker 1: Jody Fisher accused him of sexual harassment. Fisher had worked
Speaker 1: with HP to coordinate and host events on behalf of
Speaker 1: the company. She would appear at these HP events, and
Speaker 1: Mark Heard was frequently there as well, and she alleged
Speaker 1: that Heard had behaved inappropriately toward her, using his position
Speaker 1: as a means to try to manipulate her into a
Speaker 1: physical relationship, although she said no physical relationship ever actually developed.
Speaker 1: She employed a year named Gloria Allred, who sent a
Speaker 1: letter to HP filled with the accusations that Fisher had
Speaker 1: against herd Heard was ousted as CEO of HP kind
Speaker 1: of In response, Ellison criticized this move. He said that
Speaker 1: HP was crazy to fire Herd, and so he then
Speaker 1: went on to hire Herd to help lead Oracle. This,
Speaker 1: in turn, would make headlines. HP would later state than
Speaker 1: an internal investigation cleared heard of the harassment accusations, but
Speaker 1: that he had filed inaccurate expense reports in order to
Speaker 1: hide this relationship from the company, and that it was
Speaker 1: these these false expense reports that really led to his
Speaker 1: dismissal as CEO. Fisher stated that she and Herd had
Speaker 1: settled the matter out of court and without litigation. A
Speaker 1: little bit later, in September, a report revealed that Larry
Speaker 1: Ellison had received a compensation package of nearly seventies seven
Speaker 1: million dollars for the previous fiscal year. That's a pretty
Speaker 1: huge salary, even for a CEO. In fact, a lot
Speaker 1: of CEOs get relatively modest salaries compared to other executives
Speaker 1: because their compensation largely ends up being tied with the
Speaker 1: profitability of the company, so their bonuses end up being
Speaker 1: through the roof if the company is doing well, but
Speaker 1: otherwise they have still huge salaries, typically way more than
Speaker 1: what most people make, but not anywhere close to seventy
Speaker 1: seven million dollars, and that that fact had some shareholders
Speaker 1: a little concerned that Larry Elson was making that much money.
Speaker 1: In two thousand fourteen, Oracle issued a press release staying
Speaker 1: that Larry Ellison was transitioning to a new role. He
Speaker 1: was no longer going to be CEO. He was stepping down,
Speaker 1: but he was not retiring despite being in his seventies.
Speaker 1: He would serve as Chairman of the board and chief
Speaker 1: Technology Officer for Oracle. Jeff Henley, who was the previous
Speaker 1: chairman of the board, was sort of demoted to the
Speaker 1: position of vice chairman, and the new CEO of Oracle
Speaker 1: was actually two people. It wasn't a single CEO. They
Speaker 1: were not called co CEOs either, just CEOs, and these
Speaker 1: are the same two people who are CEOs of Oracle
Speaker 1: to this day. Those two people were soft Ra Cats,
Speaker 1: the person who had worked with Ellison years before as
Speaker 1: sort of the the mouthpiece between Ellison and other important
Speaker 1: leaders over at Oracle and Mark heard. Cats would oversee sales,
Speaker 1: Herd's area would be business and service units, and Ellison
Speaker 1: would oversee software and engineering. So yet again Oracle would
Speaker 1: come under the direction of a triumvirate. This is very
Speaker 1: similar to when Lane and Henley and Ellison would lead
Speaker 1: the company in the nineties. The collective compensation for Ellison,
Speaker 1: Cats and Heard, if you added it all up in
Speaker 1: two thousand thirteen, was a hundred sixties six million dollars. Yikes,
Speaker 1: adds a lot of cheddar. In two thousand and sixteen,
Speaker 1: Oracle would acquire net Suite, which, as I mentioned earlier,
Speaker 1: had received initial funding from Ellison almost two decades before that.
Speaker 1: Net Suite added more features geared toward midsized companies, while
Speaker 1: most of Oracle's products were aiming at larger enterprises. But
Speaker 1: I did a whole episode of NetSuite just a few
Speaker 1: episodes ago, so we're not going to retread that. And
Speaker 1: Oracle continues to offer up a ton of products. It's
Speaker 1: core still being database services, although there's been a lot
Speaker 1: of articles recently saying that that business is slowly starting
Speaker 1: to fade from prominence. But Oracle also offers up a
Speaker 1: ton of these web enabled services that allow companies to
Speaker 1: offload a lot of their back end processes onto these
Speaker 1: web software packages, and that means that they still have
Speaker 1: kind of an ongoing subscription based business that's an ongoing
Speaker 1: way of generating revenue. And even if the database industry
Speaker 1: ends up fading from prominence. They have this other business
Speaker 1: that they've been really right there at the leading edge
Speaker 1: of it since the beginning effect in front of the
Speaker 1: leading edge, and in some cases where the company failed
Speaker 1: to really capitalize on it because the world just wasn't
Speaker 1: ready yet. But now that seems to be the way
Speaker 1: a lot of companies are going, So Oracles still in
Speaker 1: pretty good position. It just may mean that the core
Speaker 1: of their business might shift from the database side to
Speaker 1: this web enabled services side. I may do an episode
Speaker 1: dedicated solely to Larry Ellison in the future, as his story,
Speaker 1: while tightly coupled with Oracle, I've covered a lot of
Speaker 1: it in these episodes. There's still a lot more twists
Speaker 1: and turns in his story, including his launch of a
Speaker 1: hydroponics company and his tendency to buy islands. It's kind
Speaker 1: of cool not to mention his his various yacht racing
Speaker 1: activities and other things. Also, Larry Ellison wanted at one
Speaker 1: point to be the guy to put Steve Jobs back
Speaker 1: in charge of Apple. Ellison had a lot of uh
Speaker 1: still does have. He has a lot of really powerful
Speaker 1: friends in the text sphere, and Steve Jobs was one
Speaker 1: of them. And Ellison had thought that Job's got a
Speaker 1: raw deal from Apple back in the day and he
Speaker 1: wanted to put Jobs back in charge. Of course that
Speaker 1: did happen, not necessarily with Ellison's direct involvement, but that
Speaker 1: is sort of how things unfolded when Apple's board of
Speaker 1: directors decided to give Steve Jobs the interim CEO job
Speaker 1: before he actually assumed the formal CEO position a little
Speaker 1: bit later. So there's a lot of stuff about Ellison
Speaker 1: that I could cover that is, uh, not directly tied
Speaker 1: in with his work with Oracle, but still very important
Speaker 1: in the world of technology. So I may do that
Speaker 1: in a future episode. But I want to ask you, guys,
Speaker 1: what do you what do you want me to cover? Like,
Speaker 1: what's what sort of topics would you be interested in
Speaker 1: hearing more about. Whether it's a technology, maybe it's a company.
Speaker 1: Maybe it's a person in tech who you would like
Speaker 1: to hear more about. Maybe there's someone you would like
Speaker 1: me to enter view or have on as a guest
Speaker 1: host to talk about the topic. Send me a message.
Speaker 1: My email address for this show is tech Stuff at
Speaker 1: how stuff works dot com, or you can drop me
Speaker 1: a line on Facebook or Twitter. The handle of both
Speaker 1: of those is tech Stuff hs W. Remember we've gotten
Speaker 1: Instagram accounts, so go over to Instagram and follow us
Speaker 1: to see the behind the scenes stuff and other interesting
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Speaker 1: often will stream live my recording sessions of podcasts. I
Speaker 1: do it at twitch dot tv slash tech Stuff, So
Speaker 1: go there. You'll see the schedule for my recording sessions
Speaker 1: and you can watch as I record these shows live.
Speaker 1: You can join in the chat room and chat with
Speaker 1: the other fans, and during the ad breaks, instead of
Speaker 1: reading an ad, I come over there and I chat
Speaker 1: with you guys to see how you're doing and to
Speaker 1: hear your stories and to have conversations. So I hope
Speaker 1: to see you in there, and I'll talk to you
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