From the Archives: Larry Ellison

Back from the Brink
June 28, 2009

Larry Ellison is the CEO and co-founder of the
multibillion-dollar software company Oracle. He
was listed as the third richest man in America,
according to Forbes in 2008. The following feature,
written by Michael Warshaw, was published in
SUCCESS’s 10th Annual Great Comebacks issue,
August 1995.

Abandoned by his unmarried
mother as an infant, Lawrence J.
Ellison was raised by Russian-
Jewish immigrant relatives on
Chicago’s South Side. He was a
failure as a student, dropping out
of the University of Illinois.

In 1965, Ellison moved to
California, working as a
programmer for the next eight
years. Then he went into business
with a former boss, Robert
Miner, to set up what would
become Oracle Systems Corp.

The partners struggled.
Ellison had to mortgage his
house to obtain a credit
line. In 1980, Oracle still
had only eight employees
and revenues of less than
$1 million.

But it did have one
asset that would be worth millions. A few
years before, Ellison came across a research paper IBM was
circulating in the computer industry. It described a pioneering
database programming language called SQL.

Big Blue might not have seen the possibilities, but Ellison
did. He rewrote the language so that it could be run on any
computer. In 1981, when IBM decided to allow all of its products
to support SQL, Ellison had his product ready. As IBM pumped
out its new PCs, Oracle boomed.

Ellison patterned his style after medieval samurai warriors.
He launched a ferocious attack on the database software market,
hiring troops of hungry new MBAs. Mercilessly, he attacked
competitors’ products and touted Oracle. The company doubled
in size year after year, reaching $282 million in 1988.

Driven by its warlord chairman, Oracle made promises
it could not keep. It claimed its software supported Digital
Equipment Corp.’s VAX platform three years before it actually
did. Huge ads trumpeted full compatibility with IBM’s DB 2
database package, a patent falsehood. “Up to 1990, Oracle
was fairly notorious for pre-announcing products,”
says Paul Cubbage, analyst at Dataquest
Inc. In Silicon Valley, it was jeered that
Oracle’s product development was an
overhead projector.

thought and
soul searching, I
was determined
to stay,” he
recalls. Besides,
“I realized it
wasn’t obvious
who I could be
replaced with.”

The thrice-divorced Ellison paid a high
price for his damn-the-torpedoes personal
style. His company was on the rocks.
Employees gossiped about the young women
he dated and his reckless driving, relishing
the story of how their CEO was caught three
days in a row at the same speed trap, refusing
to pull over and screaming into the Oracle
lot with the police in hot pursuit.

Oracle launched Version 6.0, a product so bug
that clients couldn’t run it. Sales reps
began giving away incredible credit deals and
booking sales before contracts were signed. “It was
a billion-dollar business out of control,” says former
Oracle executive Tom Siebel. “Internal information
systems were a disaster.”

Third-quarter earnings in March 1990 were 25
percent off expectations. In one of Wall Street’s biggest
sell-offs, the share price tumbled to $7.875 overnight. Accounts
receivable swelled to almost 50 percent of annual sales. Oracle’s
earnings in the next quarter were off by 20 percent.

Then came the big one: In September, Oracle announced a
$28.7 million loss, its first ever. From an all-time high of $28.125
in early March, Oracle’s stock price nose-dived to $5.375. The
company lost 80 percent of its $3.7 billion market capitalization.
The Securities and Exchange Commission launched an investigation
for illicit accounting practices. Ellison stayed home,
roaming his Japanese-style mansion in Atherton, Calif., thinking
his life, as he knew it, was at an end. Then, as he rode his bicycle for
miles along the California coast, Ellison asked himself a question:
“Am I the right person to fix it?”

He made a decision. He had made the mess. He would clean it
up. “After much thought and soul-searching, I was determined to
stay,” he recalls. Besides, “I realized it wasn’t obvious who I could be
replaced with.”

Ellison fired everyone in sight. Hundreds of lieutenants and
executives were canned. Scores of others left what they believed to
be a sinking ship.

Ellison and his new management team liquidated accounts
receivable, tightened financial controls and introduced a new
compensation system that rewarded sales reps only when products
actually shipped. In the middle of the process, Ellison took a vacation
to Hawaii. While bodysurfing, he took on a 13-foot wave that
overwhelmed him and smashed his body into the coral. His lung
was punctured, his neck was fractured; but Ellison refused to let
this brush with death keep him from bringing Oracle back. The
company leapt into the black. Annual revenues for fiscal 1995 are
projected at $2.9 billion.

To ensure that Oracle is poised for a video-on-demand future,
Ellison has invested an estimated $60 million of his own money to
buy a controlling stake of nCube Corp., a Silicon Valley upstart that
builds massively parallel supercomputers. By harnessing thousands
of microprocessors, each with an individual memory unit, they
provide vastly higher processing speeds at lower costs than traditional
mainframes or supercomputers. It’s the only way, he insists,
to deliver video on demand at a reasonable price. If he owns the
technology, he’ll own the future.

More than anything, Ellison is out to show Bill Gates who’s boss.
While Microsoft Corp.’s revenues are more than twice Oracle’s,
Ellison is widely viewed as the only person in the computer business
with the cash—his net worth is about $3 billion—and the vision to
challenge Microsoft and become No. 1.

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