Oracle Aims To Rule the Internet
By MICHAEL LIEDTKE
.c The Associated Press
REDWOOD CITY, Calif. (AP) - Oracle Corp. has rocketed from the humdrum of data crunching to the forefront of Internet computing so quickly that even the pilot feels lightheaded.
``I have to admit I sometimes get a little dizzy,'' CEO Larry Ellison says as he reflects on the software company's rapid rise over the last year. ``We bet the ranch (on Internet computing) and it came up. Wow!''
Wall Street's belief that Oracle has transformed itself from a mundane maker of database software to an Internet trailblazer has yielded huge returns so far.
The company's stock has surged in value six-fold since mid-May 1999, adding $172 billion to its market worth and $40 billion to Ellison's personal fortune.
And the game has just begun. Ellison believes his company will be able to raise its operating profit margin from 31.4 percent at the end of February to 40 percent by the end of this calendar year.
If that goal is realized, Oracle will be making twice as much money as it did at the end of 1998.
Redwood City, Calif.-based Oracle has reinvented itself by using the Internet to automate and centralize everything from paperwork to customer service. As it has retooled its operations and shed $500 million in expenses so far, Oracle has been selling other companies the software they need to become ``e-businesses.''
Now, it looks to many like Oracle could become the next Microsoft.
Ellison and his lieutenants make no secret of their ambition to supplant the Redmond, Wash.-based behemoth as the world's biggest computer software company.
Ellison, 56, clearly relishes the opportunity. For years, he has been an unabashed Bill Gates basher. In Ellison's mind, Gates turned Microsoft into an unimaginative corporate bully that churns out run-of-the-mill software.
Yet people familiar with Ellison say he has more in common with Gates than meets the eye.
Stylistically, the two men are polar opposites. Ellison is a debonair swashbuckler, Gates a bookish technocrat.
But they share a common intensity and ability to rally the troops, said Josh Greenbaum, a Berkeley, Calif. computer software consultant.
Peoplesoft Inc. CEO Craig Conway, who worked for Ellison for eight years, sees another common trait.
``Like Bill Gates, Larry can internalize a market and merchandise around a trend to make it sound very compelling,'' Conway said. ``The reality is not always as it appears.''
Conway and executives at other software companies, such as SAP and Microsoft, contend Oracle really isn't leading businesses into the Internet's promised land. These critics contend that all Ellison has done is cleverly leverage the strength of a dominant database business to make it seem as if Oracle is leading the charge.
``If there is anything that's world-class about Oracle, it's marketing hype,'' Conway said. ``They could say they can make gasoline from saltwater and the market would believe it because they have a pulpit to evangelize about whatever they want right now.''
Investors have placed a tremendous amount of faith in Oracle. The run-up in its stock has pushed its price-to-earnings ratio to 114 as of May 18. That's much higher than other Silicon Valley stalwarts such as Intel Corp. and Hewlett-Packard, with P/Es of 54 and 45, respectively, but lower than Cisco System's 156.
The genesis of Oracle's conversion from a database software maker to an Internet dynamo dates back to April 1999 when Ellison told a group of industry analysts how Oracle planned to become the quintessential ``e-business.''
Ellison promised Oracle would wring an additional $1 billion from its business by using the Internet to slash expenses. At the same time, Ellison predicted the company would boost revenues by selling products and services to other corporations looking to automate their businesses.
``A lot of people pooh-poohed the idea at the time,'' recalled analyst Christopher Shilakes, who follows Oracle for Merrill Lynch in San Francisco. ``But there has been a real sea change at the company. They have moved into the inner sanctum of the Internet.''
Shilakes and other industry analysts have gone so far as to describe Oracle as one of the ``Four Horsemen of the Internet,'' along with Cisco Systems, Sun Microsystems and EMC Corp., which specialize in network routing hardware, servers and storage systems, respectively.
Being included among the Internet elite delights Ellison. In 1995, he decided that Oracle should stop designing products for personal computers run by Microsoft Windows and start concentrating on network computing. The idea didn't go over well at the time.
``Even people inside Oracle were horrified,'' Ellison said. ``There were literally people inside of Oracle that were in a panic. They were insisting that I change my mind.''
Ellison stood his ground, but the strategy didn't fly on Wall Street. The investor apathy seemed to demoralize Ellison, who started to spend more time cruising around the world on his yacht than in the office.
Everything changed last year after Ellison decided that Oracle should show the world how e-business is done.
``He's completely engaged now,'' said Gary Bloom, an Oracle executive vice president who oversees the company's e-business strategy. ``He is leading the charge on this thing.''
Ellison believes Oracle is just getting warmed up.
By the end of the summer, Oracle hopes to introduce the industry's first e-business suite of products. Oracle is developing all its products internally, in contrast to its chief e-business competitors, including IBM Corp., that are forming partnerships among themselves to sell Internet software services.
Rivals believe Oracle is trying to do too much in an extremely complex market.
``They're stretching themselves too thin,'' said Chris Atkinson, a Microsoft vice president. ``I don't think you can provide an end-to-end solution for all environments. If you do, the result will be mediocrity instead of being the best of breed in certain platforms.''
People doubted Ellison a year ago, so the skepticism is nothing new for him.
``We have astonished a number of people,'' he says confidently. ``There is a lot to go.''>>
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