Is Larry the Problem or the Solution at Oracle?
By Joe Bousquin
Senior Writer
TheStreet.com
11/20/00 8:04 PM ET
Larry Ellison may have been able to amass the world's second-largest fortune. But he sure is having trouble holding on to his top managers.
On Friday, Oracle (ORCL:Nasdaq - news) announced that Gary Bloom, executive vice president in charge of the company's core database sales, was leaving to become CEO at Veritas Software (VRTS:Nasdaq - news). Just a few weeks ago, there were rumors that CFO Jeff Henley was departing, though he denied them. And five months ago, Ray Lane abruptly resigned as president of the database and applications software company.
Under the weight of all this, Oracle's stock fell $4.06, or 14%, to $24.75 Monday. But analysts, investors and ex-Oracle employees say the decline is less about who's leaving and more about who's staying.
"I think the reason that the stock is down is more over Larry Ellison running the company," says David Brady, manager of the $1.2 billion Stein Roe Young Investors fund, which counts Veritas, but not Oracle, among its holdings. "That's my read, because there are all kinds of good people at Oracle."
Since competing in a harrowing yacht race in 1998 that left six sailors dead, Ellison has become more engaged in the day-to-day operations at the company he co-founded in 1977. But some say that has resulted in less and less input from his top managers over where the company is headed.
Too Much Larry
Lane said after his departure that Ellison slowly siphoned responsibility away from him until he felt he could no longer work effectively. Bloom, widely viewed as the 56-year-old Ellison's heir apparent, also cited Ellison's continued presence as his reason for leaving. Besides Bloom and Lane, Pier Carlo Falotti, who was running Oracle's European business, and Lou Unkeless, who was responsible for Oracle's B2B initiatives, also have left recently.
"When I looked at Oracle and said what's the chance that I become CEO at Oracle in the near future, that was kind of slim," Bloom says. "Larry's firmly in charge there. He's the CEO, he's runs the company and he's the leader of the company, and that kind of collided with my own career goals to run my own company."
Ellison chose to shift the responsibilities of Lane and Bloom to other executives instead of filling their jobs.
The outspoken and flamboyant Ellison is a natural salesman who brims with confidence -- some might say arrogance. But few believe his style is suited to running the company, a task perhaps best left to more even-keeled souls like Lane and Bloom.
"Clearly, [Bloom's departure] is a negative for the story," says Jim Pickrel, an analyst at Chase H&Q. "In a way, the Oracle stock has almost become a referendum on Larry Ellison himself, especially for the Street. Ellison has all kinds of positive attributes, but the guy running the day-to-day operations should probably be someone else." (Pickrel rates Oracle a buy, and his firm hasn't done underwriting for the company.)
So Good So Far
Not that Oracle hasn't fared well under Ellison's increased leadership. The company likes to boast that it saved $1 billion by using its own e-business software to "Webify" the company, an initiative that came straight from Ellison. The initiative, in turn, boosted Oracle's profit margins, and its stock is up 33% over the past year, while the Nasdaq has fallen 14%.
Oracle didn't make Ellison available to comment. But spokeswoman Jennifer Glass says: "I think without an exception, any of our management would think it's more positive than not to have Larry at the helm. His leadership ability, and corralling 40,000 people to have us rally toward a common goal is certainly a big accomplishment. I think if you look at the growth of the company over the last year, there's no question about that."
One former Oracle executive says Ellison simply demands a lot. "When you get comfortable, and in comes a very powerful and very intelligent guy and turns rocks over and demands that the problems be fixed, that can make people very uncomfortable," says the former executive, who asked to remain anonymous. "That's clearly what Larry's done."
But since Lane departed the stock is down 38%.
Pull the Chain
Tom Siebel, an ex-Oracle exec who left in 1990 to start competitor Siebel Systems (SEBL:Nasdaq - news), offers a bleak description of life on the job under Ellison. "Those managers report to Larry on a 12-inch leash, and he jerks it hard about once a week," Siebel says.
Pickrel, the Chase H&Q analyst, says all the fretting over Ellison's command at the company is ironic given Oracle's success over the last two years.
"In November of '97, Oracle missed a quarter for the first time in a while," he says. "That was the point when Ellison got much more engaged in the business and moved Ray Lane further and further out of operational areas. That was really the changing of the guard at Oracle. In doing so, Larry changed a lot of things for the better in terms of the business. Up until then, you never heard the company talking about increasing margins."
But during that time, Ellison also had plenty of layers of brass around him to distill his vision into accomplishable goals. With Bloom's departure, one more of those layers is gone, and Oracle is one step closer to becoming what many say is inevitable: Absolute Larry. |
