This article is more than 1 year old

Why Oracle CEO Larry Ellison had to go ... Except he hasn't

Silicon Valley's veteran seadog in piratical Putin impression

Analysis What's the difference between God and Larry Ellison? God doesn't think he's Larry Ellison.

So goes the title of Mark Wilson's 2003 biography on Ellison, Oracle's now former chief executive – a man who by force of will forged a multi-billion dollar software empire.

In the process, Ellison became not just the best-rewarded CEO on Wall St but one of the world's richest men, owner of property and boats and host of yacht races.

Not bad for an unwanted kid born in the last year of the Second World War to a 19-year-old single mum in the Bronx, and who was farmed out to her aunt and uncle in Chicago.

Sometimes, even Larry can't believe how things turned out.

"When I started Oracle, what I wanted to do was to create an environment where I would enjoy working. That was my primary goal," he told the Smithsonian back in 1995.

"Sure, I wanted to make a living. I certainly never expected to become rich, certainly not this rich. I mean, rich does not even describe this. This is surreal."

If you were Larry, you'd probably have become quite confident in your powers. It's that confidence, though, that's probably behind Larry relinquishing the CEO seat on Thursday.

Oracle said Larry was giving up responsibility for running the business with immediate effect, handing over to joint CEO's Mark Hurd and Safra Catz. He is stepping down from a company he's been running since 1977, when it was called Software Development Labs – Oracle came into being in 1982.

Until Thursday lunchtime, on the US West Coast, he had been tech's longest serving chief executive. Larry is now CTO at the database giant, tinkering with his hardware and software engineering operations.

The question of Larry's exit has been in the air for some time, but nobody expected this. Aged 70, Larry is three years past the official US retirement age. In the take-it-or-leave-it attitude he fostered at Oracle, the company gave zero explanation for this momentous and sudden change at the top.

However, Ellison vacated the CEO chair on the day Oracle announced yet another set of dismal results: a third successive quarterly miss making a total of four misses out of the last five quarters.

Sales of new software are anaemic, and hardware is dragging Oracle down, down, deeper and down. Servers and server systems are only making slightly more than Oracle's cloud business, yet Oracle laid out just over $8bn to buy its way into the hardware club with Sun Microsystems.

If Larry were somebody else in his Darwinist corporate machine, Larry would have let himself go by now.

We did see a sign that something was wrong, when Larry got his pay package cut in half. Shareholders had been on the war path, angry at his record-breaking level of remuneration after more than 12 months of wince-inducing sales performance. Clearly, things couldn't just continue.

Once again, it's the hardware business that Oracle bought with Sun in 2010 that has been the weight around the neck of Larry and his company. Call it the Curse of Sun.

The failing x86 and SPARC server biz is unable to wash itself clean of red ink, but Larry bought it to become a new IBM. Here's how Larry described the way Sun would transform Oracle, his database and apps company, into a systems powerhouse:

The acquisition of Sun transforms the IT industry, combining best-in-class enterprise software and mission-critical computing systems... Oracle will be the only company that can engineer an integrated system - applications to disk - where all the pieces fit and work together so customers do not have to do it themselves. Our customers benefit as their systems integration costs go down while system performance, reliability and security go up.

That was Larry's first bad call.

Another poor decision was letting personality cloud his judgement as to whom he hired to eventually run that business: his longtime pal and tennis buddy Mark Hurd.

Hurd was ousted from Hewlett-Packard as CEO in August 2010, following a brouhaha involving expenses claims and a Playboy model that eventually blew over. Hurd was no prize; an unexciting rows and columns chief from NCR. But Larry brought him in, and branded the HP board "idiots" for letting his friend go.

Owning proprietary Sun hardware was one thing. A cost center that goes completely counter to the prevailing logic of the industry, which is to get out of that game and run Linux on Intel-powered white box gear made by somebody else. Putting Hurd in charge of Sun's custom computers proved a commercial disaster.

Hardware has been an obsession of Ellison's since the 1990s. It was around 1998 he was talking of an Oracle 8i database appliance that people bought for their own data centers. This preoccupation meant he was blind to the real growth opportunity: public cloud computing. Actually, he was complacent.

In 2008, Ellison laughed off cloud, calling it the new black. He joked he didn't really need to do anything beyond running new ads for Oracle.

Oracle is now late on cloud, having U-turned with Java cloud, developer cloud and database cloud, and partnered with Salesforce, NetSuite and Microsoft. The former two are native cloud players growing at about 30 per cent a quarter. The latter is an on-premises laggard that's catching up with Amazon.

Cloud is Oracle's fastest growing business: SaaS and PaaS are up 33 per cent, and growing faster than software license renewals and support (6.77 per cent). But the cloud revenue is measured in mere millions of dollars; Oracle must eat billions of dollars to survive.

Like other enterprise giants, such as IBM and SAP, sales of new versions of on-premises software are growing, but they are down on sales during the pre-2008 glory years.

More about


Send us news

Other stories you might like