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Ellison's Style May Be a Factor in Tech Industry Consolidation

June 22, 2003|Joseph Menn and Alex Pham | Times Staff Writers

In pursuing his hostile bid to take over PeopleSoft Inc., Oracle Corp. Chief Executive Larry Ellison isn't just fighting to preserve his company's position in the business software market. The man widely considered Silicon Valley's most bombastic executive is pursuing a plan to remake the technology industry itself.

The database software giant's $6.3-billion offer for PeopleSoft has intensified a debate about Ellison's larger vision, which is that the software industry is embarking on a massive consolidation that would leave it in the hands of a few huge companies. He wants to make sure Oracle is one of them.

Many Silicon Valley executives and venture capitalists agree that the technology universe is shrinking, and they give the 58-year-old Ellison credit for seizing the moment.

The question that intrigues them is whether he's the right captain to lead one of the high-tech behemoths that remains.

"He's an ambitious, aggressive, smart businessperson," said Randy Komisar, a consulting professor at Stanford University and veteran high-tech entrepreneur who thinks the often outrageous Ellison may be up to the job. "If he were in entertainment, people wouldn't think twice about it. But in the rather staid technology industry, people like Larry stand out."

Ellison's hard-charging pursuit of PeopleSoft shows off the ruthless drive that has made him an admired and ridiculed Silicon Valley archetype, a neck-breaking body-surfer and competitive sailor of comic-book proportions. He isn't known for following conventions in the business world, or anywhere else. And he isn't shy about trying to show who's boss.

Consider what happened when he invited his nemesis, Microsoft Corp. founder Bill Gates, for a visit.

It was 1988, when both Oracle and Microsoft were on the rise. Microsoft had sold its first shares to the public two years before, one day after Oracle. The operating system kingpin was bigger, and Gates was richer, the obvious leader in the personal race Ellison wanted to win more than any other.

Ellison wanted to discuss licensing Oracle's technology to Microsoft, then-Oracle Senior Vice President Pete Tierney recalled last week. Not wanting to distract his employees with the sight of Gates walking into Oracle's sleek Redwood City, Calif., lobby, Ellison arranged for Gates to come to his mansion in nearby Atherton, a Japanese-style extravagance with waterfalls and white oak floors.

Tierney and Oracle co-founder Ed Oates escorted Gates from the airport to Ellison's driveway gate, then pressed the buzzer. More than half an hour passed without Ellison responding, as Gates quietly seethed in the car, Tierney said. When Ellison finally let Gates in, their chat lasted perhaps five minutes, unsurprisingly producing no deal.

"There's only one way Larry wants to do something," said Igor Sill, an early Oracle investor and longtime executive recruiter, "and it's Larry's way."

Oracle said Ellison wasn't available for an interview.

Oracle already dominates the market for software that houses vast amounts of business data and allows for easy access to it. Oracle earned $2.3 billion last fiscal year on sales of $9.5 billion. But its progress in related markets for business applications programs has been slower.

Last week, Oracle raised its initial low-ball tender offer for PeopleSoft shares, convincing many skeptics that Ellison is serious about acquiring the leading maker of programs for payroll and other personnel functions. The PeopleSoft board rebuffed the sweetened offer Friday as too little.

When he launched his bid, first offering a paltry 6% premium for PeopleSoft shares, Ellison's track record made it easy for many bystanders to believe that his true goal was merely to disrupt PeopleSoft's planned acquisition of software maker J.D. Edwards & Co. PeopleSoft CEO Craig Conway likened Ellison to Genghis Khan.

Divisions in the Industry

For some, that reputation raises serious doubts about Ellison's ability to take on a leading role in the industry's consolidation. PeopleSoft, Siebel Systems Inc. and other companies that logically would come under an expanded Oracle umbrella are now led by former Oracle executives, many of whom Ellison has privately or publicly ridiculed.

"They all despise each other," which is hardly a useful place to start building industrywide alliances, said Stuart Feigin, one of Oracle's first programmers and an on-and-off employee from 1978 to 1998. Under such a demanding CEO, "it's hard to imagine even one company working as a big, happy family -- let alone many companies."

Ellison is often faulted for driving away talented and respected heirs apparent, including PeopleSoft's Conway and turnaround architect and former President Ray Lane, now a general partner at the venture capital firm Kleiner Perkins Caufield & Byers.

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