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Larry Ellison is The Next Richest Man in the World

(Part 2)

Larry Ellison is a very lucky guy: He has more money than anyone--except Bill Gates. He's CEO of the most powerful software company in the world--besides Microsoft. What's so bad about that? For Ellison, everything (by Andy Serwer., Fortune Magazine)

On March 12, 1986, Oracle Corp. went public at $15 a share. It closed the day at $20.75, giving it a market value of $270 million. Twenty-four hours later, on March 13, Microsoft went public at $21. It ended the session up $7, giving it a market cap of $700 million. From that day on--now almost 15 years ago--these two wildly successful companies have become inextricably linked. Linked, perhaps as opposites, in the way north and south poles are.
In the bizarro universe of high-tech titans, the matchup is between California playboy and disheveled Seattle nerd. It's gonad vs. brain. Satyr vs. geek. For the longest time, of course, the geek had the upper hand. Microsoft was substance. Oracle was ... a sideshow. Microsoft (until recently) never hit so much as a speed bump. Oracle crashed--and almost burned--not that long ago.

But then a funny thing happened. On Feb. 23 of this year the value of $10,000 invested in Oracle's IPO surpassed the value of $10,000 invested in Microsoft's IPO. The lines on the graph had crossed. Since then, they have continued to diverge. This particular point could be as insignificant as any Wall Street chartist voodoo, of course. But to Ellison, at least, it portends something monumental. He believes that Oracle will soon supplant Microsoft as the world's dominant software company. And if that occurs he believes that another critical thing will happen too: Ellison, who owns 24.2% of Oracle--a mammoth position for a CEO of an S&P 500 company--will supplant Bill Gates as the richest man in the world.

To some who know him well, this goal may matter even more to Ellison than his company's becoming the dominant software player on the Net. But then, knowing the real Ellison isn't easy. When Apple founder and CEO Steve Jobs (whom Ellison repeatedly refers to as his best friend) is asked what he thinks is the driving motivation of his pal, he chuckles, thinks for a moment, and then whispers into the phone: "Rosebud." Born to an unwed mother who gave him to some relatives to raise, Ellison has never known his biological father and met his biological mother only once. Ellison says his family, Jewish immigrants from Europe, took the name "Ellison" after Ellis Island. He grew up working class in an apartment building in Chicago. His adopted father, Louis, was an accountant who was forever telling Larry that he was a good-for-nothing. According to The Difference Between God and Larry Ellison, by Mike Wilson, Ellison was considered smart but bridled under authority and was not a particularly great student. He attended the University of Illinois and the University of Chicago, quit both, and headed west to work for technology companies.

In 1977 he and programmers Bob Miner and Ed Oates founded a software company. They named their first product Oracle and sold it to various early clients, including the CIA. Ellison wasn't the star programmer--Miner (an extremely likable guy who died of lung cancer in 1994) and Oates were--but he was the venture's driving force. And even then he was a memorable character. One Oracle VP, who joined the company in 1981, remembers Ellison's picking him up at the airport back then. "He showed up in a Mazda RX-7, which didn't really have a back seat, but somehow there is this blonde back there. He drove to his home, and the gal got out and walked off. We went inside the house, and there was another woman inside." Also impressive was Ellison's technical expertise: "He knew chip speeds and drive specs," says the VP.

Identifying relational databases as a great business opportunity is one of several unquestionably brilliant moves Ellison has made over his career. Databases existed back then, but they were static and couldn't interact with each other. A maker of sweaters, for example, might be able to ask for the number of pink sweaters one customer had ordered but not how many pink sweaters all customers had bought. In the 1970s computer scientists at IBM wrote about a new kind of database that was flexible and could do ad hoc queries. It could sort through all the sweaters. IBM management failed to capitalize on the idea, however, and Ellison seized upon it. While it is common lore that IBM essentially handed over the PC system-software business to Microsoft, it is less known that Big Blue also took a pass on what would become Oracle's business.

And so Oracle began writing database software for Digital Equipment Corp.'s VAX minicomputers and mainframes. Customers such as government agencies and manufacturers used Oracle programs to manage their data, such as supplier lists and accounts. From the beginning, Oracle was a sales-driven, win-at-all-costs pirate ship of a company. Ellison drove everyone hard, going through wives and top executives like pairs of boots. He developed a reputation for falling out of love with Oracle execs just before their options vested or their bonuses were due. "For most people there really is only a certain number of years they can take," says one ex-executive. "It's not like he's necessarily a bad guy. He's just very, very intense."

Intense, complicated, and a bit off-putting. Ellison's like the kid that came up to you on the playground when you were in fourth grade and said, "Everything I say to you is a lie, including this." Friends and colleagues describe him as insecure, arrogant, brilliant, sleazy, funny, cool, and ruthless. A celebrity billionaire. A rogue. His own CFO calls him a dictator. He says he's engaged (it will be his fourth marriage) to Melanie Craft, an author of Danielle Steel-like fare such as Hard-Hearted Man. He's preparing to race for the America's Cup and loves to talk sailing with Walter Cronkite. A huge hoops fan, he says NBA commissioner David Stern has suggested that he buy an NBA team.

Indeed, gossiping about Larry is one of the most popular spectator sports in Silicon Valley. Here is some of the latest dish about him served up at Buck's, the Valley's famed eatery: Larry's maid stole his Rolex. (Not true.) Larry forged the smog sticker on his McLaren. (Ellison will neither confirm nor deny this one.) Larry stiffed his boatyard. Larry--a huge fan of Bill Clinton's--is going to hire former White House spokesman Mike McCurry to be his personal publicist. (Who knows?)

"He works very hard at his bad-boy image," says Ellison's pal, former Intel CEO Andy Grove. But what makes all the boats and babes and braggadocio bearable--barely--is the fact that Ellison and his company have just been knocking the cover off the ball. In a business that chews companies up and spits 'em out by the quarter, Oracle has made it big.

Here are the numbers: The company did over $10 billion in sales last year. It had over $3 billion in operating profits, which are growing over 40% a year. (You don't even want to talk net income. Last year Oracle logged a nearly $7 billion gain in marketable securities.) Its operating profit margin has marched steadily upward over the past two years, reaching as high as 41% in a recent quarter. Since September 1998 the stock is up more than tenfold. (I don't own ORCL, but I wish I did!) The company now has a $184 billion market cap, making it one of the largest in the world. Beyond that, Oracle--along with Intel, Hewlett-Packard, Cisco, and Sun--is now one of the Silicon Valley elite. Not bad for a company that used to be best known for vaporware and an insaniac CEO.

Next Section: Analysts describe the new business Ellison is attacking as the "Internet applications business" and estimate it is a $30 billion market, growing by 25% a year.

Vol. 142, No. 11
November 13, 2000

Continue to Part 3

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