Now, those of you with your hands up, keep them in the air only if you can remember, from these Greek stories, some tragic heroes succumbing to their fatal flaws... OK, we didn't lose too many. Good! Now for the money question: Can anybody remember a fatal flaw that was not hubris? (Si' down TMF Tardior, ya spoil-sport ringer.)... Anybody?!... Nobody. Just as I expected.
OK. putting this thought on the back burner, for the moment, let's turn abruptly to the topic at hand, business software powerhouse Oracle <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ORCL)") else Response.Write("(Nasdaq: ORCL)") end if %>. When you buy shares of Oracle, let's face it, you are buying pieces of founder and CEO Larry Ellison's personal future vision. You'd be hard-pressed to find another public company, among tech stalwarts, more firmly in the control of a single person.
Now, let's bind these two opening topics -- tragic heroes and Larry Ellison -- by borrowing an old joke: Did you know that if you look up the word hubris in the dictionary, you'll see a 8x10 glossy of Larry Ellison, on the facing page? Anybody want to buy stock in a tragic hero?
Switching from old jokes to new ones, I offer the title of Ellison's biography: The Difference Between God and Larry Ellison. The punch line: God doesn't think he's Larry Ellison.
The key point here is not that Ellison is arrogant. This is a side issue unrelated to Oracle as an investment. The key point is that suddenly Ellison is starting to look a lot like our ancient Greek protagonist, the tragic hero.
Remember, tragic heroes are marked by greatness, which make them interesting, along with their Achilles' heel, which piques our empathy. In agreement with this well-tested story line, Ellison appears to be squandering his noble gift -- a keen eye for future trends and a knack for steering Oracle ahead of them.
Indeed, as recently as a year ago, Ellison looked to be riding the visionary wave, again. But, blinded by jealousy and a lust for absolute power, he appears to have shifted course towards self-destruction.
Ellison is no ordinary man
I won't quarrel with Ellison's vision. With Oracle's core database line dominant and growth slowing, Ellison boldly shifted Oracle towards an end-to-end, Internet-enabled, business software model, five years before his competition. Not a bad move, wouldn't you say, in light of today's realities?
Parallel to this shift, he continues to champion simplified, browser-based, end-user devices with data, applications, and processing power all shifted back to the center, to network servers. Anybody see a tie-in to broadband and wireless?
Not only did Ellison have the right vision early, he was in an excellent position to lead the charge. As the world-wide leader in business database software, his business was as close to the core of Fortune 500 business computing as it could possibly be, without displacing Microsoft.
So, we have a visionary leader with the right plan at the right time with the best resources. Is it agreed that we're looking at a heroic figure?
OK, so he's a hero. What makes him a tragic hero?
Pride. What else? Ahead of the curve, he sensed ultimate victory and got too greedy. Rather than moving systematically into new lines of business, as he reached the capability to dominate them, he went after the whole ball of wax, all at once.
The problem is that this never works. Tragically, it's likely that Ellison knows this even better than most, at some level, given his careful study of chief nemesis Microsoft <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MSFT)") else Response.Write("(Nasdaq: MSFT)") end if %>. Has pride suddenly blinded our hero even to truths that he once embraced?
The right way
The secret to Microsoft's success has always been Bill Gates' ruthless ringmaster model, in contrast to more control-oriented, military-like approaches to market dominance. A 1998 McKinsey study estimated that Microsoft revenues were a mere 4% of its overall value chain, the broader network of software development and consulting services built on top of the MS-Windows platform. By taking a core role, but freely giving away the periphery, Microsoft stoked the MS-DOS and, later, Windows wildfires, creating an overall business so big that just 4% of it represented the biggest software company in the world.
It's not just Microsoft, either. This ruthless ringmaster model dominates in today's high-tech world, with companies like Cisco <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CSCO)") else Response.Write("(Nasdaq: CSCO)") end if %> and Intel <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: INTC)") else Response.Write("(Nasdaq: INTC)") end if %> playing their partners and allies like a virtuoso fiddle. With dominance in key core technologies, these modern tech powers give the rest of their industry away, creating a feeding frenzy that grows the overall pie. This also enables them to remain light, as businesses, so that they can strike and acquire when they are ready to dominate a new slice.
Larry's way
In contrast, Ellison has become the ultimate control freak, seeking to single-handedly dominate every last nook and cranny, both within his company and in his industry.
Here's a laundry list of Ellison's current battles. He wants to crush the current leaders in every single category of business software, talking trash about such heavyweights as Siebel <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SEBL)") else Response.Write("(Nasdaq: SEBL)") end if %> in sales, Ariba <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ARBA)") else Response.Write("(Nasdaq: ARBA)") end if %> in procurement, i2 Technologies <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ITWO)") else Response.Write("(Nasdaq: ITWO)") end if %> in supply chain planning and, of course, long-time bitter enemy in the back-office, SAP <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SAP)") else Response.Write("(NYSE: SAP)") end if %>.
On top of all this, Oracle has to keep an eye on its core strengths. License growth in their database software slowed to just 12% last quarter, below more typical numbers in the range of 20%. Oracle is also trying to beat back Internet power BEA Systems <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BEAS)") else Response.Write("(Nasdaq: BEAS)") end if %> in another core area, application server middleware.
Even all this isn't a big enough slice of the pie for Larry Ellison, though. In the last few years, Oracle has plunged headlong into the two hottest, most competitive, emerging markets in business software today -- Application Service Providers (ASPs) and business-to-business online marketplaces.
Finally, within Oracle, Ellison has rudely squeezed out the only person he's ever successfully shared power with, Ray Lane. Lane bailed Ellison out of his last crisis, in the early '90s, by restoring Oracle's credibility on the business side of Ellison's vision. While Ellison busied himself with fast cars, yacht racing and the purchase of a Russian MiG fighter plane, Lane led the company through a decade of record growth.
Now Lane is gone, leaving behind the following picture of today's Oracle in an interview with CNET:
"Over a year ago, Larry's sole focus was on development and products... But around January or February of 1999, he said he wanted to focus on the whole company. He felt he had to personally make every decision, whether it was human resources or what computer to buy."
The bottom line
Wall Street appears to be impressed with Ellison's one-man, eight-front attack. Oracle's stock is up more than five times in the last two years. When I look at the company, though, I see a tragic hero, blind to his faults, pushing his company towards unattainable goals while it rots from the inside.
Even if Ellison does achieve his overly ambitious vision, I doubt he will be able to hold it long. Such a broad, heavy chain of interconnected products will snap quickly the next time technology takes a sharp turn. Long term, it doesn't look good for Oracle, and I don't fancy the notion of putting my hard-earned money in the hands of a tragic hero.
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