Monty Python M&A
Kessler, Andy
BY ANDY KESSLER S oftware is a bizarre business and so are the people in it. Bill Gates may be King of the Geeks, but Oracle Corporation chairman and CEO Larry Ellison is Silicon Valley's King...
...Oracle is the leader in databases, information warehouse store and retrieve gear—an important but fading franchise...
...Would you use 7 percent of your company's market capitalization to take out a competitor...
...By launching this deal, many institutional investors are beginning to question Oracle's own future...
...Bill Gates may be King of the Geeks, but Oracle Corporation chairman and CEO Larry Ellison is Silicon Valley's King Arthur, searching for the Holy Grail—the Monty Python version...
...I have been passed by Ellison in the morning a few times on Marsh Road in Menlo Park, heading towards 101...
...In Silicon Valley—as on Wall Street—the meat wagon comes around often, and those that fail to keep up are walking dead...
...He also jump-started the cellular, cable, and media business with financing neither banks nor the stock market would offer...
...the ninety-nine bucks he charges for Windows...
...Do it successfully and you can spout cash like an Iraqi oil gusher...
...Ellison has watched this over the past fifteen years and has learned a trick or two...
...Indeed, like the hapless dismembered knight in Monty Python and the Holy Grail, PeopleSoft has spent the summer desperately declaring: "I'm not dead yet...
...And now comes Ellison with Oracle's $6 billion in cash, on the prowl for walking-dead companies to fold into his realm...
...They code applications for which corporations pay hundreds of thousands, even millions of dollars, to help build better mousetraps, manage their global assets, or whatever else they do...
...And that's after the tech stock meltdown...
...Any trend here...
...In the 1990s the stock market woke up and provided all the capital any growth capital might want...
...Siebel is run by ex-Oracle salesman Tom Siebel...
...But Ellison has made a fortune charging lots for these little bit flips...
...Kill their products and the customers be damned...
...Not good for Larry...
...Ellison personally supports several local school districts where his and his ex's kids attend...
...His original bid, $5 billion, was barely 7 percent of Oracle's own market capitalization...
...Programmers at Oracle, like any good software company, work late into the night, often turning off the lights, turning up the brightness of their monitors, and wearing dark sunglasses...
...Just one problem...
...CA was Dr...
...I still have a few Microsoft DOS machines...
...I punched itto keep up, but he was long gone...
...Perhaps, but in the alchemic world of software, stranger things have happened...
...Much-discussed Computer Associates was the master at buying broken software companies, firing almost everybody, and maintaining the software just enough so customers could transition to something made by CA (and to fudge their books a bit, but that's another story...
...Wall Street has so far been willing to play along, pushing up PeopleSoft's stock ahead of Ellison's meager offer...
...Not bad, but poor Larry never finishes first...
...But software is not a land grab like autos or oil...
...Ellison has made the point loud and clear that you can forget about how much cash or how many customers a software company has...
...Kervorkian for you...
...Unfortunately, Ellison is exposing Oracle's own soft, white underbelly...
...Databases are great, but why are there so many successful enterprise software companies out there, many of them run by ex-Oracle folks...
...MIG jets and America's Cup yachts are only the most visible...
...Salesforce.com was the brainchild of ex-Oracle honcho Marc Benioff...
...No one wants to work for Larry...
...C'mon, you may be saying—Oracle is too big and too important to fail...
...Even PeopleSoft is now run by exOracler Craig Conway...
...In fact, software companies never really die because someone somewhere still uses the software and needs to be supported...
...PeopleSoft is not dead...
...But in technology, a visit from Dr...
...Bill Gates would love to do the same to kill Linux, the "open source" computer operating system now being given away for free vs...
...Ellison is pressing ahead...
...In fact, I'm feeling much better...
...He sued (and lost) to blow through the curfew at San Jose Airport and bring in his noisy Gulf-stream after dark...
...His application business is the one that could be thrown on the undertaker's wagon, a $500-million-ayear business and languishing...
...Screw up and the meat wagon is waiting...
...The software itself is just a flip of a tiny magnet on a hard disk's platter...
...SAP and IBM are being proffered as white knights...
...But investors should be warned...
...And these are not little niche companies...
...IBM, among others, has figured out that selling cheap databases helps them sell more heavy-metal computers...
...Ask Oracle's previous competitors, Sybase, Informix, and Ask, now in the morgue or in various states of disrepair...
...Germany's SAP is the largest application software company, the stuff businesses use to build those better mousetraps...
...In the 1980s Michael Milken milked the fat out of the Rust Belt...
...Ellison is probably premature...
...I can think of a few industries where this might be useful—a couple of airlines, several auto manufacturers, and maybe some insurance companies that could benefit from a lethal injection...
...His samurai-style estate, under construction for years in Woodside, California, will sport a fifty-ton boulder in the master bathroom so he can shower in a realistic waterfall...
...PeopleSoft has successfully employed the Nancy Reagan defense, "Just say no...
...Most of the post-bubbleera tech companies are survivors, not dead yet, and you can't just hit them in the head with a shovel...
...Early this summer, he announced a cash bid for the number-two enterprise software company, PeopleSoft, with the idea of shutting it down and transitioning customers to Oracle's competing applications...
...Of course you would...
...But the Street is fickle—you can only "say no" once...
...And boy does he have benefits...
...We all know how that ended—the strong still standing, but lots of wannabes wandering aimlessly, looking under rocks for growth...
...Fail, and it's Dr...
...Of course this is just noise...
...No matter...
...Sure...
...Find your competitors, use your stock and cash to buy them, and then tell them to say their last prayers...
...Among other things, the stock market—bless its cold, calculating heart—won't allow it...
...Now he wants to kill every other software company for his own benefit...
...A red XJS was interesting, but the black Bentley Arnage quite stunning...
...Bill Gates has the most valuable software company, Microsoft...
...I later heard stories of a lawyer on retainer full time to Larry "Earnhardt" Ellison just to beat his speeding tickets...
...Kervorkian, putting almost-dead companies out of their misery...
...A bold euthanasia strategy...
...It's the ability to harness those shades-wearing programming geeks...
...I don't think so...
...Last I checked, Forbes had the guy ranked number six on their billionaire list, at $16 billion net worth...
...Ellison will probably get bored with all this by year-end and walk away...
...If Oracle doesn't do something, five years from now it could end up yet another dead software company...
Vol. 36 • August 2003 • No. 4
