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Anatomy of a power play: Why Ray Lane left Oracle |
Oracle's controversial espionage campaign was only the most recent evidence of Ellison's apparent obsession with Microsoft. Those who have worked at Oracle say Ellison has pushed his product development teams to great lengths to build new software features to one-up the Windows maker, despite little customer demand for such technology.
For example, Ellison pushed his developers to build a Windows NT-like file system and operating system kernel into Oracle's 8i database so that customers would not have to use Windows NT. Months after those new features shipped, few customers reported using them.
Some amateur psychologists in the business theorize that Ellison's decidedly noncorporate exploits are related to this ego compensation. As much as his wealth and technical talent, Ellison has become known for his penchant for fighter jets, racing yachts and abundant romances.
"He built a $49 million house in Woodside. He dresses in Armani suits. Everything is first-class," one associate said of Ellison, who is fond of recounting his Horatio Alger roots in the South Side of Chicago. "He is refined in mechanical ways, such as table manners, for a guy who was raised on the other side of the tracks."
With Oracle's Internet initiative, Ellison could attain both his personal goals and grow his company's power base. At one point, Lane said, Ellison was so enthusiastic about his decision to run all facets of the company that he even discussed issuing a press release to announce the new Internet strategy and how he would serve as Oracle's CEO--that is, until Lane reminded him that he already had that title.
The shared leadership under the troika of Ellison, Lane and chief financial officer Jeff Henley had changed: No longer would each run their respective areas--technology, sales and finances--with relative independence. No decision escaped Ellison's attention, including who would receive the $150 employee recognition award. None of this sat well with Lane, who said he had grown accustomed to "running more than 80 percent of the company" on his own.
Not everyone was happy with Lane's stewardship, however. He was fine at running day-to-day operations at a company whose direction had already been set, sources say, but his consensus style of management was too slow for Ellison's Internet revolution.
As Oracle's new charter gained momentum, Lane became increasingly marginalized. One source familiar with Oracle's board said performance has improved since the transfer of responsibilities from Lane to others.
"As Larry dug deeper in the organization, he found performance was not as strong as he wanted it to be in certain areas," the source said.
By some accounts, Lane himself may have planted the seeds of his eventual downfall as early as 1997. At that time, he said the plan was to run Oracle as two businesses, a consumer-focused network computing company and a business-oriented software company. That, obviously, did not work. Ellison saw things differently: Oracle owned the database market, and a large chunk of Internet businesses used its products--so it only made sense that Oracle should be seen entirely as an Internet company.
Shortly afterward, Ellison began taking a more active role in the company, evangelizing Oracle's Internet strategy and engaging in one of his favorite pastimes, attacking Microsoft. The initiative has received mixed reviews, with some customers and analysts growing weary of the company's arrogance, led by Ellison himself.
Even with a good dose of criticism, Ellison's revived leadership has won praise in the industry and on Wall Street.
In one well-publicized move, he revamped the company's internal operations using Oracle's own business management software, reaping millions in savings and providing the ideal showcase for the company's new Net technology. The subsequent launch of Oracle 8i, pitched as an Internet-savvy version of the company's core database, along with revamped Net-centric business applications, helped boost sales and push the company's revenue to record levels.
In the last 1-1/2 years, Oracle's stock has risen more than fivefold. Trading near its 52-week high, it closed up slightly today at $75.81 a share.
Some speculated that Ellison was waiting for the right time to get Oracle's house in order before allowing Lane to go. At the same time, others say Lane stayed as long as he did because he thought Ellison might lose interest in running the company full time.
"Larry has a history of getting involved and then uninvolved in business," said a former Oracle executive. "In his sporting days of sailing or flying airplanes, he would disengage in business and then the business would drift down, and then he would re-engage and do all-nighters sometimes or work all weekend. Usually this would happen on two-year cycles."
This source said Ellison was also notorious for his fickle nature. "He's supportive of certain people at certain times, and then it takes a turn. Usually people will be in favor for about two years, and then you're in the penalty box and then discarded."
Ellison and Oracle spokesman Kevin McGuirk declined to comment on the CEO's management style or Lane's departure. But Oracle has a long history of losing talented executives, a trend that many sources attribute to intense internal politics.
Randy Baker, formerly executive vice president and a member of Oracle's management committee, earlier this year filed a wrongful-termination lawsuit against the company. Pier Carlo Falotti, executive vice president of Oracle Europe, Middle East and Africa, left Oracle in May. Polly Sumner, former executive vice president, left in September last year and is now president of AlphaBlox.
Two other senior executives left in August 1998 after a reported struggle between Lane and Ellison: Robert Shaw, former executive vice president of vertical markets, left for USWeb/CKS, and Barry Ariko, former executive vice president of the Americas region, joined Netscape Communications as chief operating officer.
Today, a new breed of executives is being groomed. When Ellison, Lane and Henley began discussing a succession plan several years ago, they each submitted names of their best candidates. Sources said Ellison's choice was Gary Bloom, a senior vice president of the system products division--a 40-year-old executive who many have identified as Lane's chief antagonist within Oracle's ranks. But Lane and several other former executives say it is unlikely that Bloom will ever be named to the top job.
"Gary is good at executing what Larry wants done. And right now, Larry wants those kind of people," one former executive said. "But a CEO has to be able to think for themselves and make decisions, and right now, there are no such people at Oracle. The prospect of Gary being the future CEO died about a year ago."
For Lane, the last few weeks have been a far cry from his early days at the company, when he was heralded as something of a savior.
A former consultant at Booz-Allen, Lane was hired by Ellison in 1992 shortly after an accounting debacle slashed Oracle's stock price and shook investor confidence in the company. Lane was charged with the unenviable task of reorganizing Oracle's sales force, which was known throughout the industry for ruthless tactics and indifferent customer service. He created a successful commission plan that rewarded sales representatives on a sliding scale to improve customer relations. Lane was universally credited with bringing a sorely needed professionalism to Oracle's sales staff.
At 53 and with a young child, Lane decided that it wasn't worth fighting to stay at Oracle any longer.
His departure did not come without a price: Lane is leaving behind more than $20 million in stock options expected to vest in July, and he's passing up another 2.8 million options, worth nearly $210 million today, that he could cash in during the first quarter of next year.
But Lane already has roughly 12 million shares of Oracle, worth nearly $1 billion, according to a March filing with the Securities and Exchange Commission.
Now, Lane is looking for a different challenge and is interested in joining a large venture capital firm. But this time, he is looking for a part-time general partner position with a flexible schedule.
"There's nothing left to prove," Lane said.
News.com's Mike Ricciuti and Wylie Wong contributed to this report.