When Ben Bernanke and his fellow board governors at the Federal Reserve took the benchmark federal funds rate down from 1 percent to a record low of 0 percent to 0.25 percent, Larry Ellison had to be relieved.
"Larry, I feel your pain"
(Credit: Federal Reserve)Not that the big guy is in need of a lower mortgage rate for a new tea house. But he sure as hell is anxious to see a lower U.S. dollar.
In the second quarter, Oracle's earnings got pinched because of the greenback's surprising resurgence, particularly in November. The company's profit declined to $1.296 billion, down from $1.303 billion during the same period a year earlier. Sales increased by 6 percent to $5.61 billion, but that would have suggested a 12 percent increase at constant currency rates.
The same applies to the company's software revenue. That number climbed 8 percent, while services revenue dropped a couple of percentage points. The same figures at fixed exchange rates increased 14 percent and 5 percent, respectively.
About half of the company's revenue comes from overseas customers and that's where the dollar's strength in the second quarter took a bite out of Oracle's bottom line. With the Fed's aggressive rate cut on Tuesday, currency traders expect a weaker dollar, which theoretically, will help U.S. exports.
During a conference call late today, Oracle's braintrust--CEO Larry Ellison, co-presidents Safra Catz and Chuck Phillips, and CFO Jeff Epstein--played down the impact of the recession on the company's business. Though not altogether.
Ellison did note that customers are signing fewer multi-year, multi-hundred million dollar projects, "though we get those also," he said.
Meanwhile, the company, famous for orchestrating some of the biggest software acquisitions of the last decade, said the global economic slowdown had not put the kibosh on future deal making. Ellison said Oracle would be opportunistic in niche segments. He added that the company would consider making a large acquisition "if the price is right."
Larry Ellison is finally in the hardware business. Maybe the second time's a charm.
Oracle CEO Larry Ellison
(Credit: Dan Farber)In the late 1990s, Ellison tried to drum up support for a network-based computer. He barnstormed around the country with Sun Microsystems' Scott McNealy and made the case for a thin-client alternative to the Wintel duopoly. They were so convincing that Intel embarked upon a crash course to squeeze down costs before the NC could ever get going. Intel prevailed in that contest and Ellison moved on.
Now he's back on a considerably bigger scale--not to mention on more familiar turf.
Oracle's announcement this afternoon qualifies as big news. So does its burgeoning development relationship with Hewlett-Packard, which may be even bigger news. (HP's Ann Livermore noted that HP and Oracle already share about 150,000 joint customers worldwide. If the companies don't blow what looks to be a big opportunity, that number can only grow.)
Oracle's got a lot more riding on its "data warehouse appliance" (as Mark Hurd described the HP Oracle Database Machine) than in the days when the network computer was Ellison's rallying cry. The first units feature 168 terabytes of disk data and 64 Intel cores. HP, which made the systems according to an Oracle design, will supply hardware support. Customers still have to order the machines from Oracle, which should make Ellison happy about the opportunity for his sales team to to cultivate (and sell) that customer list to their hearts' content.
Forrester's James Kobielus noted that Oracle had demonstrated that it can now scale its DW/DBMS platform to address the petabyte-scale analytics requirements that will soon come into the enterprise mainstream everywhere."
Indeed, Ellison made the case that customers will receive better performance because Oracle has coupled its database software with custom hardware. Dana Gardner, who has a good writeup of the event, points out that in this case, the idea is to bring the "intelligence closer to the data, that is bringing the Exadata Programmable Storage Server appliance into close proximity to the Oracle database servers, and then connecting them through InfiniBand connections."
How these two companies were able to keep this secret for most of the three years it took to complete the project is a source of some chagrin to the Fourth Estate and associated blogger types who follow this stuff. But the announcement is already being hailed as "earth shattering"--and perhaps the hyperbole this time isn't so over the top.
And here I thought that court sycophancy died out with the demise of the ancient regime.
Just another working stiff.
In Forbes' annual list of top executive salaries, Oracle's Larry Ellison finished in first place, with total 2007 compensation at $192.9 million. I'm sure it's good to be the king. But just in case any jealous serfs are asking why this mere mortal is worth such a royal sum, here comes journalist Sarah Lacy to remind us Ellison "deserves to be one of the most highly paid CEOs in the Valley."
That might have been a good point of departure for a more searching conversation on wealth and power in America or a discussion about how society divides up its spoils. Instead, the post skims the surface. Lacy writes that "Ellison gets where software is going" and that "he also gets where the technology business is going." Gee, with those credentials, I guess Oracle's board was guilty of short-changing its CEO.
More seriously, Ellison deserves fair compensation for his labors over the years. Of course, if you ask a dozen compensation experts what "fair" means, you'll wind up with a dozen different answers. Boring blather about whether Ellison's a sweetheart or someone who kicks pussycats is irrelevant. There's a statistical benchmark to measure the CEO of a publicly traded company. So I went back in time to how Oracle's shares fared over the last decade in two-year increments.
• May 4, 1998: $26.31
• May 4, 2000: $37.12
• May 3, 2002: $8.43
• May 4, 2004: $11.35
• May 3, 2006: $14.32
• May 3, 2008: $21.50
Not the most impressive stock performance in memory. Of course, the intervening 10 years were marked by the dot-com bubble burst as well as the subsequent recession. But when the economy recovered, so did the stock market. Judge Oracle's performance for what it is over the course of the last decade, but is the CEO really worth $192.9 million? You tell me.
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Update: Judging from the feedback, I'm a moron for not noting stock adjustment & dividend announcements prior to the bubble. At the risk of again letting the trolls change the subject, I ask again: Is Ellison worth nearly $193 million for the job turned in over the course of last year? I must have missed it when Oracle shares broke triple digits in 2007. Wait, they didn't? No kidding. 'I'm still rubbing my eyes in disbelief at anyone who thinks that this incredible compensation package makes sense based upon the company's performance. If some folks still want to make that claim, whatever. There is no shortage of suck-ups to corporate greed. Anyway, I'm moving on.
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