Consider it one of the great mysteries of the high-tech world:
What is Larry Ellison thinking?
| Ellisonspeak: Hinderance or help to Oracle? |
At any time, the CEO of Oracle Corp. (Nasdaq: ORCL) can erupt with a litany of delusions on technology (network computers), politics (Ellison as Governor), or culture (Ellison as Daimyo?). But sometimes he actually lowers himself into the world inhabited by most executives, a world of operations, finances and business. Unfortunately, the pronouncements are just as bizarre.
Ellison yesterday declared that Oracle has discovered it can save $1 billion in costs, or at least twice as much as the company had previously estimated. Oracle also expects to become "the hottest company in town" as it becomes the main software supplier for the Internet Age.
Would it be too much to ask Ellison to just run his business? It's hard to fathom how bluster -- as opposed to a judicious forecast -- helps Oracle.
At one time, Ellison was seen as a true visionary of Silicon Valley. Now his own employees contradict him: last month, when Ellison originally predicted as much as $500 million in cost savings over the next 12 months, Oracle President Ray Lane quietly told some analysts that figure was unrealistic; last year, Oracle's head of European operations advised his own subordinates to ignore Ellison.
Ellison's latest forecast of $1 billion in cost cuts is "ridiculous" in the eyes of at least one analyst. As for Oracle being this year's hottest company? "I'm baffled as to why he would say that after a bunch of people just lowered their estimates," the analyst says, referring to a rash of downgrades recently issued by some of his colleagues.
The idea behind Ellison's latest outburst, says another analyst, is that Oracle practices what it preaches. "What he's saying is, 'Why can't we metamorphosize ourselves into an Internet company?'" says Marshall Leisten, a vice-president with Dain Rauscher Wessels and a former employee in Oracle's sales.
Although Leisten sees Ellison as an extremely intelligent marketer, he remains just that -- a marketer. "Smart investors take whatever Larry says with a grain of salt," Leisten says. "Smart investors understand the hyperbole inherent in Larry."
The Internet can probably save Oracle a few hundred million dollars, but not $1 billion over 18 months. "I'd like Larry to put out a bet that says if Oracle doesn't save $1 billion, then I (Leisten) become a millionaire," Leisten says.
Despite Ellison's ramblings, Oracle remains the same company that's let down shareholders in recent months. And even analysts like J.P. Morgan's William Epifanio -- who gives Ellison the benefit of the doubt on the $1 billion number -- don't expect much from Oracle's next two quarterly reports.
"Given that Oracle is more of a 'Show Me' stock than they'd like to be, we can't expect a strong fourth quarter or first quarter from them," Epifanio says. "They're going through a weak spot in a market where, because of Y2K concerns, spending has slowed."
Ellison might be reaching too far with a $1 billion in cost savings, but the goal is laudable, Epifanio says. "If Oracle falls a bit short, the results will still be good," he says.
That's true, but Oracle has fallen more than a bit short lately. In any case, it still doesn't explain why investors would expect a successful moonshot from Oracle when its recent results have been more along the lines of Apollo 13. The market rewards consistent, reliable performers -- the ones who can temper expectations.
In a reversal of yesterday's action, blue chips are up today while the technology sector is down. With two hours left in regular trading, the Nasdaq Composite Index had fallen 10.17 to 2422.24, the S&P 500 was up 4.18 to 1298.99, and the Dow Jones Industrial Average had risen 68.07 to 10645.96. 22GO>