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Ellison still wants Apple

He's at it again: Oracle CEO Larry Ellison drops another hint that he'll buy Apple Computer.

There he goes again.

Larry Ellison, chairman and chief executive of database giant Oracle (ORCL), is again hinting that he wants to rescue troubled Apple Computer (AAPL) by buying the company, according to a report today in the San Jose Mercury News.

The report said Ellison might make a play for a majority stake in the computer maker by forming an investor group that would pay Apple shareholders roughly $1.25 billion in cash. The group would also offer 40 percent in equity in the company, boosting the value of the deal to $2.1 billion based on the cost of shares outstanding.

Ellison, who confirmed the Mercury report in a news release issued today, noted that he and the rest of the investor group will be acting independent of Oracle or its subsidaries.

But not, apparently, independent of public opinion.

Ellison has established an email address to ask the masses two questions:

  • can Apple benefit from new management?
  • What should be the single top priority of the company should Ellison's investor group go ahead and make the acquisition?

    The industry has heard this kind of acquisition talk before.

    Ellison has been talking about buying the computer maker since his friend and Apple cofounder Steve Jobs was kicked out in 1985. He first made public mention of the idea in February 1996, just before Gilbert Amelio became CEO.

    Ellison wants to take over Apple in partnership with Jobs and hinted again about a takeover earlier this year.

    Although today's plan might be the most specific one that Ellison has proposed--and certainly the first time he's asked for advice from the public--this time Jobs described Ellison's plan as "bizarre," according to the Mercury report.

    The database chieftain himself described his plan as a trial balloon. But his comments have been timed for public consumption just as Amelio and the Apple board are preparing to meet with shareholder activist and giant pension fund manger CalPERS on April 1. CalPERS--the California Public Employees' Retirement System--manages a $108 billion retirement fund and holds more than 700,000 shares of Apple. Apple recently topped CalPERS's list of worst-performing companies.

    Ellison's questionaire will be tabulated for "private consideration" of Ellison's investor group. An Oracle spokeswoman wouldn't say whether the survey answers will be released to CalPERS.

    Ellison's comments and clear desire to get rid of Gil Amelio, Apple's chairman and chief executive, may resonate with investors concerned about Apple's recent losses and layoffs. The company is currently trading at its lowest point in the past ten years.

    CalPERS might be receptive to Ellison's proposal. "We think it's intriguing and interesting, but it's too early too tell," said Brad Pacheco, a CalPERS spokesman. "We're also concerned with performance as well."

    Ellison and Jobs were not available to comment directly on the Mercury report.

    Apple representatives, however, had this to say about Ellison's musings: "We view this as speculation, and it's our policy not to comment on rumor and speculation," said Kristin Brownstone, an Apple spokeswoman.

    She added: "In terms of selling the company, our goal is to maximize shareholder value and so we're not looking to sell the company at this point."

    Wall Street, however, liked the story. Shares of Apple soared as high as 15 percent in trading today, reaching a day high of 19-1/4, before finishing up at 18-5/8, up 1-7/8.

    Ellison said he will decide within a couple of weeks whether to move forward after gauging the reaction of Apple's institutional investors, according to the report.

    But to a large extent, Ellison already knows what some of the biggest investors think. CalPERS has criticized Apple for posting low returns on investments compared with the S&P Computer Index since 1993, plummeting market share, and poor stock performance. The group has also previously said it is concerned about a lack of PC experience among Apple's top management and a board of directors that is stretched too thin.

    Another investor, Parnassus Fund, discounts any such deal. "[Ellison's] proposing nothing. I can go to my broker and get that," said David Pogran, head of research. "I don't know what game he's playing, but at best, it's a trial balloon."

    The fund holds 340,000 shares of Apple.

    Apple earlier this month announced plans to slash 2,700 permanent full-time workers and 1,400 part-timers and contractors from its payroll. The company is also suspending some technology efforts such as component software and videoconferencing in an effort to slice upwards of $500 million from its operating expenses. Earlier this year, it pushed back its timeline for profitability by six months, to the fourth quarter.