Recurring Revenue Authors: Elizabeth White, Yeshim Deniz, Zakia Bouachraoui, Pat Romanski, Xenia von Wedel

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Larry Says What Everyone Thinks About Sun

Oracle CEO Blasts Schwartz, Sparc, and Blogs in Interview

Reuters managed to entice Oracle CEO Larry Ellison into a rare interview and Larry delivered in turn by publicly castigating former Sun CEO Jonathan Schwartz as a raging incompetent, which will come as no news to the computer industry-at-large. It's just nice to hear it from Larry.

According to the Reuters piece Ellison met directly with Sun's technical managers "as often as four days a week to diagnose its problems, rather than delegating the work to underlings" and emerged with the observation that Sun's pony-tailed chief executive "ignored problems as they escalated, made poor strategic decisions and spent too much time working on his blog, which Sun translated into 11 languages."

According to Larry, "The underlying engineering teams are so good, but the direction they got was so astonishingly bad that even they couldn't succeed. Really great blogs do not take the place of great microprocessors. Great blogs do not replace great software. Lots and lots of blogs do not replace lots and lots of sales." Schwartz was the first CEO of a major company to blog and his example set the rest of Sun to going blog-wild.

Schwartz's predecessor Scott McNealy, who for some unknown reason handed the boy prince the reins, wouldn't talk to Reuters. Schwartz told the wire service that he couldn't talk until after August. "Until then, Larry's an outstandingly lovely, flawless man." Apparently the pig-tailed one is writing a book.

Ellison told the wire service that Sun's "management made some very bad decisions that damaged their business and allowed us to buy them for a bargain price." He did not say the dénouement started with Schwartz.

Ellison, who spent $5.6 billion buying Sun, apparently told Reuters that he found "lots of waste among the billions of dollars that had gone into R&D in recent years," that Sun "had cut back the sales staff that sold its most profitable products, including its business computers and storage equipment, causing sales and earnings to decline," that it "operated an antiquated manufacturing and distribution system," and that it "regularly sold hardware and software at a loss, sometimes losing more than $1 million on a single deal" merely to boost revenue.

Ellison also told Reuters that he had "stopped the carnage at Sun, less than four months after the sale closed in January" and expects profits from Sun to tickle Oracle's earnings this quarter, which ends May 31.

The way he stopped the blood loss was to start by shutting down "one of Schwartz's pet projects - development of the Rock microprocessor for Sun's high-end Sparc server line, a semiconductor that had struggled in development for five years as engineers sought to overcome a string of technical problems."

"This processor," Ellison told Reuters, "had two incredible virtues: It was incredibly slow and it consumed vast amounts of energy. It was so hot that they had to put about 12 inches of cooling fans on top of it to cool the processor. It was just madness to continue that project."

Sun's sales staff was also compensated on deal size, not profits. So a commission on a $1 million sale that generated $500,000 in profit was the same as one that cost the company $100,000.

"The sales force could care less if they sold things that lost money because the commission was the same in either case," Ellison told Reuters. Sun also lost money when it resold high-end storage equipment from Hitachi, storage software from Symantec and consulting services from other companies.

It also used to charter planes during the last two days of a quarter so it could book extra sales of its money-losing industry standard servers.

Ellison faults Sum for buying StorageTek for $4 billion in 2005 and then laying off all the sales people and the field service people, which resulted in sales plunging. "It's breathtaking!" he told Reuters.

With Sun under his belt, Ellison told Reuters he means to acquire other semiconductor, storage and server technologies like he's been doing in software since his hostile takeover of PeopleSoft, starting with technologies he can incorporate into his newfangled purpose-built pre-integrated factory-tuned Sun-based appliances à la Exadata.

At least two new appliances are due in September, one reportedly running Oracle's sight-unseen next-generation suite of business management programs called Fusion Apps, complete with storage and networking, and another running Oracle's middleware meant to take on IBM.

More Stories By Maureen O'Gara

Maureen O'Gara the most read technology reporter for the past 20 years, is the Cloud Computing and Virtualization News Desk editor of SYS-CON Media. She is the publisher of famous "Billygrams" and the editor-in-chief of "Client/Server News" for more than a decade. One of the most respected technology reporters in the business, Maureen can be reached by email at maureen(at)sys-con.com or paperboy(at)g2news.com, and by phone at 516 759-7025. Twitter: @MaureenOGara

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