Oracle CEO sees long slog for U.S. economy
Billionaire Oracle CEO Larry Ellison doesn't expect the U.S. economy to significantly improve until halfway through the next decade – a gloomy scenario he dubbed an L-shaped recovery.
"The American consumer is so deeply in debt, this is not going to come back, certainly for five years," he told a packed ballroom at a Churchill Club event in San Jose. "I believe we're going through some fundamental changes."
In a wide-ranging and humor-filled chat with former Motorola (MOT) CEO and Sun Microsystems (JAVA) executive Ed Zander on Monday night, Ellison riffed about the state of innovation in the technology industry, Oracle's (ORCL) acquisition of Sun, his sailing hobby, and the cloud computing trend. The event was a rare opportunity to hear Ellison talk off the cuff – he tends to be guarded with the press, and lately has done few interviews.
Ellison, 65, said that even after 32 years at the helm of Oracle, he doesn't see retiring anytime soon. He intends to develop Oracle into a technology powerhouse that provides not just software, but computing, storage and networking gear. The company recently started mapping out its five-year plan, and he intends to continue at the helm at least long enough to execute it. "We'll see how I feel after five years," he said.
Below, some more gems from Ellison.
On the value of Sun to Oracle:
"If, just for one dollar, if we could buy IBM (IBM), HP (HPQ), Sun or any of these tech companies, I'm not sure we wouldn't pick Sun."
(As Ellison later pointed out, Sun is losing $100 million a month, while IBM makes a couple billion dollars a month. I think we know which he would actually buy for a dollar.) Ellison said he has no intention of spinning out MySQL, and said he feels confident that European regulators will approve the deal.
On his frustrations with how cloud computing has become a trendy term:
"Cloud? Clouds are water vapor. My objection to cloud computing is the fact that cloud computing is not only the future of computing, it is the present and the entire past. Google's (GOOG) now cloud computing. Everybody's cloud computing. … All it is, is a computer attached to a network. What are you talking about? What do you think Google runs on? It's databases and operating systems and memory and processors! What are you talking about?"
On Microsoft's (MSFT) relevance:
"They make a lot of money. I think they're clearly relevant. I divide the computer industry into two groups. And I know for a long time I was constantly picking a fight with Microsoft. Now Oracle's constantly picking a fight with IBM. Because you've got to pick your enemies very carefully, because you're destined to become most like those enemies you select."
"Microsoft, culturally now, is a very consumer-centric company. They've got the Xbox. They've got Zune. … I think they are obsessed with Apple (AAPL). They're obsessed with Google. … Under the new administration at Microsoft, I see all of their energies going into being successful in the consumer space."
On the Obama administration:
"I don't know anyone who's against universal healthcare coverage, but it's going to be very expensive."
"I voted for President Obama, and I'll kind of confess to that right now. And I am surprised at how much spending there is. I am surprised that there are so many huge spending programs."
On net neutrality:
"I think it's very dangerous for the government to engage in pricing for companies. So I'd be a little bit worried if the government came in and did all the pricing for Safeway, priced food, even though food's essential. I think net neutrality, or having lots and lots of government regulation about how the phone companies can price their network, which they built and they own, is very interesting. Now, it's great for Google. And it's really bad for the phone companies. In general I believe in free markets, and I think this is a case where government regulation is not necessary."
On Oracle's culture:
"We are the largest employer of MIT and Caltech engineers in the world. We are the largest employer of Stanford and Harvard, CMU mathematicians in the world. We are overwhelmingly dominated by engineering at Oracle. The idea that we are a sales and marketing company, which people will write about quite often, is ludicrous on the face of it. … The company is all about engineering. It's the only thing that works. "
It surprises me that people still pay attention to Larry at all. Clearly he's very smart (his savvy is amplified by a very smart, competitive and aggressive staff) and never holds his tongue (which can be funny or interesting by turns).
The problem is that he never says anything that is not self-serving and it is completely irrelevant to him whether or not it is true. He is more or less amoral – driven only by his desires to dominate the computer industry and the sailing world, but heavily vindictive toward anyone that threatens him in any way.
I would give his advertisment promising to spend more on R&D than SUN about a 10% chance of being true.
Most likely, he'll do exactly the opposite – slash investment, move almost all of SUNs engineering and manufacturing jobs overseas, fire all of the SUN salesforce (and add the SUN portfolio to Oracle sales staff), and bundle-price Solaris and Oracle and applications on SUN hardware. Then raise the prices on them in 2 years after they are more widely deployed. He wants a monopoly market that he can't get with Linux.
I give it a 10% chance only because his achilles heel has always been hardware. He has always wanted to develop and sell appliances where he gets profit from the hardware, OS, application and the support of all of it.
It's just as likely that he's in full-court press on how great the hardware is because he is trying to shine it up to spin off parts of it to different buyers once the economy recovers a bit and he can turn a profit. (And of course he is working to keep shareholders convinced that he got a great deal for SUN – which in fact is IMO true – so the stock prices stay up).
He burns everyone that partners with him, most recently HP – after they invested heavily in co-developing Exadata, he stole the ideas and re-deployed them on SUN hardware.
Despite always having a close relationship with SUN (because both are targeted to the same high-end reliability-focused market), three years ago, when SUN ran an ad promoting mySQL, Larry banned any internal hardware purchases from SUN.
He's not any worse than Bill Gates, but he's not any better. They're the same. I am looking forward to his retirement and (hopefully) transformation to a philanthropist once he considers his legacy.
Doom and gloom? Seeing a turnaround in 5 years is a very positive outlook to many economists. We're heading down the same path as Japan. Japan is starting their third lost decade because of their futile attempt to keep insolvent zombie banks alive. And our debt load and asset bubbles are far greater than Japan's were. We're basically in for a non-stop depression until Americans can fully delever – which is starting to look more impossible each day as jobs are lost. Until the debt is purged from the system, it's going to be a downward spiral.
The only thing keeping the wheels on the track is Gov spending – the rescues were the equivalent of roughly 18 percent of global GDP over a 3 year period. Once that spending stops, it's back to square one, the collapse will be in full-force once more.
If you look at the last quarter, yes the hit in GDP was 1%. But if you stripped away the stimulus, we would have had a -8% GDP – a full blown depression. The government debt can't keep this boat afloat forever.
ALL companies are sales and marketing companies. Sales and marketing are the only activities that actually MAKE money. If you build it, they will NOT come if they don't KNOW about it!!
Jason and Bill: Democrats don't have a monopoly on deficit spending. Reagan got the deficit spending ball rolling and ran up huge debt with a combination of big tax cuts ("I'm giving you hardworking people a break.") and hiding it with increased Social Security taxes ("Your grandchildren will be paying for your tax breaks."). Bush 1 continued the deficit party and it took a Democratic President to bring it under control again and balance the budget only to see Bush 2 and his Republican congress to reverse those gains and accelerate deficit spending. The biggest chunk of our deficit is their handiwork.
Larry Ellison is no economist and neither an engineer. He's an aggressive businessman who has succeeded by the efforts of those who work for him. Although I do believe the economy is going a fundamental structural shift, I wouldn't take anything he says about the economy to heart since it's most likely based upon what he's heard from others. Unfortunately, the government has had to spend its way out of this fiasco that most likely would have brought about a depression had there been no action. We'll be reading about this in the textbooks that are written ten to twenty years from now.
Ellison is correct about the economy in the US. Ellison is correct about the government spending. Ellison is correct about the Cloud computing hype. Need I continue? No, Correct!
So many uninformed people…The democrats are spending BECAUSE why??? Bush & his smart administration tanked the economy. No only tanked it but gave away 700 billion to the financial industry. Socialism is a word disgruntled ex-affluent people like to use, live within your means.
Oracle's CEO is surprised but look at the circumstances…
The guy is a CEO billionaire.. and you all question his judgment where it disagrees with your own. Maybe instead you should respect it.. instead of deciding to segment off 'what he knows' and 'what he doesn't'.. Look at his net worth.. and then decide whether he should comment on economic issues..
True Jason. For a billionaire CEO of a major tech company to vote a democrat into office with a democrat controlled congress to be surprised about spending, well maybe he should think more towards retirement and forget his five year plan… But having done more than enough business with Oracle, well, open-source for the win!
He voted for Obama….enough said. And he's surprised about the Administrations spending…..guess he didn't do his homework before going to the polls………
Larry Ellison's middle name is gloom and doom. The only things he knows are computers and you want to quote him on the economy? He's a jerk……my ex worked for him…….
I agree with Larry – Oracle is not a sales and marketing company….their sales force is horrible and their products are clearly designed by engineers with no field or customer input.
The reason Larry Ellison is a billionare is because he outsourced/insourced(H1-B Visa) all the engineering talent.
The reason the Oracle CEO sees a "long slog for for U.S. economy" is because people like him ruined it in the first place and refuses to invest in the American economy.