Oracle Systems Corporation
A Case Study:
Oracle Systems Corporation
EXECUTIVE SUMMARY
In 1977, Lawrence J. Ellison founded System Development Laboratories to sell a database management system he had developed in a CIA project. It was only in 1982 that the company was renamed to Oracle Systems Corporation, to reflect the success of their first product, Oracle Database. Oracle used the C programming language to create its products, which was a big part of its success since this allowed Oracle software to run on various platforms and eventually became the industry standard.
Oracle achieved highly impressive growth throughout its early years, almost always doubling their revenues per fiscal year from 1980 to 1990 (see Exhibit 1). They also made their shareholders very happy with a peak share price of $28.375 in 1990 from an issue price of $2.00 upon their initial public offering.
However, things were not as rosy as they seemed. In 1990, Oracle’s earnings had 0 growth. This was due to $15 million worth of sales being disallowed by auditors. In the first quarter, they also disclosed their first net loss of $36 million. They laid off around 400 of their US employees. These events, combined with the news that Oracle officers had already sold their stocks for a profit, enraged shareholders and prompted their stock price to plummet by $8.125.
As seen in the statement of challenges and objectives, Oracle is experiencing internal financial problems. From an analysis of the case, these problems were brought about by the change of corporate strategy. First, Oracle decided to change its compensation plans to one that is based on revenue targets. This action made Oracle’s sales people perform unethical practices in order to generate sales growth due to the pressure of the new compensation plans. Second, Oracle cancelled out sales territories. This made the satisfaction of both customers and salespeople go
Oracle Systems Corporation
EXECUTIVE SUMMARY
In 1977, Lawrence J. Ellison founded System Development Laboratories to sell a database management system he had developed in a CIA project. It was only in 1982 that the company was renamed to Oracle Systems Corporation, to reflect the success of their first product, Oracle Database. Oracle used the C programming language to create its products, which was a big part of its success since this allowed Oracle software to run on various platforms and eventually became the industry standard.
Oracle achieved highly impressive growth throughout its early years, almost always doubling their revenues per fiscal year from 1980 to 1990 (see Exhibit 1). They also made their shareholders very happy with a peak share price of $28.375 in 1990 from an issue price of $2.00 upon their initial public offering.
However, things were not as rosy as they seemed. In 1990, Oracle’s earnings had 0 growth. This was due to $15 million worth of sales being disallowed by auditors. In the first quarter, they also disclosed their first net loss of $36 million. They laid off around 400 of their US employees. These events, combined with the news that Oracle officers had already sold their stocks for a profit, enraged shareholders and prompted their stock price to plummet by $8.125.
As seen in the statement of challenges and objectives, Oracle is experiencing internal financial problems. From an analysis of the case, these problems were brought about by the change of corporate strategy. First, Oracle decided to change its compensation plans to one that is based on revenue targets. This action made Oracle’s sales people perform unethical practices in order to generate sales growth due to the pressure of the new compensation plans. Second, Oracle cancelled out sales territories. This made the satisfaction of both customers and salespeople go