What Was Oracle's Biggest Crisis?

David Senra reads the account of Oracle's biggest crisis: it hit in 1991, and the company almost went out of business.

The blowup combined a massive accounting and sales crisis, aggressive sales practices, premature revenue recognition, overexpansion, and deteriorating product quality. Sales teams booked multi-year contracts upfront and recognized the revenue immediately for software that would not be delivered or paid for for months or years, and in many cases was never paid for. The books held what they call phantom revenue: Oracle was recording sales that did not exist. When earnings had to be restated, the stock price dropped by over 80%.

Larry Ellison wanted farmers, not hunters, in a sales organization. Salespeople hired in Europe were professional and service oriented, and European management built long-term relationships and did business with customers on a regular basis. United States salespeople tried to sell the largest possible transaction to any given customer, then moved on to the next customer and the next deal. He took until 1991 to figure out that the United States hunting strategy was short-sighted and unsustainable, and another decade to change the culture of the United States sales force from hunters to farmers. He repeats that he was incompetent and did not know what he was doing, and he did not regard himself as competent for the other work a CEO is supposed to handle. Other people called the approach extreme delegation. His own word for it is closer to abdication than delegation.