P3174: CID - Lawrence Joseph Ellison (Oracle), Videotaped Deposition Transcript

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11		Q. I just want to make sure I understand
12	what we're talking about here.
13		The Microsoft -- if you're allowed to
14	acquire PeopleSoft, that would increase your
15	customer base?
16		A. Yes.
17		Q. And by increasing your customer base, is
18	it your view that that would allow you to compete
19	with Microsoft better in various pieces of the
20	stack or only of the technology stock or in the
21	applications area or both?
22		A. Every place. We -- if we have more
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1	customers, we can have more salespeople. If we
2	have more customers, we can spend more money on
3	engineering. If we have more application
4	customers, we sell more database. If we have more
5	application customers, we sell more application
6	server. If we have more application customers, we
7	can spend more on support. If we have more
8	application customers, we can do all of that while
9	lowering our price.
10		Q. Now, the scale -- your view regarding
11	scale resulting from the PeopleSoft deal assisting
12	you in competing with Microsoft, is that argument
13	also true as it relates to IBM?
14		A. Absolutely.
15		Q. And how is that the case?
16		A. Same thing. The larger we are, more
17	customers we have, the more money we spend on
18	engineering.
19		Q. Let me stop you and ask the question very
20	specifically so I'll be sure I'm following you
21	now.
22		For example, Microsoft in the area of its
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1	database product --
2		A. Yes.
3		Q. -- the PeopleSoft transaction, if
4	permitted, would allow you to compete better with
5	Microsoft in the database arena by what mechanism?
6		A. We would do a better job of -- two
7	things. If we're the supplier, your applications
8	supplier, and let's say you're running PeopleSoft
9	on top of IBM, on top of the IBM database, or on
10	top of the Microsoft database. That was--for
11	some reason you decided not to buy Oracle. Most
12	people buy Oracle, but you decided to buy
13	Microsoft for whatever reason, or IBM.
14		Now you might choose to simplify your
15	support by saying, gee, my application guy also
16	sells application servers, they also sells
17	database, I can have a much simpler relationship.
18	I make one phone call, I get all my answers.
19	There is no finger pointing. It's not the
20	application guys says: Oh, no, no, no, not my
21	problem. Call IBM. That's a database problem.
22	IBM says: Oh, no, no, no. Call PeopleSoft,
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1	that's a -- you know, this finger pointing is not
2	uncommon in our industry, and it's very attractive
3	to a lot of customers to say, Oracle, hey, this is
4	your problem, you fix it. I don't know if it's
5	database. I don't know if it's applications. I
6	don't care if it's application server. It's all
7	your software. You own the problem. You fix it.
8	That's extremely attractive to customers.
9		Q. Now, if you look again at page 3 --
10		A. I would like to add to that.
11		Q. Oh, sure.
12		A. Okay. In addition, if they then elect to
13	go that route, we also now can give them a better
14	price on database and a better price on
15	application server and a better price on
16	applications, because we're selling them more
17	stuff. So our cost of sales comes down, our cost
18	of support comes down. There is a lot of
19	advantages to size. And, again, Microsoft has it.
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2		Q. Well, now, Ms. Catz testified that you
3	folks had looked at JD Edwards.
4		A. Yeah.
5		Q. And, in fact, she had approached JD
6	Edwards, though they didn't call her back, just
7	before this transaction was announced.
8		A. Right.
9		Q. Did you see the potential of an
10	acquisition of JD Edwards lending scale to you in
11	the way you described it to allow you to spread
12	costs across a larger base of customers at a lower
13	price?
14		A. Less attractive than PeopleSoft, but yes.
15		Q. And why was it less attractive than
16	PeopleSoft?
17		A. A lot of their customers were off
18	support; in other words, the JD Edwards technology
19	was so old people had stopped paying support.
20	They were kind of running the JD Edwards stuff,
21	but had no plans to ever -- they weren't keeping
22	it current. Lots of small departments. It was
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1	just lots of little departments, a lot of, quote,
2	what I'll call nonstrategic implementations, much
3	less profitable business. Overall, a much less
4	profitable business. Their margins were always
5	razor thin.
6		Q. So the idea of the amount of additional
7	scale may have been less than PeopleSoft?
8		A. That's all. Oh, absolutely. All the
9	other dynamics are the same, just a matter of
10	degree, but BEA quite different.
11		Q. Have you looked at any other potential
12	software vendors other than PeopleSoft to try to
13	acquire this type of scale?
14		A. Have I looked at? Sure. I think I
15	publicly said Tom Siebel came over to my house and
16	tried to sell me Siebel Systems.
17		Q. Okay. And was that something you were
18	considering doing?
19		A. It certainly wouldn't be in my - I think
20	PeopleSoft and BEA are much more attractive -- are
21	more attractive than Siebel. I mean, at some time
22	you've asked me -- you gave me a list of 100
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1	companies and told me to put them in order, what
2	order would I want them, you know, like a
3	Christmas shopping list or whatever, Siebel would
4	be on there.
5		Q. For example, if this transaction is not
6	permitted and you can't acquire PeopleSoft, would
7	you be able to do other transactions to acquire
8	the scale that you apparently want to acquire in
9	order to compete with Microsoft IBM and others?
10		A. Yeah, I think so.
11		Q. Now, in relation to page 3 of Exhibit
12	550, the SAP Web-Weaver product that we've talked
13	about earlier, you recall?
14		A. SAP Net-Weaver.
15		Q. Net-Weaver. I'm sorry. You're right. I
16	can't read my own handwriting.
17		Would the PeopleSoft --
18		A. If I can clarify the question before
19	this, would we be able to make other acquisitions
20	that would allow us to compete --
21		Q. Yes.
22		A. -- I'll say yes, but not as effectively.
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1	If we make no acquisitions, will we be able to
2	compete, the answer is yes. If we make other
3	acquisitions would that help, yes, it would help.
4	Do we think this is the best acquisition that
5	would enable us to compete most effectively, the
6	answer is yes.
7		Q. Why is that?
8		A. We think -- well, A, there are either --
9	we think they have a good engineering team. They
10	have got a large customer base, a larger and more
11	important customer base than our second choice,
12	which would be Siebel.
13		Q. All right, sir. In relation to the
14	Net-Weaver product, would acquiring PeopleSoft put
15	you in a position where you can compete with that
16	aspect of SAP's offering more effectively than you
17	do today?
18		A. No -- well, again, applications -- excuse
19	me. The answer is yes. Applications influence
20	the purchase of application servers and databases.
21	So -- but SAP is kind of funny, because if you buy
22	our applications, you end up buying our
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1	application server. It comes with it. If you buy
2	SAP's applications, you buy SAP's application
3	server, kind of comes with it. These things are
4	rather tightly coupled together.
5		Q. I see. Let me ask the question
6	differently.
7		A. Okay.
8		Q. If you acquired PeopleSoft, would that
9	give you any technology or add anything to your
10	product that would make it more attractive in the
11	marketplace in your view as compared to the
12	Net-Weaver aspect of SAP's offer?
13		A. No.
14		Q. Now, the process -- assume for a moment
15	that the PeopleSoft transaction is permitted and
16	you are going forward and, as you said, you would
17	get economies of scale and larger and be able to
18	spread costs, for example, over your database
19	product --
20		A. Right.
21		Q. -- if and when people transfer from
22	whatever they're using --
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1		A. Right.
2		Q. - to yours. Do you have any idea how
3	long that process would take?
4		A. Years, you know, but if we do -- we've
5	done this before. We purchased a database from
6	what was then called Digital Equipment
7	Corporation. We purchased a database system
8	called RDB and we did a good job of supporting the
9	customers and the vast majority of those customers
10	bought the Oracle database.
11		So insofar as we execute well and do a
12	good job as people make decisions - I mean, we
13	said we would support these PeopleSoft
14	applications for a decade. Some people will just
15	not want to pull these things out. But someone
16	makes a decision four years from now to go ahead
17	and do something, we think if we have done a good
18	job supporting that customer that we're more
19	likely to win them to upgrade to one of our
20	products than one of our competitor's products.
21	Though we know SAP is going to be all over -- they
22	have said they are going to be all over these
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1	customers. We know SAP is going to be all over
2	these customers. And so will Microsoft, though
3	with a very different approach.
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15		Q. Now, the scale that you have talked about
16	earlier that you want to achieve in order to
17	spread your costs over a larger customer base, is
18	it possible for you to achieve that scale without
19	an acquisition?
20		A. Well, we achieve that -- we march towards
21	that scale every year. We have more customers
22	this year than we had last year, but -- pardon me.
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1		Q. I'm sorry. Go ahead.
2		A. So we're constantly selling to new
3	customers. So our profits are going up and our
4	number of customers are going up every year.
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Updated August 14, 2015