Global CIO: Oracle Layoffs Threaten Larry Ellison's CredibilityGlobal CIO: Oracle Layoffs Threaten Larry Ellison's Credibility
Oracle has every right to cut employees while integrating Sun, but the problem is that Larry Ellison said very specifically that would not happen.
June 11, 2010
--If each employee received a severance package of $150,000—which would be extremely generous—then the number of employees affected would be somewhere between 3,666 and 4,333.
--If the severance packages averaged $100,000, then the layoffs would total between 5,500 and 6,500. --If the severance packages averaged $75,000, then between 7,333 and 8,666 employees lost their jobs. Oracle has decided not to offer any further details about the layoffs—not the actual numbers, not the locations, not the functional areas, nada. And that's Oracle's absolute right—I have no problem whatsoever with that. But I think Larry Ellison has a potentially big problem with two of his primary assets: his credibility, and his image as a single-minded leader whose public comments might often tend toward the zany or even outrageous but are always grounded in fact and reality. He said, unconditionally, that Oracle would not be cutting Sun to profitability and that it would in fact be adding more people than it was letting go. Ellison even took what in my experience was the unprecedented step of delivering a very public tongue-lashing to a financial analyst and members of the media who publicized the analyst's report that Oracle might eventually lay off half of Sun's workforce (at the time, about 13,500 out of 27,000). Take a look at Ellison's vociferous objection to those reports, which Ellison made at the otherwise-festive Oracle event in late January where it rolled out its Oracle-Sun strategy: "The last thing I'm going to say is, and I'm sure you've heard, I was very upset to see articles from analysts and in the press saying Oracle's gonna lay off half of Sun's organization. Half the Sun employee base, we're just gonna lay them off. I mean, that's a highly irresponsible thing just to make up and print. "So I think the people, whoever did that, should be ashamed of themselves. The Sun people went through enough angst without having to read this garbage that you're writing. The truth is we're actually hiring 2,000 people over the next few months to beef up these businesses, and that's about twice as many people as we'll be laying off. "So we're hiring, not firing. We're not cutting Sun to profitability, we're growing Sun to profitability." (You can read all about it here.) Technically—technically—Ellison's got the fig leaf of deniability because he was railing about a report that half (13,500) of Sun's 27,000 employees would be fired. And technically, even using the lowest severance package from our numbers above, the largest reasonable estimate of job losses is 8,666, which is far below 13,500. And technically, other than what it said in its 8-K SEC filing, Oracle doesn't have to say another word to anybody about the matter. But the potential credibility problem for Ellison and Oracle is this: while 8,666 is a long way from 13,500, it's an even longer way from the net gain of 1,000 hires Ellison said would rule the day. And it doesn't exactly square with his closing line during his scolding of the analyst and media from above when he said, with great intensity, "So we're hiring, not firing. We're not cutting Sun to profitability, we're growing Sun to profitability." Well, things change. Maybe the Sun financial condition in Europe and Asia was far worse than Oracle was able to comprehend back in January when Ellison made those comments. Maybe Sun's reputation was so badly damaged that ongoing customer erosion was worse than expected. Maybe the relentless raiding efforts on Sun customers by IBM and Hewlett-Packard and Dell have cut more deeply than Oracle anticipated. But there's no maybe about the glaring disconnect between what Larry Ellison said in January—what he promised—and the reality that has played out for Oracle's workforce in the past week. And that's a problem because people like Ellison who say outlandish things and then make them come true are regarded as visionary leaders, innovators, and luminaries. They are rare, and they are special. But people who say outlandish things that turn out not to be true aren't rare and they're sure not special. So while Oracle has no legal requirement to square what Ellison said 4-1/2 months ago, I hope they choose to do so. Because credibility is a terrible thing to waste. RECOMMENDED READING: Global CIO: Oracle-Sun Layoff Claim Was Irresponsible Garbage: Ellison Global CIO: Oracle-Sun Biggest Challenge Isn't Technology—It's People Global CIO: Hewlett-Packard And Oracle Layoffs Are Ugly But Essential Global CIO: In Praise Of Mark Hurd's 9,000 Layoffs At Hewlett-Packard Global CIO: Why IBM CEO Sam Palmisano Earned His $24.3 Million Global CIO: Oracle CEO Larry Ellison's Top 10 Reasons For Buying Sun Global CIO: Oracle-Sun A Bad Deal? Only A Fool Would Say That Global CIO: Oracle CEO Larry Ellison On The Future Of IT Global CIO: Oracle Dumps HP After Co-Creating 'Most Successful Introduction Ever' Global CIO: An Open Letter To Hewlett-Packard CEO Mark Hurd Global CIO: An Open Letter To Oracle CEO Larry Ellison Global CIO: The Top 10 CIO Issues For 2010 Bob Evans is senior VP and director of InformationWeek's Global CIO unit.
To find out more about Bob Evans, please visit his page.
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