All Things Digital

Oracle’s Larry Ellison was given a bit of a respite from the financial beating he’s taken over the past few days by the empathic folks at the San Mateo (Calif.) County assessor’s office. The Oracle (ORCL) chairman, worth $25 billion according to Forbes, recently had the value of “Sanbashi,” his grandiose 23-acre Imperial Palace in Woodside, Calif., reassessed from $173 million to about $70 million.

Why the sudden decline in value? Well, like all 16th-century Shogun estates with authentic Japanese teahouses and strolling gardens it suffers from–in the words of Ellison’s appeal–”significant functional obsolescence.” And that obsolescence is so significant that it entitles the world’s 14th wealthiest man to a $3 million tax refund.

Sadly for San Mateo County, that refund will be paid from property taxes that otherwise would have gone to schools, among other things. And what will Ellison do with the money? Who knows. Perhaps he’ll spend it on another 30-ton “shower rock” like the one in Sanbashi, which he reportedly “auditioned” by pretending to shower in front of it.

Oracle CEO Larry Ellison is a little lighter in the wallet today–about $2 billion lighter–thanks to a third quarter sales miss that sent the company’s shares down some 8% in after-hours trading.

Oracle (ORCL) posted a 30% increase in profits and a 21% increase in revenue, both in line with expectations. But a 16% rise in sales of new software that came in on the low end of its January forecast spooked investors who believed Oracle to be immune to the economic slowdown.

“A lot of investors had bought the stock in anticipation of a strong quarter,” said Avian Securities analyst Jeff Gaggin. “The applications business was definitely disappointing.”

According to last year’s safely-looking-ahead-to-the-year-to-come lists, 2007 was to be “a year of hyperdisruption for the technology industry”; it was to be “a year of significant developments” and “a year of evolution”; it was to be “a year of invention and innovation,” “a year of experimentation” and “a year of slow, but significant, change”; it was to be “a year of carnage,” but it was also to be “a year of great happiness and multiple blessings.” Above all, 2007 was to be “a busy year for technology.”

Which, as you’ll see below (and in our companion video), is pretty much how it turned out. What follows is Digital Daily’s abridged guide to the year in tech news–a fond reminiscence of what was, and our First Annual Year-End List For Year-End List Haters.

1. Yahoo Shareholders Reject Plan to Tie Executive Compensation to Company’s Crappy Performance
   Well, what do you know: Yahoo’s annual shareholder meeting didn’t conclude with CEO Terry Semel’s head piked on the exclamation point of the Yahoo sign outside company headquarters.

2. I Know It Was You, Fredo. You Broke My Heart. You Broke My Heart!
   Apparently, Fred Anderson is the “Fredo” of the Apple options backdating family.

3. We’ve Asked John Williams to Do a Special Performance of the Theme From “The Poseidon Adventure” for Our Q4 Results
   Who’s programming Microsoft’s on-hold music, Apple’s Phil Schiller? Waiting for the company’s third-quarter earnings call to begin yesterday, those listening in were treated to an instrumental piano version of Celine Dion’s “My Heart Will Go On.” From “Titanic,” the disaster movie.

4. I’m Proud to Say Our New “Soylent Green” iPod Is Made of 100% Biodegradable Greenpeace Activists!
   If you’re going to try to smear Apple for reckless environmental practices, you best have some hard epidemiological and toxicological data on hand, because goofy Photoshop treatments of the company’s marketing materials just can’t stand up to a blow from the Apple PR machine.

5. And Online Display Impressions Soared as More Americans Checked Their AOL Accounts for Old Times’ Sake
   To hear tell from Time Warner executives, the company’s better-than-expected earnings for the first quarter owed quite a bit to gains in online-advertising market share by its AOL Internet division.

6. Web 2.0 Audience in Mirror May Be Smaller Than It Appears
   How ironic is it that Web 2.0–the “participatory Web”–has far fewer participants than its architects would have us believe?

7. And for My Next Trick, I’ll Turn Myself Into a Complete Jackass
   If you’re going to demand that YouTube remove a video to which you object under the Digital Millennium Copyright Act, it’s probably wise to make sure that you actually understand the DMCA.

8. War Is Peace. Freedom Is Slavery. Ignorance Is Strength. DRM Is DCE.
   You can’t put frosting on manure, but HBO’s Chief Technology Officer Bob Zitter isn’t above trying.

9. We’re Naming It the Motorola STNKR, After Our Q1 Earnings …
   Carl Icahn was right. Motorola really is desperate for a new product. How else to explain a patent the company was awarded last month for a “communication device having a scent-release feature and method thereof.”

10. The Frienemy of My Frienemy Is My Enemiend
    If Microsoft is planning an acquisition in the online marketing and advertising space, it better act fast, because if it waits much longer there won’t be anything left to acquire.

11. How Would Monsieur Ellison Like His BEA Served? Mixed in a Bucket With Oracle’s Other Acquisitions?
    Looks like we may be in for another PeopleSoft-esque takeover drama …

12. I’m Just Biding My Time Here Until I Can Quit and Study Whale Feces Full Time
    Given the chance, how would you alter the course of your career? Well, if you worked at Microsoft’s Security Response Center, you might consider taking a job as an Olympic drug tester, a gravity research subject, or a “whale-feces researcher.”

13. Much Like Energy, BS Cannot Be Created or Destroyed, It Can Only Be Changed From One Form to Another
    If Steorn’s perpetual motion effort is anything like its e-commerce venture (and by all accounts things do seem to be going that way), the only thing in its future is insolvency.

14. From Now On, We’ll Be Known as Nlsn/NtRtings
    Looks like vowels won’t be the only accoutrements to be tossed aside in the rise of Web 2.0. The venerable page view is to be abandoned as well.

15. The Defendant Stands Accused of Copyright Infringement, Breach of Contract and Misappropriation of Dumb Luck
    According to popular legend Facebook founder Mark Zuckerberg once kept two versions of his business card in his wallet–one with the title CEO, the other with “I’M CEO . . . BITCH.”

16. Well, Here Come YouTube’s Video ID Tools. Guess That Means Godot Will Be Here Any Minute Now
    Google’s apparently finished “educating users about copyright law” and has moved on to the far more important business of making sure not to run afoul of it.

17. Look at It This Way: Now That Yahoo’s an ‘Ecosystem,’ the EPA Can Finally Declare It a Superfund Site
    “Our financial performance is not what we would like to see long-term.” This, from Blake Jorgensen, Yahoo’s chief financial officer who, just six weeks into the job, is already well versed in the company’s fiscal truisms.

18. Gates to Google: My Lyrical Technique Will Leave Your Body Weak
    Much as Microsoft Chairman Bill Gates fancies himself untroubled by Google’s incursions into his software empire, they clearly do chafe him a bit.

19. Newest Yahoo Mail Feature: BCC Beijing
    Sure, Yahoo signed China’s “Public Pledge on Self-Discipline for the Chinese Internet Industry,” a voluntary agreement to monitor and restrict information deemed “harmful” by Beijing, but did it have to take it quite so seriously?

20. Apple: Wham, Bam, Thank You Fanboi
    “I feel like a $200 whore.” That was one iPhone early adopter’s crass assessment of his feelings of self-worth, after Apple unexpectedly cut the price of the device by a third–just two months after it arrived at market.

21. In the Unlikely Event of a Water Landing, Sergey’s California King May Be Used as a Flotation Device
    With its onboard hammocks, full-size sofas and California King beds, it’s a wonder Google’s “party plane” has room for scientific instrumentation befitting the National Aeronautics and Space Administration, but apparently it does.

22. Act Now and Get a Downgrade to the OS You Really Want, ABSOLUTELY FREE!
    It’s looking more and more like the pent-up demand for Windows Vista we’ve heard so much about this past year is really just pent-up demand for Windows XP.

23. Dude, I Work for Friggin Forbes Magazine. Have You Heard of It?
    The year-long guessing game is over. New York Times reporter Brad Stone has outed Daniel Lyons, a senior editor at Forbes magazine, as the author of the Secret Diary of Steve Jobs, the satirical blog lampooning Apple’s iconic CEO (See? Told you it wasn’t me).

24. If Facebook’s Worth $15 Billion, Then My Stupid Idea’s Got to Be Good for $10 Mil
    Apparently the vainglory from which Facebook CEO Mark Zuckerberg appears to suffer is communicable and spreading rapidly throughout the social network’s developer community.

25. A Billion Here, a Billion There, and Pretty Soon You’re Talking Real Bollocks
    MySpace is worth $65 billion in the same way that Facebook is worth $15 billion–hypothetically.

26. “Apple Has Destroyed the Music Business”–Not That We Didn’t Try Our Best
    Many, many years ago, when the digital-music business consisted of little else besides Napster and the Recording Industry Association of America’s lawsuits against it, Apple proved that there was indeed a decent business to be had in selling music online for $1 per song.

27. It’s Not an Unpaid Endorsement, It’s a “Social Ad”
    Facebook’s Social Ads aren’t endorsements, they’re a “representation” of user activity.

28. Obama Announces “No Tech Policy Left Behind” Plan
    If Google’s mission is to organize the world’s information and make it universally accessible and useful, then Democratic presidential candidate Barack Obama’s is to do the same to its tech-policy issues.

29. Sounds More Like the “Zune of Reading” to Me
    If Jeff Bezos truly hopes to create “the iPod of reading,” observers say he’s going to have to do a hell of a lot better than Amazon’s new Kindle e-book reader.

30. Fiascobook
    What Facebook CEO Mark Zuckerberg lacks in foresight, he certainly makes up for in disingenuous hair-shirt remorse.

Oracle CEO Larry Ellison’s had a hell of a week, hasn’t he? Yesterday, Oracle shrugged off concerns about a tech slowdown, besting Wall Street’s expectations with a 35% gain in its second-quarter earnings. And then today, shares of NetSuite, the “software as a service” venture of which he is a principal owner, priced at $26 a share in their IPO debut, well above the expected per-share price range of $19 to $22, which itself was $6 higher than $13 price initially set by underwriters.

NetSuite sold about 6.2 million shares in its modified Dutch auction IPO, raising$161.2 million. That makes the company worth more than $1.5 billion and the stake of its mercurial investor–who’s already No. 11 on Forbes list of billionaires–worth about $1 billion.

Larry Ellison’s other company is finally going public. Today, NetSuite–the software-as-a-service company of which Ellison is a majority owner–opened bidding on the 6.2 million common shares it plans to sell in a modified Dutch auction.

Assuming the IPO goes off as planned–and given the healthy market for tech IPOs, there’s every reason to believe it will–NetSuite shares will price out in the range of $13 to $16, raising the company some $99 million with which to pay off some debt, make new investments and further enrich Ellison, who controls about 60% of NetSuite’s outstanding stock.

To be fair, though, he does plan to set aside some 31.9 million shares for charitable purposes–perhaps another $115 million pledge to make and then withdraw from Harvard University?

Turns out William Klein, BEA Systems’ vice-president of business planning and development, was sorely mistaken when he said “BEA is worth substantially more to Oracle, to others and, importantly, to our shareholders than the price” Oracle offered for it. Certainly, that’s the opinion of Oracle CEO Larry Ellison, who says any future Oracle takeover bid for BEA Systems–if there ever is one–will be for less than the $7 billion it offered last month.

“If we made another offer [for BEA], the price would be lower,” Ellison said at Oracle’s annual analyst meeting yesterday. “Clearly the $17 price seems too high today. It seems unlikely anyone will want to buy them now. … If their goal was to stay independent, I think they’re doing a good job.”

That said, Oracle’s BEA experience hasn’t exactly put Ellison off his feed. “We are now looking at our second favorite stocks and we have found some attractive” ones, he said.

Microsoft chairman Bill Gates, not Apple co-founder and CEO Steve Jobs, is the most influential IT personality of the past quarter-century.

This according to a survey of IT professionals conducted by the Computing Technology Industry Association. Asked to list the most influential tech personalities of the last 25 years, 84% of respondents listed Gates, and 73% listed Jobs. Also appearing on the list: Dell CEO Michael Dell (53% of respondents); Linux founder Linus Torvalds (47%); Google founders Sergey Brin and Larry Page (also 47%); Cisco CEO John Chambers (44%); Oracle CEO Larry Ellison (36%); Vint “Father of the Internet” Cerf (35%); Microsoft CEO Steve Ballmer (also 35%); and eBay CEO Meg Whitman (30%).

BEA Systems made good on its promise to allow the deadline to lapse on Oracle’s $17-per-share offer to buy the company. And Oracle made good on its threat to drop the bid. Minutes after 5 p.m. PDT yesterday, the deadline set by Oracle for BEA to agree to its offer, the company issued a terse, disdainful statement announcing its expiration.

On Oct. 9, Oracle proposed to acquire BEA for $17 per share. That offer expired today, Oct. 28, at 5 p.m. BEA shareholders should not assume that Oracle will renew its $17-per-share offer in the future.

“Over time many things can change: BEA’s business might materially weaken, the stock market can fall further from its recent record highs, or Oracle may have committed its capital elsewhere. Over the last 20 days, the BEA Board has repeatedly rejected our offer and refused to meet with us, even though we offered to meet without any preconditions. We asked the BEA Board to allow their shareholders to vote on our $17-per-share proposal. They chose not to. If the BEA shareholders are unhappy with the behavior of the BEA Board, it is up to those shareholders, not Oracle, to take the appropriate action.”

And by “BEA shareholders,” Oracle clearly meant one BEA shareholder in particular–Carl Icahn, who owns 13.2% of BEA’s outstanding shares, and has for some time now been pushing the company to put itself up for sale.

And Icahn did not disappoint. The billionaire investor filed suit against BEA, demanding it hold a shareholder meeting to consider the auction of the company. “BEA should allow its shareholders to decide the fate of BEA by conducting an auction sale process and allowing the shareholders to accept or reject the proposal made by the highest bidder,” Icahn wrote in a letter to BEA’s board. “BEA should not allow the stalking-horse bid from Oracle to disappear (failure to take the Oracle bid as a stalking horse would be a grave dereliction of your fiduciary duty in my view). If a topping bid arises, then all the better. But if no topping bid arises, it should be up to the BEA shareholders to decide whether to take the Oracle bid or remain as an independent company.”

BEA’s board, for its part, insists that it’s not opposed to selling the company, it’s just opposed to selling it to Oracle for $17 per share. But it may end up doing just that, given the company’s current financial situation and shareholder pressure that’s only just beginning to build. “BEA is in a tailspin,” Cowen & Co. analyst Peter Goldmacher told Bloomberg. “At $17, it would be a graceful exit for BEA, which has been in rough shape for a while. … BEA is badly miscalculating Oracle’s desire. Oracle doesn’t need BEA. At some point, Oracle will buy these guys, but it’s completely at Oracle’s discretion.”

You have to take a broader view and realize this is an industry like any other–telecom, railroads. They went through consolidation. Why shouldn’t the computer industry be any different? This shouldn’t have been a surprise to anybody. But it seemed to be, and a lot of people thought I was nuts when I said these things. And that’s why we’re out there alone as a consolidator.”

–Oracle CEO Larry Ellison, Forbes magazine, July 2006

Will BEA Systems go down in history as the place where the Ellisonian consolidation wave sweeping the business-software market finally broke and rolled back? Not likely, but at the moment it’s doing a passable job of holding it back. This week the company rejected Oracle’s $17-per-share, unsolicited takeover offer for the second time, refusing even to meet with the company to discuss it.

And so Oracle is turning up the heat a bit. In a letter to BEA’s board, Oracle President Charles Phillips said it will walk away from its proposal if BEA doesn’t accept it or put it before shareholders for a vote.

Dear Members of the Board of Directors:

“Last night we were told by Bill Klein, Vice President-Business Planning and Development (speaking on behalf of the board), that BEA’s board again rejected our proposed price of $17 per share in cash. The board has refused to meet with us since we made our Oct. 9 proposal.
Oracle urges the BEA board of directors to let BEA’s shareholders decide: sign an acquisition agreement with Oracle and allow the shareholders to vote. Oracle believes that our $17 per share price is generous and there are no offers for BEA above $17 per share. $17 per share represents:

• a 21% premium to BEA’s closing price of $14.05 on the date before we
  made our proposal;

• a 31.5% premium to $12.93, the 52-week average before our proposal;
• a 44% premium to $11.77, BEA’s stock price on the date immediately
  prior to the date that activist shareholders disclosed their position
  in BEA; and

• a price higher than BEA’s five-year high before our proposal.

“Oracle has no interest in a long, drawn-out process to acquire BEA. If the BEA board refuses to execute an acquisition agreement and refuses to let their shareholders vote, then our $17-per-share proposal to acquire BEA will expire at 5 p.m. PDT, on Sunday, Oct. 28.

Sincerely,

ORACLE CORPORATION

Interesting move, eh? More so given its impact on BEA’s share price today. Prior to Oracle’s offer, BEA was trading at $14.05 per share. After it, the stock hit $18.58. This morning, it’s trading at $17.98–down 3.28% on fears that Oracle will rescind its offer.

Looks like we may be in for another PeopleSoft-esque takeover drama.

BEA Systems’ board formally rejected Oracle’s $17-per-share offer to acquire it last Friday, saying the company is trying to buy it on the cheap. “BEA is worth substantially more to Oracle, to others and importantly, to our shareholders than the price indicated in your letter,” William Klein, BEA’s vice-president of business planning and development, wrote to Oracle.

And by shareholders, Klein apparently meant billionaire investor Carl Icahn–who, though he’s been pushing for the company to sell itself, said in a statement that he agreed that, at $17 a share, the price was too low.

And perhaps it is. At this writing, BEA is trading well above $18, suggesting that Oracle’s offer of $17 a share is a tad anemic. And Oracle surely knows this as well as anyone. After all, this isn’t the first time it’s low-balled a potential acquisition. Oracle began its pursuit of PeopleSoft with a first stingy bid that it later sweetened. And like BEA, PeopleSoft spurned its advances, which in its case was not a winning strategy–because Oracle CEO Larry Ellison has the patience of the devil himself in these situations, especially when he can hurt a competitor’s business during takeover wrangling.

“This is very clearly thought out,” Ellison said after Oracle first besieged PeopleSoft. “I think we’re likely to be successful and we are very determined to see this through to the end. … With or without us, PeopleSoft can’t survive. They can’t compete in this business in the long term.”

Message to BEA: Like PeopleSoft, you will be assimilated. And, BEA’s Klein best be careful, lest he go out like former PeopleSoft CEO Craig Conway, of whom Ellison once said: “I think at one point, ‘Craigey’ thought I was going to shoot his dog, Bear. If Craigey and Bear were standing next to each other and I had one bullet, trust me, it wouldn’t be for the dog.”