Prior to forming Oracle, founders Lawrence Ellison and Robert Miner had worked together at Ampex Corporation on a CIA project code-named “Oracle.” While working on the CIA project, Ellison came across a research paper published by IBM describing work being done to develop a relational database management system (RDBMS) that would allow computer users to retrieve corporate data from almost any form using Structured Query Language (SQL). Finding that no company had committed to commercializing the technology, the pair teamed up with coworkers Ed Oates and Bruce Scott in August 1977 to form Software Development Laboratories (SDL).
The company’s first customer was the Central Intelligence Agency (CIA) from whom they received a $50,000 contract to build a customized database program. Meanwhile Ellison and Miner were also working to develop and market database management systems (DBMS) software for digital minicomputers. As president and CEO, Ellison managed the company’s sales and marketing efforts. Miner oversaw software development and well known private venture capitalist Donald Lucas was brought on to serve as Chairman of the Board.
In 1978, the Oracle RDBMS V1 was revealed, the world’s first relational database using SQL which now allowed organizations to use standardized software on different-sized computers from different manufacturers. One year later, the company now renamed Relational Software Inc. (RSI) began to commercially offer Oracle V2, beating IBM to the market by almost two years. The RDBMS proved to be very profitable as the company, renamed Oracle, reported annual revenues of nearly $2.5 million.
Some of these profits went towards international expansion by way of founding Oracle Denmark, but a quarter of profits were put back into research and development. The resulting version offered in 1983 was the first portable RDBMS, which could be run on a range of hardware and operating systems. Customers could now use the system on their mainframes, minicomputers, workstations, and PCs. The introduction of V3 doubled Oracle’s revenues to over $5 million.
Despite the numerous entrants into the DBMS market in the early 1980s, Oracle kept to the head of the market with its aggressive advertising and reputation for innovative technology. The company worked to simplify data management, build solutions for emerging computer platforms, and increase system interoperability. Oracle V5/5.1, released in 1986, was another hallmark of Oracle innovation. The new version, based on the company’s SQL*Star software. allowed users to access data stored on a network of computers just as easily as if the data on the entire network had been stored on one computer.
By 1986 when the company went public, Oracle was known as the fastest-growing software company with a skyrocketing yearly revenue of $55.4 million, a customer base that had ballooned to 2,000 mainframe and minicomputer users represented by major international firms, and 17 international marketing subsidiaries. The company had also expanded its business operations to include related customer support, education, and consulting services.
The new Oracle Version 6 of 1988 debuted several more major advances. Row-level locking allowed multiple users to work in the same table; hot backup, employees to continue working in a system while supervisors duplicate and archive data; PL/SQL, users to process data while it remains in the database. A new line of accounting programs for corporate bookkeeping and the Oracle Transaction Process Subsystem (TPS) opened up a new market niche for the customer. Banks and other financial institutions were particularly pleased with the TPS which sped up the processing of financial transactions.
The late 1980s were spent building relations with an expanded network of hardware and even software manufacturers. As the relational DBMS provider for most major computer manufacturers, the company was now able to increase the number of hardware brands on which its products could operate. Also, the number of software companies using Oracle had grown five-fold. To take advantage of these partnerships, the company also instated a value-added reseller (VAR) alliance program with other software makers to build cooperative selling and product-planning alliances.
At this time the company also spun off a few more subsidiary divisions. Oracle Complex Systems Corporation (OCSC) to add systems- integration services to its line of customer services and Oracle Data Publishing to develop and sell reference material and other information in electronic form. Oracle finished up the 1980s with annual revenues of $584 million.
Believing that its high growth rate would continue, Oracle went looking for $100 million in public financing to supports its expansion in January 1990. But when the company reported its first flat earnings quarter that March, stock prices dropped from $25.38 to $17.50 in a single day and several shareholders looked to the courts for remuneration, claiming that the company had issued false and misleading earnings forecasts. To counteract this negative publicity, Oracle announced that it intended to conduct an internal audit and immediately restructured its management, giving Ellison the additional post of chairman while Lucas remained a director. The company also created a domestic operating subsidiary Oracle USA in its efforts to deal with its domestic management and financial problems.
When the internal audit’s results were reported in August and forced the company to restate its earnings for three of its four fiscal quarters, stock prices fell further to only $11.62 per share. As a result, Oracle negotiated a $250 million revolving line of credit, but was forced to result to more drastic measures when it reported its first ever quarterly loss soon after. The company reorganized its management team once more, reduced its annual growth rate targets from 50 to 25 percent, laid 10 percent of its domestic employees, condensed its domestic operations and consolidated some of its international ones.
For the next two years, quarterly losses continued to mount. Oracle’s achievement of $1 billion in sales in 1991 was marred by its first ever annual loss. The company was forced to admit that it had expanded too rapidly. Work was done to revamp its accounting methods and how sales and earnings were reported, financiers and new lines of credit had to be sought out. By the end of 1992 sales finally began to rise again and earnings rebounded back into the positive numbers.
The success of industry acclaimed Oracle 7 in 1992 seemed to further cement the company’s renewed profitability. Always on the cutting edge of innovation, Ellison looked to expand the role of databases even further. What began as a partnership with British Telecom and Apple Computer evolved into a “media server alliance” in which Oracle’s databases were used to deliver video to interactive TV videos, for example movies ordered through a library of digital multimedia. The integration of these features into version 3 of Oracle 7 helped the company take an impressive 40 percent share of the data management market.
Looking forward to the Internet Age, Oracle released software such as WebSystem, which let corporations organize and distribute their data over the Internet. However, in another 90s slip-up, the company began talking up their new product, the NC, too quickly. The Network Computer (NC) was a PC with no hard drive that could access data and applications via the Internet or from remote server computers. Aimed at competing with Windows and Intel, the NC flopped in execution.
Still, the release of Oracle 8 kept the company’s sales growing and helped launch the company into its position as a major e-commerce player.
For the past decade Oracle has concentrated on remaining innovative and on the cutting edge of technology. It also moved to consolidate its share of the market by initiating a hostile takeover of PeopleSoft Inc. in 2003. Met with much controversy from the public, shareholders, and even the Department of Justice (for antitrust issues), the two companies were finally merged late in 2004.