The Oracle Corporation was originally known as Software Development Laboratories, Inc., when Larry Ellison, Robert Miner, Edward Oates, and Bruce Scott founded it in 1977. The Central Intelligence Agency had commissioned the project to build a commercial database management system for IBM mainframe computers and code-named it Oracle. Software Development Laboratories took the Oracle name in 1982. After completion of the project, Ellison, Miner, Oates, and Scott had a vision of developing and distributing their database software as a profitable business opportunity. From 1982 to 1986, Oracle had achieved 100% growth. On March 15th, 1986, Oracle went public, one day after Microsoft’s initial public offering. From 1986 to 1989, revenues skyrocketed from $55 million to $584 million, making it one of the largest independent software companies in the world, employing over 4,000 people in 24 countries.
The Oracle Corporation’s objective of becoming a profitable database software company had been achieved. Market and industry growth continued until the third quarter of 1990. Oracle suffered a $15 million dollar loss on $240 million in revenues. Between 1988 and 1991, operating margins had plummeted from 23 to 3 percent. During this time, the company’s stock value also fell. Oracle responded by letting go of 400 employees in the United States and reorganizing its senior management team.
This business problem was the direct result of something the company simply overlooked. As the company was focusing all of its energies on growth during the late 1980’s, they were losing sight of their internal operations and infrastructure. They also planned their expenses based on the 100% annual growth rate they experienced in the prior years, causing them to lose money. In addition, they delayed the delivery of their latest product, which allowed the competition to draw closer to them. However, the release of their next product...