?I think Apple can be saved and I think Apple should be saved,? declared Oracle chief executive Larry Ellison last week as he confirmed longstanding Silicon Valley rumours of a $1.25 billion hostile takeover of the ailing PC company. In so doing, he served notice on Apple chief executive Gil Amelio that his days were numbered.
Ellison?s declaration of hostilities was the last thing the beleagured Amelio needed to hear as he prepared for a make or break showdown with one of Apple?s largest institutional investors: the California Public Employees' Retirement System (CalPERS) which is fiercely critical of his handling of the company it recently condemned as the worst performing in corporate America.
With the official Apple line being that the company was not interested in commenting on speculation,Amelio shrugged off Ellison?s announcement. It was, he claimed, a ploy by the Oracle boss to drive down the share price - in which case, it backfired on Ellison since the stock actually went up by 11% on the day - and insisted that a takeover would hurt Apple?s recovery. ?I think we do have it figured out,? he claimed. Amelio insisted that he will not be diverted from his chosen strategy. ?I just cannot let this be a big distraction,? he said on Friday. ?I will not get into a mode of reacting to Larry Ellison. I see my job as keeping my nose to the grindstone and not devoting any energy to this thing.?
But behind the scenes, he is known to have set Apple?s attorneys on red alert to fend off any hostile takeover bid. The firm has a shareholder rights plan which can act as a poison pill by offering new shares to existing shareholders at half the current market value, thus diluting the outstanding stock.
Initial reaction in Silicon Valley and on Wall Street to Ellison?s statement was one of resigned familiarity. This is not the first time that the Oracle boss has made such sabre-rattling statements of intent. The idea of an Ellison-inspired Apple takeover was first voiced in 1995 just before Amelio was appointed, when a joint bid by Ellison and ousted Apple co-founder Steve Jobs came close to fruition.
That bid collapsed when Jobs - described by Ellison as ?my best friend? - pulled out at the last minute to concentrate on his Pixar start-up. But as recently as last month, Ellison was telling anyone who would listen that he was ready to bankroll a takeover as soon as he got the go-ahead from Jobs, comments he later acknowledged had embarassed Jobs who was recently returned to Apple as Amelio?s special advisor.
Piling the public pressure on Amelio and his fellow board members, Ellison has set up an electronic questionnaire on the Oracle corporate server to lobby support from shareholders. It asks two loaded questions: `Can Apple benefit from new management?' and, ``Presuming the successful acquisition of Apple by the Ellison Investor group, what do you believe should be its single top priority?'
But any notions that Ellison?s threats could be dismissed as aggressive PR or mischief making were dispelled with the purchase of two massive batches of Apple stock - a total of 3.3 million shares - worth over $40 bn in the hours following his statements. The identity of the buyer or buyers is unknown, although an Oracle spokesman said he knew of no trading on Ellison?s part.
What also makes this latest takeover speculation more credible is the level of detail Ellison has made public about his intentions. He intends to buy 60% of the existing stock, but only if shareholders are willing to accept the current market valuation. Leaving aside the poison pill option, Apple has 124.7 million shares worth around $2.1 billion, so Ellison would need to find at least $1.25 billlion to complete his takeover.
That money would come from a consortium dubbed the Ellison Investor Group, the members of which have not been named - given Ellison?s track record for making impetuous announcements, it?s possible they haven?t even been found yet! - but the 1995 takeover plans are thought to have included the backing of a Japanese consumer electronics firm, with Sony as the favoured candidate.
The timing of Ellison?s latest pronouncement is clearly linked to a long awaited face to face meeting between Apple bosses and representatives of CalPERS, a $108 billion pension fund which controls 709.000 Apple shares. Last month it named Apple as the single worst stock in America, prompting the crucial confrontation on 1 April at which Amelio and his team had to convince CalPERS that they were capable of rescuing Apple.
Amelio?s task at the meeting was set to be difficult enough without Ellison?s intervention. The pension fund has made no secret of its unhappiness with the current Apple managment team which it has criticised for an overall lack of experience in the PC market. CalPERS doubts whether Apple's directors are dedicated to the company?s recovery, pointing out that some board members do not even own stock in the firm.
The fund has already taken action against Amelio and his people. In February, the organization voted against Apple's board of directors at its shareholders' meeting. A spokesman for CalPERS declined to comment on whether the fund would support Ellison?s plans, although he admitted that it was intruigued by what had been said. `We're really focused right now on Apple's performance,? he said.
An Ellison-led takeover will mean the end for the current Apple management team, headed by Amelio and chairman Mike Markkula. `Apple is in desperate need of all-new management and leadership,? Ellison said.`Markkula has taken 10 years to destroy what Steve Jobs created.? But he said he would not head up Apple himself,although he would hold an executive position on the board along with Jobs.
So far, Jobs is keeping as low a profile as he can and, when unable to avoid the issue, is going out of his way to distance himself from Ellison. ?This is a stupid little soap opera and I don't have a clue about it,? he said on Friday. ?The whole thing is bizaare. Larry brings this up now and then. I try to explain my role at Apple is to be an advisor.?
?I don?t know about this takeover bid,? he insisted, although according to Ellison, Jobs was told of his intentions on a recent hiking trip that the two men took. But Jobs is adamant: ? I have nothing to do with it. I?m focusing all my energies on working with Gil and putting together the best management team at Apple.?
For his part, Amelio apparently clings to the belief that Jobs is still on his side. ?He has told me on several occasions when this sort of rumour has surfaced that there is nothing going on,? said Amelio. ?And I believe him.?
But there can be little doubt that an Ellison-inspired Apple would be more compatible with Jobs? vision than one led by Amelio, while Ellison himself has said that he would only be interested in acquiring Apple if his ?best friend? was part of the package. There is no reason to assume that his postion has changed.
Since returning to Apple in December - following the $400 million takeover of NeXT Software - , Jobs has exerted his considerable influence to win former NeXT executives key roles at the expense of the existing Apple management team, most notably the ignobly demoted chief technology officer Ellen Hancock.
But insiders say Amelio has overruled him on a number of occasions on issues which Jobs feels are crucial to the recovery of Apple. For example, Jobs is said to have wanted the corporate advertising budget slashed until the next generation Rhapsody operating system is available. Amelio heavily bumped up the ad spend instead.
What specific actions any new Ellison-inspired regime would take to restore Apple?s fortunes has to be articulated, a point Amelio has made with increasing regularity in recent days. For Ellison, the attractions of winning control of Apple are clear. Despite the disasters of recent years, there is unquestionably still mileage in the Apple brand with the traditional Apple values of easy-to-use technology fitting neatly alongside his personal crusade for the network computer concept.
There is little that Amelio and his management team can do but play a waiting game. They have already taken action to restore the company?s profitability and credibility. Apple earlier this month announced plans to axe 2,700 permanent full-time workers and 1,400 part-timers and contractors from its payroll and canned a number of product lines.
But losses for the coming quarter will be anything up to $250 million and Amelio will have to ride out the shareholder reaction to those figures. By the time those results are published , Apple may have a new self-appointed saviour. Ellison has pledged that he will decide one way or another within two weeks whether to pursue the takeover, but for the moment his intentions can only be gauged from his rhetoric.?Now is the time,? was his battlecry last week. For Amelio and his team, it will be a long fortnight...
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