Oracle boss Larry Ellison is rumoured to have hired a firm of San Francisco headhunters to find new management to run Apple if he buys the firm. His hostile takeover plans looked more likely to succeed after the hardware company reported appalling second quarter losses this week.
Ellison last month confirmed long standing Silicon Valley speculation that he intended to buy Apple when he announced that he was putting together a group of investors to mount a $1.25 billion bid for 60 per cent of the company?s outstanding stock. At the time, he said he would decide whether to proceed with the takeover attempt in the next few weeks, after he had gauged reaction to his plans from analysts and customers.
According to Silicon Valley sources, Ellison has been successful in putting together a consortium of backers to fund the bid - no names have been confirmed - and in the wake of Apple?s announcement of a second quarter $708 million loss on Wednesday, a hostile bid now seems almost inevitable in the next few weeks.
The latest sign that Ellison intends to make good on his threat comes with the rumour that he has contracted San Francisco recruitment firm The Geneva Group to find him senior executives to form a new Apple management team. Ellison has already made it clear that in the event of a successful takeover, his first action will be to fire current chief executive Gil Amelio and his team.
For his part, Amelio remains unruffled by Ellison?s actions, in public at least. Talking to analysts following the announcement of the quarterly losses this week, he said: "We?ll have to wait and see. Mr Ellison will do what Mr Ellison does, but I?m going to stay focused on what we have to do at Apple."
Ellison was in Tokyo this week attending the Oracle Open World conference and has made no direct comment on the latest set of results from Apple. But he has reaffirmed his interest in taking over the company - he expects there is a "very high possibility" that he will succeed - and given a taste of some of his plans for the supplier.
Although he would not take over Amelio?s job as chief executive, Ellison conceded that he would probably take over from Mike Markulla, Apple?s long standing chairman, whom Ellison is known to dislike. He also refloated the idea of a generation of network computers (NCs) running the Macintosh operating system. "Apple would be a great supplier of NCs," he said.
That?s an idea for which Amelio has no time. "We want to make products that people want to buy," he said. "At this point in time there isn?t a market for NCs of any substance and there is a market for the product we?re making today."
But if there is still a market for Apple products, it has several weak points, notably the flagging sales of Macintoshes. For the first three months of the year, shipments were down by one-third from 892,000 in the comparable quarter last year to 602,000 in 1997.
The second quarter results were considerably worse than Wall Street had been expecting. Removing one-off charges relating to laying off a third of the Apple workforce and acquiring Next Software, the quarterly operating loss - the second in succession - was $186 million.
Apple immediately went on the defensive about the figures, taking out full page adverts in many US newspapers to run an open letter from Amelio to customers, in which he claims: "The numbers don?t really tell the whole story" and insists that "I am now more optimistic than ever".
Amelio?s attentions must now be focused on two of Apple?s largest shareholders, whose support may be vital in any takeover battle that lies ahead. At the end of this month, he will meet with the Calpers public sector pension fund, which owns over 700,000 Apple shares. He has to win the fund managers over to his side, which is not likely to be an easy task. Earlier this year they voted against him at the Apple shareholders' meeting and they have already expressed an interest in what Ellison has to offer.
The rogue element is still Prince Alwaleed Bin Talal Bin Abdulaziz, the 40-year Saudi Arabian billionaire who bought up five per cent of Apple?s stock in recent weeks and holds the distinction of being the second largest shareholder. He has publicly described Ellison as his "good friend", leading many observers to assume that he will side with the Oracle boss.
But Amelio has clearly not given up hope of convincing the prince to back him, despite criticism by the Saudi Arabian that not enough has been done to turn the company around. The two men have not met, but Amelio said they had spoken on the telephone. Describing the prince as "a shrewd and highly successful businessman", Amelio added: "We welcome him as a friendly investor".
While he waits to find out if this is an accurate description, Amelio is getting irritated at the level of bad publicity Apple is attracting and took time out this week to blame the media for discouraging customers. "There is something holding back the customers," he claimed. "That?s the press, how we?re covered, the negative emphasis."
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