Oracle Corp - Slowing Growth

SLOWING GROWTH

Diversification efforts continued in 1989 when Oracle established Oracle Data Publishing, a subsidiary focusing on creating and marketing reference material and other information electronically. That year, Oracle was included for the first time on Standard & Poor's 500 index. Believing its intense growth pace would continue, Oracle sought $100 million in public capital. In 1990, when the firm experienced its first quarter of poor earnings, stock prices dropped from $25.38 to $17.50 in a single day. Several shareholders filed suit against the firm, alleging that management had issued misleading earnings forecasts. In the wake of this negative publicity, Oracle made public its intent to audit operations and reshuffle management. Larry Ellison assumed the additional post of chairman, while Lucas remained a director. When the internal audit results were made public, prompting the firm to restate earnings for the first three quarters of 1990, Oracle's stock plummeted to $11.62 per share. To protect itself from hostile overtures, the firm's board implemented a poison pill, or stockholder rights plan, that would make takeover attempts much more expensive. Oracle also scaled back its annual growth rate targets from 50 percent to 25 percent and eliminated 10 percent of its employees. The milestone achievement in 1991 of reaching $1 billion in sales was marred by Oracle's first ever annual loss, which totaled $12.4 million.