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Can that guy in Ironman 2 whip IBM in real life

BOSTON In the movie «Ironman 2,» Larry Ellison makes a cameo appearance as a billionaire, playboy software magnate. It is a role he knows well. He is playing himself chief executive of Oracle Corp, one of Silicon Valley’s most enduring, successful and flamboyant figures.

At age 65, he is undertaking one of the biggest challenges of his career, and it’s not playing Hamlet on Broadway. Oracle, the company Ellison founded three decades ago and built into dominant force in the software industry, is making a go at hardware with the acquisition of money losing Sun Microsystems.

This is not entirely unlike MIT deciding to field a competitive football team, but Ellison being Ellison, he could not be less worried. «We have a wealth of technology to package into systems,» said Ellison, who won the America’s Cup in February. «I see no reason why we can’t get this to where Sun under Oracle should be larger than Sun ever was.»

In a rare interview he discussed his turnaround efforts at Sun so far, revealed plans to purchase additional hardware companies and detailed new products that will launch in the near future. And he did so with his usual in your face style heaping all manner of abuse, for example, on Sun’s previous managers.

During the 1990s, Sun prospered by selling high end computers at top dollar to large corporations and dot com start ups. Its business peaked in 2001, then slid with the collapse of the Internet boom and never recovered, though the company is still widely respected for its technological prowess and the brain power of its engineering staff.

Sun came into play in November 2008 after IBM CEO Sam Palmisano made an overture to buy it. Oracle, which had been strictly a software maker, unexpectedly jumped in to outbid IBM by just 10 cents a share, paying a total of $5.6 billion in cash.

Now Ellison says he is going to rebuild Sun’s hardware business by using a strategy that helped IBM prosper in the 1960s: Selling computer systems built with standardized bundles of hardware and software.

Plenty of skeptics doubt Ellison can pull it off. Sun lost $2.2 billion in its last fiscal year as an independent company. Conventional wisdom holds that he will end up divesting the company’s hardware business.

Ellison has a pretty good track record when it comes to predicting where the industry is headed. Besides innovating the wildly lucrative relational database that bears Oracle’s name, Ellison was quicker than most in creating software that works with both Internet technology and the widely used Linux operating system.

He also started buying up smaller software makers in 2003 when critics said his consolidation strategy was doomed to fail. It hasn’t. «People have lost a lot of money second guessing Larry about IT strategy,» said Dave Roux, co founder of Silver Lake, the world’s biggest private equity firm focused on technology, in which Ellison was an original investor.

«He’s a very thoughtful and reasoned observer of the big tectonic forces that kind of go rippling through the industry,» said Roux, who worked for Oracle before setting up Silver Lake.

Ellison has maintained his status as the leader of a powerhouse in the topsy turvy, protean technology world. IBM, which pioneered business computers, nearly collapsed in the 1990s, but then recovered as it aggressively expanded in services and software. Ellison’s close friend Apple’s Steve Jobs, was forced out of Apple, only to return a decade later to resurrect his company with the iPod. Meanwhile, Google has replaced Microsoft as the ‘ubertech company’ and occasional villain.

Although his products are used by businesses only and not nearly as recognizable as Apple’s Macs or Google’s search engine, they’ve made Ellison the world’s sixth richest man, worth an estimated $28 billion, according to nfl jerseys Oracle counts the bulk of the world’s major corporations as customers, and the company’s market value now tops that of Hewlett Packard, the world’s top maker of personal computers.

Ellison says he has already stopped the carnage at Sun, less than four months after the sale closed in January. «Their management made some very bad decisions that damaged their business and allowed us to buy them for a bargain price,» he told Reuters. He added that he expects profit from Sun’s operations to boost Oracle’s earnings in the current quarter, which ends May 31.

The integration has proceeded swiftly, says Ellison, because a protracted antitrust review in Europe gave Oracle time to draw up an exhaustive plan for resuscitating Sun. In typical Ellison fashion, he took a hands on approach to the integration, choosing to meet directly with technical managers at Sun as often as four days a week to diagnose its problems, rather than delegating the work to underlings.

Mark Barrenechea, a former Oracle executive who used to sit in on weekly engineering meetings with Ellison and is now CEO of specialty computer maker Silicon Graphics International Corp., says this is what Ellison does best. «He doesn’t write the code. He doesn’t solder resisters onto motherboards. But he understands how all the pieces fit together and how he wants the building to look,» said Barrenechea.

When Ellison started scrutinizing Sun, he says he found plenty wrong: lots of waste among the billions of dollars that had gone into R in recent years. The hardware maker had cut back the sales staff that sold its most profitable products, including its business computers and storage equipment, causing sales and earnings to decline. It operated an antiquated manufacturing and distribution system. It regularly sold hardware and software at a loss, sometimes losing more than $1 million on a single deal.

«Oracle is much more disciplined on the financial side. Much more detail oriented,» said John Fowler, head of Oracle’s new hardware division and the most senior Sun manager to survive the acquisition.

Ellison says he learned that Sun’s pony tailed chief executive, Jonathan Schwartz, ignored problems as they escalated, made poor strategic decisions and spent too much time working on his blog, which Sun translated into 11 languages.

«The underlying engineering teams are so good, but the direction they got was so astonishingly bad that even they couldn’t succeed,» said Ellison. «Really great blogs do not take the place of great microprocessors. Great blogs do not replace great software. Lots and lots of blogs does not replace lots and lots of sales.»

Schwartz declined comment as did Sun co founder and former Chairman Scott McNealy.

At the start, Ellison shut down one of Schwartz’s pet projects development of the «Rock» microprocessor for Sun’s high end SPARC server line, a semiconductor that had struggled in development for five years as engineers sought to overcome a string of technical problems. «This processor had two incredible virtues: It was incredibly slow and it consumed vast amounts of energy. It was so hot that they had to put about 12 inches of cooling fans on top of it to cool the processor,» said Ellison. «It was just madness to continue that project.»

More infuriating, says Ellison, is that Sun routinely sold equipment at a loss because it was more focused on boosting revenue than generating profits.

The sales staff was compensated based on deal size, not profit. So the commission on a $1 million sale that generated $500,000 in profit was the same as one that cost the company $100,000, he said. «The sales force could care less if they sold things that lost money because the commission was the same in either case,» he said. Ellison added that Sun also lost money when it resold high end storage equipment from Hitachi Ltd, storage software from Symantec Corp and consulting services from other companies. Oracle is ending those deals.

Ellison has been pruning Sun’s line of low end servers, an area where it lost money as it tried to compete in volume with market leaders Hewlett Packard Co and Dell Corp. Sun never gained enough share to make it price competitive, but Ellison says that Sun became so desperate to goose the unit’s revenue the company would pay a fortune to charter planes during the last two days of a quarter so that it could book extra sales for the period.

In recent years, Sun outsourced much of its sales, counting on resellers to promote its products. That’s anathema at Oracle, which employs 22,000 salespeople and 11,000 software consultants who work directly with its largest customers.

One casualty of that strategy was StorageTek, a maker of tape storage systems for mainframe computers, which Sun bought for $4 billion in 2005.

«Astonishingly they laid off all the sales people and they laid off all the field service people. They just got rid of them all,» he said. «Guess what? Sales dropped. It’s breathtaking!»

The result: Sun went from being tied with IBM as the market leader in 2005 to No. 2 in 2009, when its $474 million in sales were about half those of IBM, according to data from IDC.