Sunday, November 2, 2014

Courts Nix More Software Patents

About time patent trolls get claims denied. Aivars Lode avantce

Courts Nix More Software Patents
Decisions Follow Supreme Court Ruling on Intellectual-Property Protection

A senior patent counsel at Google lauded the recent ruling. Bloomberg News
It's open season on software patents.
That's the message federal courts have sent in recent weeks after a U.S. Supreme Court ruling in June that tackled the question of whether—and when—computer programs can qualify for intellectual-property protection.
Since the country's top court struck down patents on a computer program that reduces risk in financial transactions, federal trial courts have rejected software patents in nine cases, according to Lex Machina, which supplies patent data to lawyers. The U.S. Court of Appeals for the Federal Circuit, which sets much of the nation's patent law, has nixed software patents in three others.
Software Slump
Courts have been taking the ax to software patents.

  • July 8: A U.S. court in New York invalidated a patent for an online dieting tool.
  • July 17: A federal appeals court struck down a patent on the idea of keeping the look of digital photos consistent when moved across devices.
  • Aug. 26: A federal appeals court in Washington nixed a computer-bingo game patent.
  • Sept. 3: A federal court in Texas invalidated a patent on the idea of using a computer to convert one retailer's reward points to another's.

Source: WSJ research
Among the invalidated patents was one involving an online dieting tool, another for a computer bingo game, and yet another for using a computer to convert reward points from one company's loyalty program to another's.
The trend represents a worst-case scenario for patent-licensing firms, which their detractors call "patent trolls." In recent years, such firms have bought up masses of patents on software and other technology, hoping to make money by licensing those patents to other companies or suing them for patent infringement.
Knocking down flimsy software patents, some patent experts say, will help keep these licensing firms in check.
But the recent court rulings, including those from the Federal Circuit, which sets much of the nation's patent law, have also triggered a broader concern.
Some patent experts wonder whether the rationale behind the Supreme Court ruling—that some software patents describe ideas that are too "abstract" to warrant legal protection—might ultimately affect patents in other fields, such as biotechnology and medical diagnostics.
"This is only the beginning of the fallout," said Mark Lemley, a patent lawyer and law professor at Stanford University.
In the Supreme Court case, known as CLS Bank International v. Alice Corp., the court was asked to consider whether software could be patented at all—a question courts have largely left unanswered for years.
The high court's unanimous opinion, written by Justice Clarence Thomas, said that for a software patent to be valid, it must describe more than an old idea, such as escrow, simply applied to a computer.
The court "has changed things fundamentally," said William Lee, a leading patent litigator at Wilmer Cutler Pickering Hale & Dorr LLP in Boston. Mr. Lee said he thinks the CLS Bank ruling, and its aftermath, might prompt some inventors and "endlessly creative lawyers" to rely on trademark or trade-secrets law, rather than patent law, to protect their ideas.
Since mid-June, lower courts have invalidated one software patent after another. In July, the Federal Circuit struck down a patent—originally granted to Polaroid Corp.—on a way to ensure that digital images maintain their original color and proportions when moved from one device to another. This month, the Federal Circuit ruled against a patent that described the process of using a guarantee from a third party to ensure an online transaction.
Some patent lawyers think the reckoning is long overdue. "Many of these patents are just taxes and impediments to those companies that are doing the hard work of building products and putting them in the hands of customers," said Suzanne Michel, senior patent counsel at Internet giant Google Inc. GOOGL +1.36%"This is a good thing for innovation."
In the mid-1990s, the Patent and Trademark Office began granting a flood of patents for computer programs. Many of those patents ultimately ended up in the hands of patent-licensing firms, which used them to file thousands of infringement suits, typically against well-heeled corporate defendants.
Rather than spending the time and money to fight these infringement claims all the way to trial, many companies paid relatively small sums—often in the five-figure range—to settle the suits and put the dispute behind them.
But the CLS Bank ruling, and its aftermath, has raised hopes among some of these repeat defendants that federal courts will continue to crack down on patents used largely in licensing and litigation, especially those related to software.
Others, however, question whether the crackdown on software patents is for the best. Their fear: that courts may start invalidating patents on other ideas, especially those requiring costly research-and-development efforts.
"You need strong legal protections to spur invention, bring ideas to market," said Timothy Holbrook, a patent expert and law professor at Emory University. "I worry about those protections falling away."

HP aims to take flash storage array costs below $2 per GB

If you want to know why the results of HP, Oracle , IBM are not there, It's because a GB of capacity from these guys costs $2, when it costs Facebook and Google 3 cents. If you are a CIO you are compelled to look elsewhere. Aivars Lode avantce

HP aims to take flash storage array costs below $2 per GB

Summary: HP's enhanced 3PAR StoreServ 7450 array aims to provide scalability and affordability that broadens its use to a wider range of mission-critical applications.

HP has launched an all-flash storage array that it claims lowers costs below $2 per usable gigabyte.
The enhanced 3PAR StoreServ 7450 array includes hardware-accelerated inline primary deduplication, thin cloning software, express indexing and 1.92TB commercial multi-level cell solid state drives.
The system, announced at HP Discover in Las Vegas today, is described by HP as delivering "faster response times at the same price as high-performance spinning media without sacrificing enterprise-class storage resiliency and petabyte scalability".

The new high-density 1.92TB cMLC drive, when combined with HP 3PAR compaction technologies, lowers the cost of storage to below $2 per usable gigabyte, according to HP.
These new compaction technologies, include HP 3PAR Thin Deduplication and HP 3PAR Thin Clones software, which add to the benefits of existing thin provisioning with zero-block deduplication, that HP says frees up significant space.
HP also collaborated with SSD suppliers to extend usable capacity per drive by up to 20 percent by reducing the space typically reserved by media suppliers.
Express Indexing allows the array to be scaled to 460 TB of raw storage and more than 1.3 petabytes of equivalent usable capacity.
The system also comes with a guarantee of 99.9999 percent storage uptime and HP offers a five-year warranty on its 480GB, 920GB and 1.92TB HP 3PAR StoreServ SSDs.
The 3PAR StoreServ 1.92TB cMLC drives are planned to be available in July at $14,315 per drive.
3PAR Thin Deduplication and 3PAR Thin Clones software for 3PAR StoreServ 7450 is expected to begin shipping as part of the 3PAR Operating System Software Suite in September 2014 at no additional charge.
IDC forecasts that by 2016 the market for all-flash storage arrays will jump to $1.6 billion, with the market experiencing a 59 percent compound annual growth rate between 2012 and 2016.

Why Oracle CEO Larry Ellison had to go ... Except he hasn't

A more interesting view on why Larry left. Aivars Lode avantce

Why Oracle CEO Larry Ellison had to go ... Except he hasn't
Silicon Valley's veteran seadog in piratical Putin impression

Analysis What's the difference between God and Larry Ellison? God doesn't think he's Larry Ellison.
So goes the title of Mark Wilson's 2003 biography on Ellison, Oracle's now former chief executive – a man who by force of will forged a multi-billion dollar software empire.
In the process, Ellison became not just the best-rewarded CEO on Wall St but one of the world's richest men, owner of property and boats and host of yacht races.
Not bad for an unwanted kid born in the last year of the Second World War to a 19-year-old single mum in the Bronx, and who was farmed out to her aunt and uncle in Chicago.
Sometimes, even Larry can't believe how things turned out.
"When I started Oracle, what I wanted to do was to create an environment where I would enjoy working. That was my primary goal," he told the Smithsonian back in 1995.
"Sure, I wanted to make a living. I certainly never expected to become rich, certainly not this rich. I mean, rich does not even describe this. This is surreal."
If you were Larry, you'd probably have become quite confident in your powers. It's that confidence, though, that's probably behind Larry relinquishing the CEO seat on Thursday.
Oracle said Larry was giving up responsibility for running the business with immediate effect, handing over to joint CEO's Mark Hurd and Safra Catz. He is stepping down from a company he's been running since 1977, when it was called Software Development Labs – Oracle came into being in 1982.
Until Thursday lunchtime, on the US West Coast, he had been tech's longest serving chief executive. Larry is now CTO at the database giant, tinkering with his hardware and software engineering operations.
The question of Larry's exit has been in the air for some time, but nobody expected this. Aged 70, Larry is three years past the official US retirement age. In the take-it-or-leave-it attitude he fostered at Oracle, the company gave zero explanation for this momentous and sudden change at the top.
However, Ellison vacated the CEO chair on the day Oracle announced yet another set of dismal results: a third successive quarterly miss making a total of four misses out of the last five quarters.
Sales of new software are anaemic, and hardware is dragging Oracle down, down, deeper and down. Servers and server systems are only making slightly more than Oracle's cloud business, yet Oracle laid out just over $8bn to buy its way into the hardware club with Sun Microsystems.
If Larry were somebody else in his Darwinist corporate machine, Larry would have let himself go by now.
We did see a sign that something was wrong, when Larry got his pay package cut in half. Shareholders had been on the war path, angry at his record-breaking level of remuneration after more than 12 months of wince-inducing sales performance. Clearly, things couldn't just continue.
Once again, it's the hardware business that Oracle bought with Sun in 2010 that has been the weight around the neck of Larry and his company. Call it the Curse of Sun.
The failing x86 and SPARC server biz is unable to wash itself clean of red ink, but Larry bought it to become a new IBM. Here's how Larry described the way Sun would transform Oracle, his database and apps company, into a systems powerhouse:
The acquisition of Sun transforms the IT industry, combining best-in-class enterprise software and mission-critical computing systems... Oracle will be the only company that can engineer an integrated system - applications to disk - where all the pieces fit and work together so customers do not have to do it themselves. Our customers benefit as their systems integration costs go down while system performance, reliability and security go up.
That was Larry's first bad call.
Another poor decision was letting personality cloud his judgement as to whom he hired to eventually run that business: his longtime pal and tennis buddy Mark Hurd.
Hurd was ousted from Hewlett-Packard as CEO in August 2010, following a brouhaha involving expenses claims and a Playboy model that eventually blew over. Hurd was no prize; an unexciting rows and columns chief from NCR. But Larry brought him in, and branded the HP board "idiots" for letting his friend go.
Owning proprietary Sun hardware was one thing. A cost center that goes completely counter to the prevailing logic of the industry, which is to get out of that game and run Linux on Intel-powered white box gear made by somebody else. Putting Hurd in charge of Sun's custom computers proved a commercial disaster.
Hardware has been an obsession of Ellison's since the 1990s. It was around 1998 he was talking of an Oracle 8i database appliance that people bought for their own data centers. This preoccupation meant he was blind to the real growth opportunity: public cloud computing. Actually, he was complacent.
In 2008, Ellison laughed off cloud, calling it the new black. He joked he didn't really need to do anything beyond running new ads for Oracle.
Oracle is now late on cloud, having U-turned with Java cloud, developer cloud and database cloud, and partnered with Salesforce, NetSuite and Microsoft. The former two are native cloud players growing at about 30 per cent a quarter. The latter is an on-premises laggard that's catching up with Amazon.
Cloud is Oracle's fastest growing business: SaaS and PaaS are up 33 per cent, and growing faster than software license renewals and support (6.77 per cent). But the cloud revenue is measured in mere millions of dollars; Oracle must eat billions of dollars to survive.
Like other enterprise giants, such as IBM and SAP, sales of new versions of on-premises software are growing, but they are down on sales during the pre-2008 glory years.

Alibaba's IPO Priced at $68 a Share

Alibaba's IPO Priced at $68 a Share
The $21.8 Billion Offering by the Chinese E-Commerce Giant Is Among Biggest Ever

Alibaba Group Holding Ltd.'s shares priced Thursday at $68 apiece, putting the Chinese company on track for an initial public offering that will raise at least $21.8 billion.
The price was at the top of the company's expected range of $66 to $68, which was increased from an initial $60 to $66.
The price gives the e-commerce company an initial market value of $168 billion, making it one of the 40 biggest public companies globally, according to S&P Capital IQ, and worth more than U.S. online- shopping giant Inc. Amazon is currently valued at $150 billion. 
Mr. Ma told investors that the move to separate key units from Alibaba, such as online-payment network Alipay, was one of the toughest decisions of his life, but necessary due to rules in China about foreign control of some types of assets, people at the meetings said.
Some analysts and investors have said the deal price gives the stock room to rise on the open market, though its performance could depend heavily on whether markets are volatile on Friday—possibly because of uncertainty around the long-term effects of Scotland's independence vote—and whether bankers correctly read the intentions of investors.
The deal sets the stage for the shares to begin trading Friday on the New York Stock Exchange, under the ticker symbol BABA, an event expected to be watched by investors world-wide.
Another wild card: A group of early investors holding more than $8 billion of Alibaba stock aren't subject to a so-called lockup, an arrangement that typically restricts share sales immediately after an IPO.
Alibaba's founder and executive chairman, Jack Ma, Alibaba's top managers and their bankers have pitched the company over the past two weeks as an opportunity to invest in the growth of China's middle class, as more Chinese buy goods and services via the Internet and mobile phones, and to enjoy the profits generated by the company's "platform" model. The company connects buyers and sellers without the cost of holding inventory on its own.
With Mr. Ma joining presentations, including in the U.S., Hong Kong and the Middle East, the company fought back against criticism from some academics and investors who see great risk in Alibaba. Among the reasons for their concern is the fact that it operates in part through a series of "variable interest entities" in China that will be owned by senior executives, including Mr. Ma, rather than by Alibaba's foreign shareholders.
The company also faced questions about the way it concentrates its corporate power in a group of 30 partners, a system that barred it from listing in Hong Kong. Mr. Ma, in a public letter to investors, wrote that preserving the partnership culture was integral to Alibaba's future success.
At the IPO price, Mr. Ma will own a stake in Alibaba worth more than $13 billion. He also reaped $867 million in a sale of shares in the offering.
The initial deal size surpasses the $19.1 billion raised by Agricultural Bank of China Ltd. in 2010, according to Dealogic. Alibaba's IPO could raise as much as $25 billion if its underwriters exercise an option to buy more stock from the company and its selling shareholders. Agricultural Bank's IPO was valued at $22.1 billion after a similar option was exercised.
A committee made up of Mr. Ma, Executive Vice Chairman Joseph Tsai and representatives of SoftBank Corp. and Yahoo Inc., Alibaba's two largest shareholders, decided on Thursday's pricing, the people familiar with the matter said.
Also present at the final meeting were the six investment banks who led the deal—Credit Suisse Group AG, Deutsche Bank AG , Goldman Sachs GroupInc., J.P. Morgan Chase  & Co., Morgan Stanley and Citigroup Inc.  —the people added. The company also hired Rothschild to act as an independent adviser.
As a group, the 35 banks working on the offering will split a base pool of 1% of the deal's proceeds, or as much as $250 million, plus potentially 0.2 percentage points more, or as much as $50 million, in incentive fees, people familiar with the deal have said.
The five banks named first on the deal will each earn up to roughly $45 million in fees, depending on how the final incentives are allocated, they added.
Alibaba took the unusual approach of divvying up key jobs, instead of naming a single lead bank for the offering. On Friday, Goldman Sachs will oversee the opening trades, people familiar with the deal have said.
For the pricing, the company and its advisers adopted a strategy of starting relatively low, then nudging the price higher, people familiar with its thinking said. The aim was to build support for the stock from the biggest institutional investment firms, who tend to be most conservative on pricing because they have strict valuation models they follow. Their interests differ from those of faster-money traders who try to grab hot IPOs with fast-rising prices just to "flip" them for a quick profit.
The pricing strategy contrasted with that of Facebook Inc. FB +1.19% For its $16 billion IPO in 2012 the social network raised its range much more sharply and expanded the size of the deal. Moreover, Facebook put a relatively large portion of the IPO in the hands of small investors—about 26% of the offering, bankers said at the time.
Alibaba also hoped to stir up aftermarket demand by placing the stock primarily with large investors and giving only a small portion of it—likely less than a quarter of the deal—to midsize hedge funds and small investors, who will now have to trade in the open market to get shares, the people familiar with the process said.
The result was a price that was higher than where the company started, but still below where some analysts and investors have pegged it. Vince Rivers, a senior portfolio manager at JO Hambro Capital Management, said that most investors he spoke to expected the stock to trade "between $80 and $100" a share on its first trading day.
Companies are often concerned about underpricing their deals, effectively leaving money on the table. In this case, Yahoo, as the deal's biggest seller—offering up to 140 million shares, or $9.5 billion worth at the IPO price—would lose out.
But earlier this summer Alibaba agreed to let Yahoo sell less stock than originally planned, which was more than 200 million shares. That move helped Alibaba keep a free hand to price the offering attractively for the biggest investors, people familiar with the deal said.
On Friday, attention turns to the stock's opening trades. Mr. Rivers said the key variable for judging initial buyers' returns would be the volume of the opening trades, rather than the actual price. "If you see it open with big volume, you're clearing out a lot of the potential sellers. But if it spikes up with no volume, then you might see it come back down quickly," he said.
While Facebook's opening trade actually came above its IPO price, the stock quickly fell back. It was hit by a technology glitch on the Nasdaq Stock Market, but also by a wave of selling from buyers who got more stock than they anticipated.

SAP to Acquire Concur Technologies

How do you hide missing numbers on organic growth? Buy something and spend a lot. Aivars Lode avantce

SAP to Acquire Concur Technologies$8.3 Billion Deal for Maker of Expense Management Software Expands SAP's Cloud-Based Businesses

SAP SE  agreed to buy Concur Technologies Inc. in a deal valued at $8.3 billion, allowing the German software giant to expand into travel-related software for hotels and tourism services.
The deal with Concur, which makes software to help employees manage their expense accounts, would be the most expensive in SAP's history, according to Dealogic, ranking above SAP's $7.1 billion acquisition of Sybase Inc. in 2010.
It also ranks among the 10 largest software deals, according to Dealogic, along with Hewlett-Packard Co.'s $11.7 billion deal for Autonomy Corp. and Oracle Inc.'s $10 billion purchase of PeopleSoft Inc. in 2003.
The deal also sets a new mark for companies offering cloud computing, or providing service over the Internet, rather than selling software.
SAP Chief Executive Bill McDermott said it was " the largest acquisition in the history of the cloud industry."
Concur shareholders would receive $129 per share, a 20% premium over Wednesday's closing price of $107.80.
Analysts had mixed views on the deal and investors reacted negatively to the steep price SAP is paying. Shares dropped more than 3% in midday trade in Frankfurt.
"The deal multiple is quite rich, given that travel and entertainment is not strengthening SAP's core business or bringing its cloud business (from a technological viewpoint) to the next level," Commerzbank analyst Thomas Becker said, questioning whether Concur is the right choice. Commerzbank downgraded the SAP's stock to add from buy, predicting it would take SAP a long time to achieve synergies and given the more limited scope for further deals.
In recent years, SAP has invested in cloud-based computing business including human-resources application SuccessFactors, an e-commerce application called Ariba and Fieldglass, which allows companies to manage contingent workers and services.
Analysts at Citigroup noted that SAP's execution in cloud with SuccessFactors and Ariba has been largely successful and "if SAP can bring similar execution to this transaction, we think the deal, even at a steep price, will pay off."
Concur provides its software as a service delivered via the Internet, while most of the software SAP sells today, managing everything from companies' supply chains to their financial ledgers, is integrated directly into those companies' computer systems.
"While this particular acquisition was a surprise, the idea of major [mergers & acquisitions] in the cloud was something we have argued for some time as the medium-term targets made little sense without it," Berenberg analyst Daud Khan said.
Mr. McDermott said the company will update its outlook after the completion of the takeover, which is expected either in the last quarter of this year or first quarter of next year.
"There's a desperate race for cloud scale," said Mark Moerdler, an analyst at Sanford C. Bernstein. "Everyone needs to be big; hopefully they'll gain scale efficiency out of it."Cloud software companies have been growing more quickly than their rivals that sell actual software. Cloud software can be installed and updated more easily and less expensively than the more traditional product.
Mr. McDermott said Concur hadn't put itself up for sale, but SAP approached its CEO, Steve Singh, about 90 days ago to explore a takeover.
"We are making a bold move to innovate the future of business within and between companies," Mr. McDermott said.
Credit Suisse agreed, calling it an aggressive move not only because it extends SAP's cloud offerings but because of its ability to grab an "attractive, defensible asset" ahead of a potential gains in both revenue growth and margins.
Founded in 1993, Bellevue, Wash.based Concur posted a loss of $24.4 million on revenue of $546 million in the fiscal year ended Sept. 30, 2013.
Mr. McDermott, the first American to run SAP, said the addition of Concur would mean its business network will now handle transactions totaling more than $600 billion annually.
Asked on an analyst conference call if SAP will continue making acquisitions, Mr. McDermott said it doesn't have a long list of companies it is planning to buy.
SAP said it would use a credit facility of up to €7 billion ($9 billion) to finance the purchase, as well as debt refinancing and acquisition-related costs.

Larry Ellison to Step Aside as Oracle CEO

Interesting move and one that I have seen happen when you want to blame someone for future bad results.

Larry Ellison to Step Aside as Oracle CEO

Software Pioneer to Become Chairman; Mark Hurd and Safra Catz Named Co-CEOs

Larry Ellison, a college dropout who built Oracle Corp. into one of America's largest and most prominent technology companies, is stepping down as chief executive in a momentous Silicon Valley handover.
Mr. Ellison, 70 years old, a brash personality who engaged in public fights with rivals and gobbled up potential competitors, has been the only CEO at Oracle. He founded the company in 1977 and through his canny pulse on technology and acquisitions turned it into a dominant seller of business software.
Mark Hurd, 57, and Safra Catz, 52, two of Mr. Ellison's deputies, will take over as co-CEOs. The two have shared power as Oracle's co-presidents since 2010, when Mr. Ellison hired Mr. Hurd following his departure from Hewlett-Packard Co. after the board said it lost confidence in him.
Mr. Ellison has been among the last of the founder-CEOs of Silicon Valley's pioneering companies. Bill Gates turned over the CEO post at Microsoft Corp. more than a decade ago. Steve Jobs, the Apple Inc.  co-founder, died in 2011 shortly after handing the company to a lieutenant. Hewlett-Packard's executive suite and boardroom no longer include family members of Bill Hewlett or David Packard.Oracle's Mark Hurd and Safra Catz are tapped as co-CEOs to replace founder Larry Ellison. What are the challenges for a company run by co-CEOs? WSJ's Shira Ovide explains. Photo: Getty
It is unclear how Oracle will fare long-term with Mr. Hurd and Ms. Catz at the helm. The duo effectively have run day-to-day operations at Oracle for several years with Mr. Ellison tending to focus on technology, a role he will continue to play. As executive chairman and the owner of a quarter of the company's shares, worth $48 billion, Mr. Ellison won't be walking away from its Redwood City, Calif., headquarters.
But Mr. Ellison's associates say he has demonstrated over the years a unique knack for both product-engineering details and business positioning that will be hard to replace. No one else at the company, they say, has the same combination of talents. "There always has been, [and] always will be, one CEO at Oracle," Marc Benioff, who left Oracle in the 1990s to start software firm Inc., posted on Twitter.
His decision to step down as Oracle CEO comes at a delicate point for the company. Oracle has struggled recently with choppy sales as Mr. Ellison rewired the company's software to be accessed from remote computers and sold by subscription—part of the broad trend known as "cloud" technology.
Oracle shares fell 2.4% in after-hours trading after finishing up 41 cents at $41.55 in 4 p.m. New York trading. The company disclosed the executive changes and the quarterly results after 4 p.m. Eastern Time.

Mr. Ellison has thwarted many business rivals that threatened to knock the company off its perch over the years. He spent billions of dollars on technology deals and acquisitions to reshape what started as a database software company. Oracle acquired Sun Microsystems, developer of the Java programming language, customer relationship software maker Siebel Systems, and human resource management software maker PeopleSoft.
In a sign of Oracle's difficulties, the company missed Wall Street's quarterly revenue estimate, delivering a 2.7% sales gain for the three months ended Aug. 31. Oracle has missed analyst revenue expectations for six of the last eight quarters. Earnings for its fiscal first quarter slipped less than 1% over a year earlier.
Publicly, he also derided rivals' products and executives with a sometimes-savage wit. After Mr. Hurd resigned from H-P after clashing with its board, Mr. Ellison famously called it the "worst personnel decision since the idiots on the Apple board fired Steve Jobs many years ago." In 2000, Mr. Ellison admitted to hiring private investigators to dig up dirt on Microsoft, calling it a "civic duty." The investigators found Microsoft helped fund companies that supported Microsoft in a battle with the Justice Department.
More recently, he has turned Oracle to focus on cloud software, another existential threat, vowing to make Oracle the biggest in the business.
"Larry stepping down speaks to Oracle needing new leadership at this point with a CEO that will help put fuel back in the growth engine," said Daniel Ives, an FBR Capital Markets analyst.
Mr. Hurd, regarded as a sales-strategy visionary, has been running Oracle's sales organization. Ms. Catz is Oracle's financial and operations whiz and a close ally of Mr. Ellison. People in the technology industry have anticipated the two wouldn't be able to share power forever, and now they have been thrust into an even more high-profile alliance.

Oracle said Mr. Ellison will continue with the company as executive chairman and chief technology officer. Jeff Henley, Oracle's chairman since 2004 and a former CFO, will take a post as vice chairman.
Oracle said manufacturing, finance, and legal functions will continue to report to Ms. Catz. All sales, service and vertical industry global business units will continue to report to Mr. Hurd. All software and hardware engineering functions will continue to report to Mr. Ellison.
"The three of us have been working well together for the last several years, and we plan to continue working together for the foreseeable future," Mr. Ellison said in a statement. "Keeping this management team in place has always been a top priority of mine."

Mr. Ellison started college at the University of Illinois, and then attended the University of Chicago, but dropped out in the late 1960s to move to northern California. There, he tried his hand at the fledgling computer-programming industry.
In 1977, he started his own company with a few thousand dollars and a bold idea to topple International Business Machines Corp.'s stranglehold on corporate databases. Among his earliest and most important clients for his database software was the U.S. Central Intelligence Agency.
Oracle became successful beyond his wildest dreams, and the company became a launchpad to personal riches. Forbes ranks him as the fifth-richest person in the world. Mr. Ellison owns lavish homes around the world, recently purchased an island in Hawaii, and used his wealth to finance a champion America's Cup sailing team.

Oracle Sails Uncertain Course

Oracle sails an uncertain course. Aivars Lode avantce

Oracle Sails Uncertain Course

Spencer Jakab

Sept. 17, 2014 4:01 p.m. ET
A year after one of the most remarkable comebacks in history, Oracle Corp.ORCL -0.12% is seeking an encore.
The prospect of doing so in the software business is better than the 250- to-one odds the company's yacht team at one point faced during The America's Cup. But doubters still abound, and it isn't hard to see why.
Oracle's fiscal 2014 results were disappointing. Revenue was up by 3% from the previous year and operating income was just 1% higher. Even worse, crucial sales of new software licenses were flat. Those feed through to ongoing payments for updates and support, Oracle's most stable and important source of sales.
The company stressed the waters weren't so choppy. The way cloud-service revenue is recognized—over time rather than up front with license sales—made its income statement look weaker. But total cloud revenue is only about one-sixth the size of traditional software sales, so the impact couldn't have been so substantial.
And even if Oracle on Thursday meets or beats analysts' earnings projection of 51 cents a share for the fiscal first quarter through August, compared with the year-ago quarter's 47 cents a share, investors will be left with questions. In particular, they will be looking for signs of how quickly cloud services are growing and how profitable they can be.
"The cloud" means three businesses at Oracle. The first, infrastructure, is mired in a price war with the likes of Rackspace Hosting Inc. RAX -17.67% Inc. AMZN -1.15% that has battered margins. The latter two, software and platform as a service, are far better and growing quickly, bolstered by acquisitions.
Chief Executive Larry Ellison insists this area can earn better margins than the existing software business, in the range of 40% to 50%. That doesn't seem boastful, if and when the cloud software and platform businesses reach a certain size. His ambition of being No. 1 in cloud computing isn't entirely fanciful, either.
Unfortunately, even if it becomes a cloud giant, Oracle's reliable software-support-and-update income stream will suffer. That, plus slow growth overall, explain Oracle's subdued trailing earnings multiple of just 17 times.
Unlike a winner-take-all race, though, Oracle merely has to do better than the market's bookmakers believe. By no means will it be smooth sailing, but it has the wind at its back

Riverbed Expands Board, Rejects Director's Resignation

Activist investors are shaking the software world... more to come. Aivars Lode avantce

Riverbed Expands Board, Rejects Director's Resignation

Network Equipment Maker Also Changes Executive Pay Structure

Riverbed Technology Inc., which has been fighting a takeover bid by an activist investor, said Wednesday that it added two new directors, expanding the size of its board to nine members, while making changes to its executive pay structure.
Riverbed also declined to accept the resignation of board member Mark Lewis. In May, Mr. Lewis offered to quit after he failed to receive a majority of nonbinding shareholder votes at the company's annual meeting.
Based on shareholder feedback, Riverbed said it concluded the re-election vote on Mr. Lewis resulted from concerns that the company's stockholder rights plan wasn't submitted to a vote at the annual meeting, rather than concerns about his performance or qualifications.
Mr. Lewis had been the only board member up for election.
The company said Wednesday the addition of Mike Nefkens and Steffan Tomlinson means that seven of its nine directors are independent.
Riverbed also said it opted to make changes to its executive compensation plan, an acknowledgment of the concerns of investors who voted against the plan.
Starting next year, the company said a portion of annual equity awards will be subject to vesting based upon a total shareholder return index, while a portion will be linked to time-based vesting, and a another portion will be tied to Riverbed's performance beyond the first year following the date of the award grant.
Riverbed also said that it would give its investors a chance to vote on a shareholder rights plan at the 2015 annual meeting, if indeed the company puts such a plan into effect.
Elliott Management Corp., which recently owned more than 10% of Riverbed, has been critical of the company's operations and management and has been calling for the company to launch a sale process.
The hedge fund dismissed Riverbed's latest moves on Wednesday and reaffirmed its offer, worth $21 a share in cash, to buy the company.
"The board didn't just ignore the larger message to stop entrenching and engage," Elliott said in a news release. "It even decided to keep the board member that was voted off, failed to articulate any meaningful changes to the compensation plan, and chose to keep its poison pill."

The manager and the moron

Peter Drucker on managers and morons. AIvars Lode avantce

The manager and the moron

The computer is a moron. And the stupider the tool, the brighter the master must be, says Peter Drucker. In this Quarterly archive article, he explains how “the dumbest tool we have ever had” will compel managers to think through their actions.

December 1967 | byPeter F. Drucker
As all of us know, during the last 20 years the free world has had the greatest, most sustained economic advance in history. Most of us believe that this has been a time not merely of forward movement, but of vast economic change.
The facts and figures, however, do not support this impression. They show, instead, that our era has actually been a time of unprecedented non-change. It has been largely a period of linear forward movement along old trend lines, of adding new stories to an old building according to the old architectural design.
Imagine an economist in 1913, just before World War I, taking the economic trend lines of what were then already the advanced countries, and projecting each of them ahead to 1966. He would have hit it on the nose for Japan, Western Europe, and the United States, in fact for every one of the developed nations with one important exception—the Soviet Union, which is significantly below where it would have come out on our economist’s projection. The reason for this, as all of us know, was that the Russians imposed a political straitjacket on agriculture and froze farm technology just at the worst possible moment, when the technological revolution in farming was getting under way. Worse, they froze the agricultural population. By making it possible for anybody who stayed on the farm to be fed, no matter how poorly, they removed the economic pressure that elsewhere in the world has pushed the farmer off the farm, brought about fantastic productivity jumps in agriculture, and provided labor for the expansion of industry.
Suppose, again, that our economist, having made his projections in 1913, fell into a 50 years’ sleep. When he woke up, he would have found the industrial geography of the world virtually unchanged. Every country that is today an industrially advanced nation was well past the takeoff point in 1913. Not a single new one has joined the club, unless you count satellite economies like Canada, Australia, South Africa, and Mexico. Brazil, which has a long and distinguished history as a country of the future, may join the club tomorrow, but it isn’t quite there yet.
Compared to this linear movement, the 50 years before 1913 present the greatest imaginable contrast. During those five decades the industrial map of the world had been changing as rapidly as the physical map of the world changed in the fifteenth and the early sixteenth centuries—the Age of Discovery. Right after the Civil War, the United States and Germany emerged as economically advanced countries and rapidly overtook the old champion, Great Britain. A quarter of a century later Russia and Japan emerged, along with the western part of Austria-Hungary—the present Czechoslovakia and Austria, with Northern Italy. In short, the 50 years before 1913 were a period of very rapid shifts in economic power relationships.
Since World War I, however, such changes have been absent. This explains why economists of today are so concerned with economic development. Before 1913, it was taken for granted, but since then we’ve apparently gone sterile. And we don’t know how to start it up.
Perhaps the greatest shock to our Rip Van Winkle economist, however, would be the fact that, with the exception of the plastics industry, the main engines of growth in the past 50 years were already mature or rapidly maturing industries, based on well-known technologies, back in 1913.

The dynamos of growth

Our most rapidly advancing industry in the last 20 years of expansion has been agriculture. The productivity of farming has been increasing twice as fast as the productivity of manufacturing in all the developed countries except Russia. Yet the average farmer of today in the United States is not farming in a much more advanced way than the top farmer of 1913. Hybrid seed is about the only new development of any consequence.
And the next dynamo has been the steel industry. World steel capacity has expanded fivefold since 1913. Yet 99 percent of all steel capacity in existence today is built on a technology that was considered antiquated—and Lord knows was antiquated—in 1913.
Our third engine of growth has been the automotive industry. Yet in 1913 Henry Ford was already producing and selling 183,000 Model T’s, and a year later the figure had climbed to 261,000—more cars than the Soviet Union has ever produced in a single year. Even the Ford Motor Company of 1913 would be a major producer in today’s free-world automotive industry.
Much the same is true of the electrical apparatus industry. Neither Westinghouse, nor GE, nor Siemens was exactly unknown in 1913. They were blue chips. And this is also true of the organic chemical industry.
Plastics is the only industry based on new technology that is economically important today in terms of contribution to gross national product, employment, and so on. As far as the economic statistician is concerned, other industries hardly exist as yet. The airplane began to have an economic impact when the jets came. But the real impact will come with the big freight jets, which will make every airstrip in the world a deep-water port. In a few years, they may make the ocean-going freighter, man’s oldest efficient transportation, look roughly the way the railroads began to look around 1950. This will be one of the greatest changes in transportation we’ve ever had. But it is still ahead of us.

Much ado, little impact

The computers, despite all the excitement they have been generating, are not yet economically important. It’s only now that IBM is shipping them out at a rate of a thousand a month that they’re even beginning to have an impact. But we haven’t begun to use the potential of the computer. So far we are using it only for clerical chores, which are unimportant by definition. To be sure, the computer has created something that had never existed in the history the world—namely, paying jobs for mathematicians. But that is hardly a major economic contribution, no matter what the graduate dean thinks.
So the economic impact of the new technologies is still in the future. If we subtracted every single one of them from the civilian economy, we would hardly notice it in the figures—perhaps a percentage point or two.
But this situation of linear movement is rapidly changing in every respect. And the greatest change is one that our Rip Van Winkle economist, looking only at the figures, wouldn’t even notice: In the past 20 years we have created a brand-new form of capital, a brand-new resource, namely knowledge.
Up until 1900, any society in the world would have done just as well as it did without men of knowledge. We may have needed lawyers to defend criminals and doctors to write death certificates, but the criminals would have done almost as well without the lawyers, and the patients without the doctors. We needed teachers to teach other ornaments of society, but this too was largely decoration. The world prided itself on men of knowledge, but it didn’t need them to keep the society running.
As late as the mid-forties, General Motors carefully concealed the fact that one of its three top men, Albert Bradley, had a PhD. It was even concealed that he had gone to college, because, quite obviously, a respectable man went to work as a water boy at age 14. A PhD was an embarrassing thing to have around.
Nowadays, companies boast about the PhDs on their payrolls. Knowledge has become our capital resource, a terribly expensive one. A man who graduates from a good business school represents some $100,000 of social investment, not counting what his parents spent on him, and not counting the opportunity costs. His grandparents and great-grandparents had to go to work at the age of 12 or 13 with the hoe in the potato patch so that he could forgo those ten years of contribution to society. And that’s a tremendous capital investment.
Besides spending all that money, we are also doing something very revolutionary. We are applying knowledge to work. Seven-odd thousand years ago, the first great human revolution took place when our ancestors first applied skill to work. They did not use skill to substitute for brawn. The most skilled work very often requires the greatest physical strength; no ditchdigger works harder than the surgeon performing a major operation. Rather, our ancestors put skills on top of physical labor. And now—a second revolution—we’ve put knowledge on top of both. Not as a substitute for skill, but as a whole new dimension. Skill alone won’t do it anymore.
Now, this has two or three important implications for management.
First, we must learn to make knowledge productive. As yet we don’t really know how. The payroll cost of knowledge workers already amounts to more than half the labor costs of practically all business I know. That represents a tremendous capital investment in human beings. But so far neither productivity trends nor profit margins show much sign of responding to it. Pretty clearly, although business is paying for knowledge workers, it isn’t getting much back. And if you look at the way we manage knowledge workers, the reason is obvious: we don’t know how.
One of the few things we do know is that for any knowledge worker, even for the file clerk, there are two laws. The first one is that knowledge evaporates unless it’s used and augmented. Skill goes to sleep, it becomes rusty, but it can be restored and refurbished very quickly. That’s not true of knowledge. If knowledge isn’t challenged to grow, it disappears fast. It’s infinitely more perishable than any other resource we have ever had. The second law is that the only motivation for knowledge is achievement. Anybody who has ever had a great success is motivated from then on. It’s a taste one never loses. So we do know a little about how to make knowledge productive.

The obsolescence of experience

Another implication flows from the creation of this new knowledge resource. The new generation of managers, those now aged 35 or under, is the first generation that thinks in terms of putting knowledge to work before one has accumulated a decade or two of experience. Mine was the last generation of managers who measured their value entirely by experience. All of us, of necessity, managed by experience—not a good process, because experience cannot be tested or be taught. Experience must be experienced; except by a very great artist, it cannot be conveyed.
This means that the new generation and my generation are going to be horribly frustrated working together. They rightly expect us, their elders and betters, to practice some of the things that we preach. We don’t dream of it. We preach knowledge and system and order, since we never had them. But we go by experience, the one thing we do have. We feel frustrated and lost because, after devoting half our lifetimes to acquiring experience, we still don’t really understand what we’re trying to do. The young are always in the right, because time is on their side. And that means we have to change.
This brings us to the third implication, a very important one. Any business that wants to stay ahead will have to put very young people into very big jobs—and fast. Older men cannot do these jobs—not because they lack the necessary intelligence, but because they have the wrong conditioned reflexes. The young ones stay in school so long they don’t have time to acquire the experience we used to consider indispensable in big jobs. And the age structure of our population is such that in the next 20 years, like it or not, we are going to have to promote people we wouldn’t have thought old enough, a few years ago, to find their way to the water cooler. Companies must learn to stop replacing the 65-year-old man with the 59-year-old. They must seek out their good 35-year-olds.
For all its importance, however, the appearance of knowledge as a new capital resource is not the most vivid change in our environment, if only because it does not yet have a visible impact on the world’s economic figures. Probably the most vivid change is in technology.
Many of the old technologies, of course, still have a lot of life in them. I think it’s quite clear that the automobile, for instance, has yet to experience its greatest growth period. In the developed countries, however, it’s in a defensive position. I don’t think we need a great deal of imagination to foresee the day when the private car will be banned in the midtown areas or the day when the internal combustion engine will be limited to over-the-road use.
Or consider steel. I think one can quite easily foretell technological changes that will cut the cost of steel by about 40 percent. But whether that’s enough to re-create momentum for the steel industry is debatable. I think that steel would probably need a greater cost advantage to make it again the universal material it used to be. Since steel, like all multipurpose materials, isn’t ideal for any one use, it has to compete on price. And, as you know, the steel industry has lost 20 percent of the markets it had before World War II. It’s concrete here, plastic there, and so on. Whether steel will lose the automotive-body business to one of the new composition materials in the next ten years is a moot question. Only a fool would bet on it at this point, but by the same token only a fool would bet against it. If it does happen, it’s very doubtful whether even a 40 percent reduction in cost might be enough to keep steel from joining the long parade of yesterday’s engines of economic growth.
In agriculture, the great need is for an advance in productivity—but again, not in the developed countries. By now, the agricultural population in the developed countries has shrunk to such a small percentage of the total that even tripling its productivity would make little difference in the overall economic picture.
And so on. I’m not saying that the industries based on old technologies can’t advance, but I am saying they’re unlikely to provide the impetus we need for continuing expansion. From now on, I think, the expansion will have to be powered by new industries based on new technologies, something we have not seen to any extent since before World War I.

Enter the knowledge utility

One of the most potentially earthshaking forces in our economy is the technology of information. I don’t mean simply the computer. The computer is to information what the electric power station is to electricity. The power station makes many other things possible, but it’s not where the money is. The money is in the gimmicks and gizmos, the appliances, the motors and facilities made possible and necessary by electricity, that didn’t exist before.
Information, like electricity, is energy. Just as electrical energy is energy for mechanical tasks, information is energy for mental tasks. The computer is the central power station, but there are also the electronic transmission facilities—the satellites and related devices. We have devices to translate the energy, to convert the information. We have the display capacity of the television tube, the capability to translate arithmetic into geometry, to convert from binary numbers into curves. We can go from computer core to memory display, and from either one into hard copy. All the pieces of the information system are here. Technically there is no reason why Sears, Roebuck could not offer tomorrow, for the price of a television set, a plug-in appliance that would put us in direct contact with all the information needed for schoolwork from kindergarten through college.
Already the time-sharing principle has begun to take hold. I don’t think it takes too much imagination to see that a typical large company is about as likely to have its own computer 20 years hence as it is to have its own steam-generating plant today. It is reasonably predictable that computers will become a common carrier, a public utility, and that only organizations with quite extraordinary needs will have their own. Steel mills today have their own generators because they need such an enormous amount of power. Twenty years hence, an institution that’s the equivalent of a steel mill in terms of mental work—MIT, for example—might well have its own computer. But I think most other universities, for most purposes, will simply plug into time-sharing systems.
It would be silly to try to predict in detail the effects of any development as big as this. All one can foresee for certain is a great change in the situation. One cannot predict what it will lead to, and where and when and how. A change as tremendous as this doesn’t just satisfy existing wants, or replace things we are now doing. It creates new wants and makes new things possible.

A new age of information

The impact of information, however, should be greater than that of electricity, for a very simple reason. Before electricity, we had power; we had energy. It was very expensive and rather scarce, but we had it. Before now, however, we have not had information. Information has been unbelievably expensive, almost totally unreliable, and always so late that it was of little, if any, value. Most of us who had to work with information in the past, therefore, knew we had to invent our own. One developed, if one had any sense, a reasonably good instinct for what invention was plausible and likely to fly, and what wasn’t. But real information just wasn’t to be had. Now, for the first time, it’s beginning to be available—and the overall impact on society is bound to be very great.
Without attempting to predict the precise nature and timing of this impact, I think we can safely make a few assumptions.
Assumption No. 1: Within the next ten years, information will become very much cheaper. An hour of computer time today costs several hundred dollars at a minimum; I have seen figures that put the cost at about a dollar an hour in 1973 or so. Maybe it won’t come down that steeply, but come down it will.
Assumption No. 2: The present imbalance between the capacity to compute and store information and the capacity to use it will be remedied. We will spend more and more money on producing the things that make a computer usable—the software, the programs, the terminals, and so on. The customers aren’t going to be content just to have the computer sitting there.
Assumption No. 3: The kindergarten stage is over. We’re past the time when everybody was terribly impressed by the computer’s ability to do two plus two in fractions of a nanosecond. We’re also past the stage of trying to find work for the computer by putting all the unimportant things on it—using it as a very expensive clerk. Actually, nobody has yet saved a penny that way, as far as I can tell. Clerical work—unless it’s a tremendous job, such as addressing 7 million copies of Life magazine every week—is not really done very cheaply on the computer. But then, kindergartens are never cheap.
Now we can begin to use the computer for the things it should be used for—information, control of manufacturing processes, control of inventory, shipments, and deliveries. I’m not saying we shouldn’t be using the computer for payrolls, but that’s beside the point. If payrolls were all it could do, we wouldn’t be interested in it.

Managing the moron

We are beginning to realize that the computer makes no decisions; it only carries out orders. It’s a total moron, and therein lies its strength. It forces us to think, to set the criteria. The stupider the tool, the brighter the master has to be—and this is the dumbest tool we have ever had. All it can do is say either zero or one, but it can do that awfully fast. It doesn’t get tired and it doesn’t charge overtime. It extends our capacity more than any tool we have had for a long time, because of all the really unskilled jobs it can do. By taking over these jobs, it allows us—in fact, it compels us—to think through what we are doing.
But though it can’t make decisions, the computer will—if we use it intelligently—increase the availability of information. And that will radically change the organization structure of business—of all institutions, in fact. Up to now we have been organizing, not according to the logic of the work to be done, but according to the absence of information. Whole organization levels have existed simply to provide standby transmission facilities for the breakdowns in information flow that one could always take for granted. Now these redundancies are no longer needed. We mustn’t allow organizational structure to be made more complicated by the computer. If the computer doesn’t enable us to simplify our organizations, it’s being abused.
Along with vastly increasing the availability of information, the computer will reduce the sheer volume of data that managers have had to cope with. At present the computer is the greatest possible obstacle to management information, because everybody has been using it to produce tons of paper. Now, psychology tells us that the one sure way to shut off all perception is to flood the senses with stimuli. That’s why the manager with reams of computer output on his desk is hopelessly uninformed. That’s why it’s so important to exploit the computer’s ability to give us only the information we want—nothing else. The question we must ask is not, “How many figures can I get?” but “What figures do I need? In what form? When and how?” We must refuse to look at anything else. We no longer have to take figures that mean nothing to us and read them the way a gypsy reads tea leaves.
Instead, we must decide on our information needs and how the computer can fill those needs. To do that, we must understand our operating processes, and the principles behind the processes. We must apply knowledge and analysis to them, and convert them to a clerk’s routine. Even a work of genius, thought through and systematized, becomes a routine. Once it has been created, a shipping clerk can do it—or a computer can do it. So, once we have achieved real understanding of what we are doing, we can define our needs and program the computer to fill them.

Beyond the numbers barrier

We must realize, however, that we cannot put on the computer what we cannot quantify. And we cannot quantify what we cannot define. Many of the important things, the subjective things, are in this category. To know something, to really understand something important, one must look at it from 16 different angles. People are perceptually slow, and there is no shortcut to understanding; it takes a great deal of time. Managers today cannot take the time to understand, because they don’t have it. They are too busy working on things they can quantify—things they could put on a computer.
This is why the manager should use the computer to control the routines of business, so that he himself can spend ten minutes a day controlling instead of five hours. Then he can use the rest of his time to think about the important things he cannot really know—people and environment. These are things he cannot define; he has to take the time to go and look. The failure to go out and look is what accounts for most of our managerial mistakes today.
Our greatest managerial failure rate comes in the step from middle to top management. Most middle managers are doing essentially the same things they did on their entrance jobs: controlling operations and fighting fires. In contrast, the top manager’s primary function is to think. The criteria for success at the top level bear little resemblance to the criteria for promotion from middle management.
The new top manager, typically, has been promoted on the basis of his ability to adapt successfully. But suddenly he’s so far away from the firing line that he doesn’t know what to adapt to—so he fails. He may be an able man, but nothing in his work experience has prepared him to think. He hasn't the foggiest notion how one goes about making entrepreneurial or policy decisions. That’s why the failure rate at the senior-management level is so high. In my experience, two out of three men promoted to top management don’t make it; they stay middle management. They aren’t necessarily fired. Instead, they get put on the Executive Committee with a bigger office, a bigger title, a bigger salary—and a higher nuisance value because they have had no exposure to thinking. This is a situation we are going to eliminate.
On the other hand, we are going to open up a new problem of development at the middle-management level. It isn’t difficult for us to get people into middle management today. But it is going to be, because we shall need thinking people in the middle, not just at the top. The point at which we teach people to think will have to be moved further and further down the line. We can already see this problem in the big commercial banks.
We will have to manage knowledge correctly in order to preserve it. And this gets us into myriad questions of teaching and learning, of developing knowledge and techniques of thinking—not only in the developed nations, but in countries that are yet unaware of the distinction between management-by-experience and management-by-thinking, countries that are unaware of management itself. But that is another subject.