After months of on-again-off-again negotiations to sell itself to IBM, Sun Microsystems this spring found a new, if unlikely, suitor. Oracle, the business-software giant, in many ways promised to be a better fit for Sun, the beleaguered maker of server computers.
But Oracle's all-cash offer of $9.50 per share, or $5.6 billion minus Sun's cash and debt, bested IBM's per-share bid by a mere 40 cents. So on the afternoon of Saturday, April 18, during a Sun board meeting called to pick a winner, CEO Jonathan Schwartz did what chief executives must do in such situations. He phoned Oracle to ask for more money.
He didn't call Ellison, his titular counterpart. Instead, he dialed Safra Catz, Oracle's president. Schwartz proposed a higher price, which, in the dry language of a subsequent securities filing, "Ms. Catz stated would not be acceptable to Oracle." Tail between its collective legs, Sun's board of directors accepted Oracle's final offer that weekend, informed IBM it was out of the game, and on Monday morning announced the shocker of a deal.
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Low profile, high impact
To anyone who has dealt with Oracle on any matter of import for the past decade, it makes perfect sense that Schwartz would appeal to Catz, who shares the president's title with onetime research analyst Charles Phillips. Yet Catz, a 47-year-old former investment banker, is nearly unknown in the broader business world — and she is something of a mystery even within Oracle.
Many of the executives she oversees know next to nothing about her. She shuns the limelight assiduously: Oracle's own marketing department once struggled to persuade her to be photographed. The low profile masks her high impact.
"Make no mistake," says a prominent tech industry CEO. "She's running the company, not Charles Phillips. When Larry and I are discussing something that goes beyond us, out comes the cellphone, and Safra is on the other end."
In one sense, Catz is the model corporate executive. Every ounce of her energy is focused on serving two, and only two, interchangeable masters: Larry Ellison (who owns almost a quarter of the company, a stake recently worth $26 billion) and Oracle, which sells $23 billion a year in software and services. If Catz has a personal agenda — such as becoming CEO of Oracle or another company one day — she's done an artful job of hiding it.
"She's much more interested in Oracle's stock going up than she is in having her picture on the cover of a magazine," says Joseph Grundfest, a Stanford University securities law professor and an Oracle board member from 2001 to 2006.
To portray Catz merely as a willing and blunt instrument of the shareholders and their CEO doesn't tell the whole story, however. As Ellison's ultra-effective consigliere, Catz not only acts as his proxy, but translates her boss's ideas and ambitions into reality — power that goes well beyond the scope of most conventional deputies. That earns her a No. 12 ranking on Fortune's annual list of the most powerful women in business.
Given the way Oracle is remaking the technology landscape by acquisition — Catz is the chief executor of the buyout strategy — the company and its mysterious president warrant a closer look. The pending Sun deal alone could spark a new dealmaking wave among tech's giants.
What's more, Catz's unique relationship with Ellison provides a useful case study on how a celebrity (and easily distracted) CEO deploys a talented No. 2 executive to keep a massive enterprise humming.
To understand Catz, then, is to understand Oracle's success. Figuring out this complex and secretive executive requires a bit of digging, though, and Catz doesn't make it easy.
Shortly after joining Oracle in April 1999, Safra Catz showed her new colleagues just how influential — and unusual — her tenure would be.
Consigliere to a celebrity
Thirty executives had gathered in a conference room on the 11th floor of Oracle's headquarters in Redwood Shores, Calif., to discuss business alliances. Ellison, as is his wont, fidgeted in his seat and grew increasingly distracted, until finally he got up to leave, murmuring something about a prior engagement.
Catz immediately sprang from her chair. "Safra grabbed him by the arm," recalls one participant, "and said, 'Larry, you can't leave. This is important. And I know you have the time for this.' And he sat back down. No one else at Oracle could do that."
The other executives may not have known it at the time, but Catz had joined Oracle, whose databases and software help companies manage everything from financial reports to human resources, with a mission.
"I come from Wall Street, and you'll never see me do a PowerPoint because I'm all about Excel spreadsheets," she once said, by way of explaining why Ellison recruited her from Donaldson Lufkin & Jenrette. "If it's not in the numbers, I don't care how strategic it is, it doesn't play out."
The numbers Catz found were, in a word, unacceptable. As she recalled last year in a speech at Stanford University, the company had been growing quickly, but its operating margins had stalled around 22%. That's great for most businesses, but not in software, where marginal costs are negligible.
The problem, as Catz saw it, was that Oracle was too fragmented. "It was 70 little companies," each with its own leader, Catz told the Stanford audience. She waged war by spreadsheet against these feudal lords, who either acquiesced or found employment elsewhere.
The key was centralizing control. As an example, Catz cited the revamping of Oracle's customer-support service, a mundane yet critical cost center for all businesses. Before, Oracle offered support in soothing local accents and at tiered rates. After Catz was done crunching the numbers, all customers received 24/7 service at a single, lower price and from whichever product specialist picked up the line. "No negotiation," she said.
Catz knew enough to offer a carrot along with the stick. Business heads sliced expenses from their budgets, meaning they could focus on divisional profits and, importantly, their own bonuses. "This, amazingly, got people in line where we needed them," said Catz, chopping the air as she spoke. A year after Catz started, Oracle had eliminated $1.2 billion from its operating expenses. Margins shot up to 35% the next year and continued climbing for the rest of the decade. In Oracle's quarter that ended this past May, operating profits hit 42% of revenue. (Monopolist Microsoft (msft) made 30% margins; Oracle arch-foe SAP (sap) managed 25%.)
Catz's arrival at Oracle — her first title was senior vice president — was a source of some confusion and consternation at the company. Initially she didn't even have an office, working instead at a round table near Ellison's. "For a long time no one knew what she was there for," recalls Ray Lane, then Oracle's president.
A senior executive from the Oracle unit that sells to the federal government arranged a meeting with Catz to figure out what she did. "I'm here to help Larry," Catz said, according to an attendee. "Does that mean you're getting his laundry?" the executive responded. Catz, no one's gofer, was not amused.
"I'm here to help Larry," Catz once said. "Does that mean you're getting his laundry?" an exec replied. She was not amused.
Over time, Catz's role became more formalized. Within months of joining she was named an executive vice president, and just two years later, in 2001, Ellison placed her on Oracle's board. The board seat erased any doubt that Catz held real power at Oracle, and in 2004 she became a co-president.
Along the way she'd also serve two stints as chief financial officer and come to oversee all finance, M&A, human resources, and legal functions.
Catz's rise also coincided with the departures of top executives with CEO aspirations of their own, including Gary Bloom (later CEO of Veritas and now retired), Lane (a venture capitalist at Kleiner Perkins), and Greg Maffei (president of Liberty Media).
Over the years many executives have left Oracle and gone on to prominent roles in the tech world.
Ray Lane (FORMER PRESIDENT AND COO)
Managing partner, Kleiner Perkins
Marc Benioff (FORMER SENIOR VP)
David Roux (FORMER EXECUTIVE VP)
Co-CEO, Silver Lake
Zach Nelson (FORMER VP, WORLDWIDE MARKETING)
John Wookey (FORMER SENIOR VP)
Executive VP, SAP
Gary Bloom (FORMER EXECUTIVE VP)
Catz's title never has been particularly meaningful. Her real job is making sure the entire organization follows the policies that Larry Ellison sets.
Larry Hagewood, former CEO of a billing-software company Oracle acquired two years ago, says he wanted permission to keep paying his consultants per diems for their travel meals. But Ellison had banned per diems at Oracle, preferring employees to expense their actual costs.
"I sat down for a two-hour meeting with Safra and laid out the complete financial effect on my business," says Hagewood, who left Oracle after a year. "She fundamentally did not care. It was not the Oracle way. It was not the Larry way. And she wasn't going to change it."
This fusion of financial and operational acumen with a willingness to stubbornly enforce the CEO's vision makes Catz a singular force to be reckoned with at Oracle. Given that Ellison likes to rule from a distance — the 65-year-old spends time in Malibu, Calif., these days — the buck effectively stops with Catz.
"She's sharp, inquisitive, and doesn't suffer fools," says Timothy Chou, who formerly ran Oracle's online-software business and currently teaches at Stanford. "People would say, 'Well, Larry says,' and she'd say, 'Not to me he hasn't.' "
Making her own luck
Safra Catz was born in Israel and emigrated at age 6 to Brookline, Mass., when her father, a nuclear physicist, took a position at MIT. Her mother, a Holocaust survivor who settled first in the U.S. and then in Israel, worked as a speech therapist in public schools in the Boston area.
After graduating from Brookline High, where she overlapped with Conan O'Brien, Catz studied business at the University of Pennsylvania. The undergrad showed her fierceness by going out for the school's fencing team, despite never having picked up a foil. David Micahnik, who coached Catz, fondly recalls her "combative personality." Catz stayed at Penn for law school, though she switched to Harvard for her final year. (Her law degree is from Penn.)
Catz passed on practicing law after figuring out during a summer internship that on Wall Street the lawyers took orders from the investment bankers. Instead, in 1986 she joined DLJ in New York.
A bit of a math nerd and computer buff, Catz picked up early on the potential in the nascent software industry, an area where DLJ lacked a strong banking presence. She represented clients like Softbank, Symantec (symc), and Oracle and shrewdly attached herself to DLJ's top-rated software analyst, Scott Smith.
A workaholic who was constantly on an airplane, Catz developed a reputation as a super-diligent worker, if not a superstar, who mastered her subject matter. "Safra always thought there was more to be done. Her clients always came first," says Vince DiGiaimo, DLJ's longtime chief administrative officer. "She was always pushy, and I want to be careful how I say that. She wouldn't take no for an answer."
Though admired, her later success provokes much chin scratching among her peers from the 1980s and '90s. DLJ's stars of that era included power players such as banker Ken Moelis and up-and-coming analysts Sallie Krawcheck and Susan Decker. Competing tech bankers like Frank Quattrone and Eff Martin shepherded the top tech IPOs of the day, including Netscape and Microsoft, respectively.
Cristina Morgan, a senior banker at Hambrecht & Quist then and vice chairman of J.P. Morgan today, remarks about Catz, "I didn't say to myself, 'There's someone who's going to run a billions-of-dollars business one day.'"
Catz created her own breaks. In 1997 she requested a transfer to Silicon Valley, where she could be closer to clients. By this time Catz had married an Israeli named Gal Tirosh, who stayed at home with the couple's two young children. Catz once described Tirosh as a writer who was secure in his role as a stay-at-home dad. She reflected in a 2000 interview with Fortune how Tirosh enabled her career. "If the ops meeting runs late, I don't have to pick [my children] up at day care," she said.
Unquestionably ambitious, Catz nevertheless is the antithesis of a publicity hound. She rarely grants interviews, and then typically on the subject of Oracle. Informed this article would be about her, she declined Fortune’s repeated requests for comment, as did Ellison and other Oracle executives. Acquaintances say one reason is a strong desire for privacy. Another is Catz's disdain for the media.
When she arrived at Oracle, Catz didn't even have an office; she worked at a round table in CEO Ellison's suite.
"The press is not your friend," she told a group of Penn law students in 2008, explaining Oracle's efforts to avoid negotiating its deals in print. That's the sanitized version of Catz's opinion of the press. "If a reporter is giving you a hard time, is being unreasonable, you have my permission to tell them to go fuck themselves," she once told an Oracle public relations staffer.
Multiple theories explain Catz's aversion to exposure. Corporate publicity doesn't sell software, after all. And her training as an investment banker probably taught her to deflect attention to the client — in her case, Oracle's charismatic CEO. Catz takes this to an extreme: She appears determined never to upstage Ellison. Executives whose profiles get too high have found themselves on the outs with Ellison (former president Lane is the prime example), and Catz is making sure it doesn't happen to her.
That's not to say Catz is invisible. A sharp dresser with a Snow White bob of jet-black hair — though she wore it blond in her banker days — she regularly addresses company meetings of various sizes. She's also a staple of the company's quarterly calls with investors.
Based on interviews with dozens of people who've dealt with her over the years, she oscillates between delightfully charming and matter-of-fact dismissive. "One day she is your long-lost sorority sister," says a Valley big shot with top-level access throughout the industry. "The next day it's 'I don't know who the fuck you are.' "
Catz knows full well that the only person whose opinion matters is Larry Ellison's. The two are in constant touch. "I've had lunch with Safra where she would not take anyone's call but Larry's," says Behnam Tabrizi, an engineering professor at Stanford who has consulted for Oracle.
Their dynamic liberates the details-averse Ellison. "Safra allows Larry to work 30 hours a week but have the effectiveness of a CEO who works 100 hours a week," says a former senior Oracle executive. "Ninety-eight percent of the time she'll just do things and inform him after the fact. Two percent of the time she'll ask him what he wants."
What Catz wants for herself is anyone's guess. If she has hobbies, she doesn't blab about them at the office. She frequently hosts political fundraisers, but apparently does so in the bipartisan manner befitting the president of a company that gets a sizable portion of its revenue from the federal government. She also has shown a keen interest in Oracle's philanthropic efforts, which she oversees.
Catz certainly has reason to be thankful herself, having built a fortune unthinkable for most investment bankers. Since 2004 she has earned $27 million in cash compensation, sold Oracle stock worth $58 million, and amassed equity in the company currently worth another $67 million. Yet she remains personally frugal. A work acquaintance recently got a chuckle upon seeing Catz on a weekend shopping trip to Costco, her children in tow, like any other busy professional stocking up on her family's needs.
The dealmaking bug
In June 2003, Catz was watching CNBC on her home exercise bike when news flashed of rival PeopleSoft's agreement to merge with another software maker, J.D. Edwards. According to an account in a Harvard Law School case study, Catz e-mailed Ellison at 7:30 a.m.: "Now would be a good time to launch on PeopleSoft." Ellison replied 13 minutes later: "Just what I was thinking. Where are you?"
Thus began the transformation of Oracle — and the rest of the tech sector. Ellison had pooh-poohed acquisitions for years, judging Oracle's internal investments to be better bets. He had changed his mind that year when he publicly declared that the software industry had matured to a point where the best opportunities for growth would come through consolidation. Weeks before beginning the tortured assault on PeopleSoft — it would take Oracle 18 acrimonious months to nab its prey — Ellison had hired Charles Phillips, one of the premier software analysts on Wall Street.
With two banking-oriented co-presidents, Oracle began methodically picking off one billion-dollar-plus software company after another — Siebel and BEA were the biggest to follow PeopleSoft — as well as scores of smaller tuck-in acquisitions that made Oracle a player in business applications.
The deal for server maker Sun takes Oracle in a whole new direction, pitting the company against some of its most important hardware partners — Oracle frequently pairs its software with computer makers — especially Hewlett-Packard (hpq). Executives at rivals ranging from IBM to SAP must now factor Oracle's broadened portfolio into their strategies and plans.
The Sun deal is about far more than hardware, though. Sun makes the Java operating software that is critical to the programs Oracle, IBM, and others sell.
A Decade of Dealmaking
Since Catz's arrival in 1999, Oracle has gobbled up more than 60 companies—and not all the deals have been friendly.
PeopleSoft: $9 BILLION
Oracle launches a hostile bid and spends two years fighting for it.
Siebel Systems: $5.5 BILLION
A second big deal, it broadens Oracle's software portfolio.
BEA Systems: $8.5 BILLION
Ellison goes hostile again; this time victory takes months.
Sun Microsystems: $7.4 BILLION*
A pending deal propels the software company into hardware.
*Includes Sun's cash and debt.
SOURCE: SHEA & CO.
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Sun also owns MySQL, a low-end database product that undercuts Oracle with small customers. Controlling Java keeps it out of IBM's hands; taking over MySQL either gives Oracle a new price-point opportunity, or, ominously, allows Oracle to smother a prospective nuisance. The European Union cited this concern recently in extending its antitrust review of the deal.
With the broad strokes of Oracle's strategy set, if not completely transparent, the great unknown for its management is who would succeed Ellison should he cease to be CEO. For now, the company is a well-oiled machine. Insiders say Ellison is as engaged as he has been in years and that Catz and the affable Phillips, who heads sales as well as many of the smaller acquired companies, make for an efficient team.
"Charles is the bait, and Safra reels them in," says one careful Oracle observer, referring to acquisitions and customer engagements. Catz herself refers to the duo as classic good cop/bad cop. There's no need to wonder which role she plays.
Despite Catz's closeness with Ellison and her aggressive behavior within and without Oracle, it's actually "more likely" Phillips would get the nod if Ellison should make an unplanned exit, according to someone with a good sense of the thinking of Oracle's independent board members. (Eight outsiders sit on the board alongside Ellison, Catz, Phillips, and former CFO Jeffrey Henley, the chairman.)
Phillips, who has broad customer relationships and a likable demeanor, would be a "better bet," at least in the short term, says this person, who says succession planning is an "active process" that is far more formalized than it was only a few years ago.
Ellison has given every indication of wanting to rule Oracle for years to come. In Catz's few public pronouncements on the subject of succession, she has said she isn't interested in Ellison's job. Yet in her speech at Stanford in late 2008 she sounded quite the motivational leader and not merely the efficient corporate taskmaster.
Having just completed a successful quarter, she related how she had implored her troops not to get sloppy. "I called many of my folks together and said, 'Hey guys, this is the most dangerous moment of your lives. This is when you make big mistakes. This is where you assume you're better than you are, when you ignore the red flags because you think you're going to get over it.'"
Indeed, it would be foolish to count Catz out as a contender for the top job at Oracle simply because she's not as amiable as Phillips. After all, she's morphed careers before; she might just as easily adopt a new persona for the right opportunity. How she'd feel about being in the spotlight is a different matter.
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Research associate: Doris Burke
A version of this article appeared in the September 28, 2009 issue of Fortune magazine with the headline “The Enforcer.”