Scott McNealy, Chairman and CEO of Sun Microsystems

This is a partial transcript from Your World with Neil Cavuto, May 19, 2003, that was edited for clarity. Click here for complete access to all of Neil Cavuto's CEO interviews.

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NEIL CAVUTO, HOST: These next guys make Oprah money look like chump change. Together, they’re kind of like the GDP of most Latin American countries, particularly Oracle Corporation’s Larry Ellison, California’s richest man and the sixth richest overall, according to Forbes. And that’s despite the fact that both he and fellow industry heavyweight Scott McNealy of Sun Microsystems have seen their stocks tumble. That has not stopped them from teaming up and giving the industry’s ultimate kingpin, Bill Gates, a run for his money. With me now to explain their venture and the state of their high tech world, Oracle’s Larry Ellison and Sun Microsystems’ Scott McNealy.

Welcome, gentlemen. Good to have both of you.

SCOTT MCNEALY, CHMN. & CEO, SUN MICROSYSTEMS (SUNW): Hey, it’s good to be here. He’s Batman, I’m Robin.

(LAUGHTER)

CAVUTO: Without the outfits.

LARRY ELLISON, CHMN. & CEO, ORACLE (ORCL): Hi, Neil, how are you?

CAVUTO: Good.

Larry, I would like to begin with you on whether this is an assault on Bill Gates, is it?

ELLISON: Well, we are trying to deliver highly reliable, high performance computing in a new low cost form. So, sure, every time we introduce a new and better product, we are trying to take share away from our competitors. So it is an assault on Bill up in Seattle, and the boys in New York and everybody else.

CAVUTO: I want to get to Scott in a second, but you raised a lot of headlines not too long ago, Larry, when you said on one occasion, we think a thousand Silicon Valley (search) companies need to go bankrupt. You had earlier said, it is not coming back, referring to Silicon Valley. The industry is maturing, we will never see what it once was. So in this environment who are you going to win over?

ELLISON: Well, companies are watching every dime, every dollar that they spend. And they are very concerned about the their IT budget. And they would like to see their IT budget come down. But they don’t want to give up security. They don’t want to give up high performance. And we think the Sun-Oracle combination allows them to keep high performance, keep their highly secure environment. But pay less for computing.

CAVUTO: Scott McNealy, Ed Zander, your former president, is now with the Silicon Valley investment firm, Silver Lake Partners. is he up to something?

MCNEALY: Yes. I think he got bored with the doing nothing. So I think he is up to work.

CAVUTO: All right. But that is a takeover firm, really. He is not setting his sights on you, or helping someone set their sights on you, is he?

MCNEALY: You will have to check in with him on that one. I think he is done with Sun.

CAVUTO: OK. All right. The reason why I ask is that whether this effort today with that guy sitting next to you is a means by which on your own you can boost shareholder value, because others think it is going to have to come at the behest of a takeover?

MCNEALY: You know, I think that both of us have huge upside opportunity. There is a massive amount of complexity out in the marketplace. There is a massive amount of integration that customers have to do. And Oracle and Sun are going to go do that R&D integration, that collaboration, bringing things like the collaboration suite from Oracle together with the Star Office, bringing our developer communities together, bringing the Oracle rack environment and all of the database and commerce and apps and collaboration software onto all three key platforms, Solaris on SPARC, Solaris on X-86, and Linux on X-86. We’ll do all of that R&D.

CAVUTO: Even in this environment, Scott? I mean, if the guy sitting next to you is right, this is still a dicey environment. You’re going to have to tempt people that this is worth the expense and worth the initiating. Is it?

MCNEALY: It is especially important in this environment because they can’t afford to do all this integration. They can’t afford to have their own V.P. of Linux kernel release engineering and database, integration application, environment, whatever. And we’re going to do that work for them and provide them a complete, workable system so that they don’t have to spend that money. And then we’re going to run it on low-cost X-86 hardware, high-end super high performance, high availability SPARC architectures with their entire suite. And they won’t have to do that integration.

CAVUTO: Larry Ellison, let me ask you, I know you are asked this a lot, about your wealth, and you probably get tired of these questions. But right now you are worth at least, depending on what you read, about $16 1/2 billion, that’s down from 23 billion a year ago, do you count that? Do you look at that?

ELLISON: Well, yes, when I was worth 23 billion I would eat out a lot more.

(LAUGHTER)

CAVUTO: So you don’t pay attention that it is down 7 billion?

ELLISON: I am a man of modest needs. I can live on a few billion dollars.

CAVUTO: OK. Just a few yachts then. And the reason I mention money or what - you are one of the investors in this Silver Lake along with people like Michael Dell and Jim Clark, Bill Gates. Do you know whether, again, that guy sitting next to you is takeover bait?

ELLISON: Well, you know, the Silver Lake Partners, when they were formed, they were formed with a fellow by the name of David Roux, who used to work for me at Oracle. So maybe he is looking at both of us.

MCNEALY: Yes, you think?

ELLISON: Which is fine as long as he pays top dollar.

MCNEALY: In cash, cash.

CAVUTO: In cash, right. I’ll open this up to either of you, but this environment today, IBM’s chairman not too long ago saying he sees some promising signs of recovery worldwide, I’m paraphrasing there, but I think that is the gist of what he had said. Intel had given signs as well that it saw improvement abroad, although not double-digit growth, certainly improvement. Where do you guys stand on technology right now, and whether given the run-up prior to today in the Nasdaq, what, about 38-40 percent from its lows, that this is real this time, is it?

ELLISON: Well, I would say that you can have a small number of winners and a large number of losers because we are going through a consolidation phase in our industry, this happened in the railroad industry. It happened in the automobile industry. It happened in the PC industry. There used to be 500 PC companies in the United States. There are going to be very few winners. And we think that Oracle and Sun are among them, very few survivors, Oracle, Sun among them. IBM is clearly going to survive. Microsoft is going to survive. But it is a very short list. And there will be a lot of other companies that just vanish.

CAVUTO: Scott, do you agree with that?

MCNEALY: Absolutely. You know, I think there will be lots of little, tiny start-ups that will get absorbed into the big infrastructure players, the big enterprise players that have the global reach, the global service and support capabilities that have the big brands and that have lots of cash. It doesn’t hurt to have $5 1/2 billion of cash in the bank and been cash flow positive for 34 straight quarters through the ups and downs. And Oracle is another cash machine. I think you have got to follow the cash in this world. And you will see a lot of little start ups get started up and then they will go out of business or they will get bought and absorbed into the larger infrastructure organizations.

CAVUTO: All right. Scott McNealy, Larry Ellison, gentlemen, thank you both very much, appreciate it.

MCNEALY: Thank you.

ELLISON: Thanks, Neil.

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