Larry Ellison talks to Karlin Lillington in Valencia about the aggressive takeover of PeopleSoft, Ireland and what lies ahead for one of the world's leading software companies.

Larry Ellison doesn't like losing. "The complete, crushing finality of defeat. It's really devastating," he says, making a pained face.

But the founder and chief executive of database and enterprise software company Oracle, sitting at a long teak table on one of the numerous decks of his 452-foot yacht Rising Sun (the largest personal yacht in the world), isn't talking about the rough and tumble of the business world, where he recently led a dogged and aggressive takeover of rival PeopleSoft.

He's talking about sports, and more specifically, sailing. Dressed in khakis and a blue and cream team polo shirt, he is fresh from two gruelling back to back, hours-long races in his sleek carbon-fibre hulled boat with his 17-strong Oracle BMW Racing Team, yet an observer might guess he'd spent a relaxing day in his spa two decks down.

Ellison, who officially has been the second richest man in the world and who briefly deposed Bill Gates from the number one position (Oracle's shares were up; Microsoft's, down), ranks 10th in the United States now and 12th worldwide with a personal fortune worth $10.7 billion (€8.85 million).

In other words, more than enough to fund his passion for sailing and yachts, which has seen him win the Maxi-World Championships three times with another boat, Sayonara, and take the number two slot in the last America's Cup race.

He is in Valencia as part of a three-year set of qualifying races that preface the next America's Cup in 2007.

Rising Sun, with its discreet staff (also in cream and khaki), is of another magnitude entirely, a low-slung floating hotel. In length, she is longer then a football field; her décor is tasteful, comfortable teak and fabric armchairs and sofas, Japanese style interiors, a grand piano here, a table to seat 24 there, the kind of opulent simplicity extreme wealth and taste can buy. Few outsiders have seen her up close, except the kind of guests a billionaire invites to come sailing (Bill Clinton is currently a favourite pal, says Ellison).

"The thing about sports that is so different from business is that when you lose, it's over. You've lost! It's over!" He laughs. Business is more "like a marathon that never stops", he says.

He says the two most notable trends in business in the past five years have been "inflation and the explosion of the tech bubble. A great many more companies than were needed were created, and there were some spectacular failures.

"But it's not the worst bubble I've ever seen," he says, which he believes was the Japanese property bubble.

"This is twice in a 10-year period you saw markets make mistakes of this magnitude," he muses. More pain lies ahead, says the man who believes less (at least in terms of companies) is more in the software industry. "We're going to go through even more consolidation."

That doesn't mean fewer ideas or less new technology, he says: "It's just that for every new idea, there won't have to be a company around that idea." Ellison is a big believer in the doctrine of consolidation and in a big company ecosystem, and finds the consolidation phase of any industry "fascinating". And yes, he thinks the software industry is going through such a phase and intends to make Oracle one of the major consolidators, not just through big ticket purchases such as PeopleSoft, but smaller acquisitions such as those that have peppered Oracle's press releases in recent weeks: TimesTen, MatchPoint.

However, the company's acquisition strategy and the uncertain payoff for shareholders is expected to dampen its share price despite expectations of strong results next week from Oracle, several analysts have said. Some fear another PeopleSoft-sized acquisition might be on the cards as well.

Nonetheless Ellison insists, "The secret to the software business is scale."

Asked if Oracle is considering a bid for rival German company SAP - which Oracle has targeted in its current "SAP OFF" advertising campaign to lure SAP users to Oracle, while SAP in turn has begun a verbal offensive against Oracle - Ellison laughs. "Yeah, like the anti-trust people are going to let the world's number two company [ Oracle] take over the number three company [ SAP]," he says.

He warms to a discussion of SAP - a long standing rivalry even at the level of yacht-racing. SAP's co-founder and former CEO (and current board member) Hasso Plattner also races, once famously mooning Ellison and the Oracle racing team after a race, from his boat Morning Glory, and Ellison takes a wicked pleasure in running through all the details.

He also enthusiastically discusses the role of education in entrepreneurial success - which he, a college drop-out like fellowbillionaires Bill Gates, Paul Allen and Michael Dell, thinks is about zilch. "Our education awards a certain degree of conformity that's not very useful in business," he says.

"It's no surprise that many entrepreneurs leave college to start companies. I'm sure Galileo would have flunked his astronomy course."

Europe's old style, job-protecting labour laws also work against entrepreneurs and businesses, and hence inward investment, he says. "I think it's no surprise that the UK has low unemployment and Germany, France and Italy have high unemployment."

He does understand the social intent of such laws, "but it makes it difficult for us to hire in those countries. And the more protected the labour market and the economy, the more horrific globalisation looks. It's a non-trivial problem and the source of one of the fractures in the EU right now."

What about Ireland? Would the growing costs to do business in the Republic cause Oracle to reconsider its 900 jobs based here?

"Ireland's economy is rocketing - it's the fastest growing economy in the EU. We have to pay more raises there because we have higher turnover there than elsewhere - because there are a lot of other good jobs in the country! We were attracted first by the tax breaks and the lower cost of labour. We still get a low cost and highly skilled labour force there. We're definitely not going to shut down the Irish operation," he laughs. "In terms of growth now, there's a lot going into Romania, the Czech Republic, Hungary. We keep an eye on all of those."

Overall, Europe remains extremely important to Oracle. "It's the largest market for our software. And I think Europe is doing quite well, but you're in transition, and transitions are painful."

He isn't worried about the US economy, he says, not even the huge budget deficit. "I think the economy is doing well. No, I'm not worried about the budget deficit versus GDP if you look at profit growth," he says.

"Tax receipts are up 17 per cent. Lots of people criticized Bush's tax cuts, but he slashed taxes and tax receipts are up 17 per cent."

Could there be another tech bubble? "Certainly not anything on the scale we saw." What would it be driven by? "A short memory," he quips, and laughs.

Given the time spent racing yachts (he also enjoys playing the piano, classical guitar, tennis and basketball), does the sailing not intervene with running the second largest software company in the world? "I spend a lot more time on my company than I do on my boat," he says - he notes that he also funds the entire America's Cup venture from his own pocket.

"The most important thing to me is my family [ he is married to romance novelist Melanie Craft, whose recent novel Man Trouble is about a romance writer who tries to seduce a billionaire]. Then my company, then my hobbies."

Would he have liked to have done things differently? "In my whole life? Yeah! How much time have you got," he laughs. "We joked in Oracle about having a company humility day when you could feel sorry for things you've done. But I've got a reasonable number of things right."

OK, then, what's it like to be one of the most powerful men in the technology world? "I don't think of itas having power. I think of it as being very lucky. I get to spend a lot of time with interesting people. I get to sail boats. And I really enjoy running Oracle."