Larry Ellison, co-founder and leader of Oracle Corp
for 37 years, stepped aside as chief executive officer on Thursday, to
be replaced by co-CEOs Safra Catz and Mark Hurd, raising questions about
a job-sharing arrangement that has had a fraught record elsewhere.
Ellison and the two new co-CEOs each stressed that nothing would change
under the new management structure, with Ellison staying on as
executive chairman and chief technology officer.
But Oracle
shares fell 2% to $40.70 in after-hours trading after it reported the
management shake-up and that profit had fallen below Wall Street's
average forecast, hurt by weak hardware sales.
The move immediately attracted criticism from management experts.
"In almost all cases, these co-CEO configurations are a jerry-rigged
solution to a political problem," said Jeffrey Sonnenfeld, a professor
at Yale School of Management.
The move comes earlier than
expected by many investors, and appears designed to address concerns
about the company's direction under Ellison, 70, who co-founded the
database company that became Oracle in 1977 and has been Oracle's only
CEO.
"While there was some speculation Larry could step down,
the timing is a bit of a head scratcher and the Street will have many
questions," said Daniel Ives, an analyst at FBR Capital Markets.
"Investors have a mixed view of Safra and especially Hurd as co-CEOs
given the missteps we have seen from the company over the past few
years."
On a conference call with analysts, Ellison said, "I'm
going to continue doing what I've been doing over the last several
years. They're going to continue what they've been doing over the last
several years," referring to Hurd, 57, and Catz, 52. "Mark and Safra
have done a spectacular job and I think they deserve the recognition of
their new titles."
Catz and Hurd echoed that mantra on the call.
"I want to make sure we are very, very clear. There will actually be no changes," said Catz. "No changes whatsoever."
For his part, Hurd stressed that Oracle was not hierarchical. "We're
pretty flat in terms of the way we run the place, and we want to keep it
that way," he told the conference call.
The creation of two
CEO roles, which has largely been unsuccessful when tried at other
companies, raises questions of how Catz and Hurd, both strong
personalities, will work together at the top.
"Co-CEO
structures are typically not ideal," said Bill Kreher, an analyst at
Edward Jones. "They're both very independent thinkers who have strong
wills. At times they won't agree. But they have worked closely together,
and with Ellison. We don't see the day-to-day changing."
The
two have very different histories. Catz, trained in finance and law, was
a Wall Street banker from 1986 until she joined Oracle in 1999, and has
been a central figure in Oracle's many acquisitions.
Sales-oriented Hurd spent 25 years at computer and ATM pioneer NCR Corp
before joining Hewlett-Packard, where he was CEO from 2005 until 2010,
when he resigned in the wake of sexual harassment claims by a female
contractor. HP concluded that its harassment policy had not been
violated but that Hurd had made inaccurate expense claims concealing
entertainment for the contractor. He was courted by Ellison and joined
Oracle later that year.
Stepping back, but still present
Under the new arrangement, manufacturing, finance and legal functions
at Oracle will continue to report to Catz, while sales and service units
will continue to report to Hurd. Software and hardware engineering will
continue to report to Ellison.
The major difference is that
Catz and Hurd will now report to Oracle's board, rather than to Ellison
himself, although Ellison is now executive chairman of that board.
Ellison will keep working full time, Oracle said in a statement. His
step back from the top job mirrors Bill Gates at Microsoft, who stepped
down as chairman of the software giant earlier this year but remains a
board member and adviser to new CEO Satya Nadella.
Ellison has
recently been edging back from his role as the face of Oracle. Last
year, he skipped a quarterly conference call to be out on the water to
watch his Oracle Team USA compete in sailing's America's Cup, and he
also skipped his widely followed keynote speech at Oracle's OpenWorld
conference as the regatta got down to its nail-biting final races.
But he promised to appear on the company's quarterly earnings calls
with analysts. "You'll have to wait a little while longer before you get
me off the calls," he told analysts on Thursday. "I apologize to
everyone for that."
Marc Benioff, CEO of Oracle competitor Salesforce.com, commented on Twitter that Ellison will remain in power.
"There always has been, & always will be, one CEO at Oracle," Benioff tweeted in reaction to the news.
Rags to riches
Raised in a rough Chicago neighborhood, Ellison built Oracle into one
of Silicon Valley's most successful technology companies, whose
databases have become the technology backbones of the world's largest
corporations.
Ellison took the company public in 1986, the same
year as Microsoft, with revenue of $55 million. This fiscal year
revenues are expected to top $40 billion.
Through dozens of
acquisitions, Ellison widened Oracle's portfolio of business software to
include tools for customer service, human resources and business
intelligence, investing tens of billions of dollars to acquire
PeopleSoft, Siebel Systems and other tech companies.
But in
recent years, Ellison has stumbled. Investors widely criticized his $7.4
billion acquisition of Sun Microsystems in 2010 after sales of Sun
servers and other equipment fell after the deal.
Ellison
famously mocked cloud computing as "complete gibberish" in a 2008 tirade
after a Wall Street analyst asked him to comment on the new phenomenon,
a broad term referring to the delivery of computer services via the
internet from remote data centers.
Since his remarks, cloud
computing has become a driving force in enterprise software and Oracle
is struggling to build out its own cloud offerings to catch up with
smaller rivals.
Ellison, who battled big rivals IBM and SAP for
most of his tenure, appeared to change his tune this year, when he
called Amazon.com and Salesforce.com the company's most immediate threat
Samsung on Tuesday brought to India its new wearable device, the Gear
S. Priced at Rs 29,500 and expected to sell at Rs 29,000, the
smartwatch will give a premium option to those who want to own a
wearable.
The Gear S, which will now come with a curved AMOLED screen and will be
able to live a unfettered life thanks to inbuilt 3G and Wi-Fi
connectivity.
