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Oracle co-founder Larry Ellison steps aside

Last updated on: September 19, 2014 09:26 IST

Larry EllisonLarry 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 per cent 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 apologise 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 centres.

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.

Image: Larry Ellison; Photograph: Justin Sullivan/Getty Images

(Additional reporting by Alexei Oreskovic, Deepa Seetharaman and Sarah McBride in San Francisco, Supantha Mukherjee in Bengaluru)

Noel Randewich and Bill Rigby in San Francisco/Seattle
Source: REUTERS
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