(Bloomberg) -- Oracle Corp.’s Larry Ellison stepped down as chief executive officer of the software maker he founded, making way for a new generation of executives after one of the most profitable runs for a leader in business history.
Mark Hurd and Safra Catz, currently co-presidents of Oracle, were both named CEO to succeed Ellison, the company said today. Hurd will run sales, marketing and strategy, while Catz will remain chief financial officer and oversee legal and manufacturing operations. Ellison will become chairman, replacing Jeff Henley, and also take on the title of chief technology officer.
Ellison, who turned 70 last month, guided the Redwood City, California-based company for more than 35 years to make it the world’s largest database-software company and one of the biggest providers of business programs. Oracle’s products have become the backbone of modern commerce and industry. The company has a market capitalization of more than $185 billion and produces annual revenue of $38 billion.
Ellison’s departure as CEO also signals a broader changing of the guard in the technology industry, as a generation of founder-CEOs who ushered in the personal-computer and business- software era leave their posts. Ellison, who co-founded Oracle in 1977 and has run the company ever since, rose alongside Apple Inc.’s Steve Jobs and Microsoft Corp.’s Bill Gates. Oracle went public on March 12, 1986, a day before Microsoft held its initial public offering.
Oracle’s shares slipped in extended trading after increasing less than 1 percent to $41.54 at the close in New York. The stock is up 8.6 percent this year, compared with an 8.8 percent gain in the Standard & Poor’s 500 Index.
Ellison is leaving the day-to-day operations of Oracle at a time when the software industry he helped champion has been disrupted by the rise of cloud-computing technologies. Oracle’s core business has been selling software designed to run on gear owned by the customer, and by charging a license fee. New cloud technologies let companies rent software without having to invest in equipment or commit to a license.
Oracle’s sales growth has clocked in at less than 5 percent for 11 of the past 12 quarters. The company has struggled to sign up new customers and has turned to selling more hardware and industry-specific technologies to existing customers.
Oracle today reported fiscal first-quarter earnings that fell short of analysts’ estimates, with revenue up 2.7 percent to $8.6 billion and profit before certain costs of 62 cents a share. On average, analysts projected profit of 64 cents on revenue of $8.78 billion, according to data compiled by Bloomberg. Oracle also said it would buy back $13 billion in stock.
The company forecast profit excluding items of 66 cents to 70 cents a share for the fiscal second quarter, which ends in November. That missed analysts’ average estimate of 74 cents. Oracle projected revenue will be flat to up 4 percent.
Ellison remains Oracle’s largest shareholder, holding 1.1 billion shares, or 25 percent, of the company. The next largest shareholder is BlackRock Inc., with a 4.2 percent share, according to data compiled by Bloomberg.
Ellison in a conference call today played down the risks posed by cloud computing to Oracle’s business. He said the company would become larger and more profitable and that customers would pay more as Oracle offers more products.
He also said that he, Catz and Hurd have worked “well” with one another in the past few years and emphasized that would continue and he would remain involved.
“They deserve the recognition, they deserve the CEO title,” he said of Catz and Hurd. “I’m going to continue doing what I’ve been doing over the past several years.”
Michael Boskin, Oracle’s presiding director, said in a statement that Ellison had made it clear “he wants to keep working full time and focus his energy on product engineering, technology development and strategy.”
In the conference call, Catz and Hurd also said changes would be minimal to none in how the leadership changes would affect the rest of the company.
“There will actually be no changes, not no significant changes,” Catz said.
Hurd echoed the sentiment, saying, “We’re pretty flat in terms of the way we run the place, and we want to keep it that way.”
Brent Thill, an analyst at UBS AG, said the executive changes aren’t surprising because the top three people at Oracle essentially remain unchanged.
“There’s been a very clear division of labor for many years,” Thill said.
During his run helming Oracle, Ellison became the seventh- richest person in the world, with a net worth of about $46 billion, according to the Bloomberg Billionaires Index. Ellison flaunted his wealth, building a sprawling Japanese-inspired home in Silicon Valley, scooping up large swaths of land in Malibu and making a splash in 2012 when he bought the Hawaiian island of Lanai. He’s also well known for yachting exploits and sponsored the team that won the America’s Cup last year.
One of the strategies Oracle mastered during Ellison’s tenure was the art of binge acquisitions. Oracle has bought dozens of companies over the years, with Ellison sometimes making huge deals to wipe out competitors.
That included the 2005 purchase of PeopleSoft Inc. for $10.3 billion. The deal was a hostile battle that involved warnings that Oracle would cut thousands of employees and even threats of violence against the PeopleSoft CEO, Craig Conway, and his dog. More recently, Oracle in June agreed to buy hospitality software maker Micros Systems Inc. for around $5.3 billion.
Hurd, 57, joined Oracle as president in 2010 from Hewlett- Packard Co., where he was CEO for four years. He left after investigations into allegations of sexual harassment found inaccurate expense reports filed by Hurd or in his name. Upon Hurd’s departure from Hewlett-Packard, Ellison upbraided the company’s board, writing in a letter to the New York Times that “the HP board just made the worst personnel decision since the idiots on the Apple board fired Steve Jobs many years ago.”
At Oracle, Hurd has taken charge of sales and spends much of his time meeting with customers and overseeing the company’s corporate direction.
Catz, 52, joined Oracle as executive vice president in 1999 and became the president in 2004. Before Hurd’s arrival, she was regarded as the natural successor to Ellison. Catz, who earlier in her career worked as an investment banker, has moved around different parts of the company and shied away from the limelight. She is also a lecturer in accounting at Stanford University’s Graduate School of Business, where she co-teaches a course on mergers and acquisitions.
Catz becomes the 25th female CEO in the S&P 500 Index. She is the fourth to start her CEO role this year, after General Motors Co.’s Mary Barra, Reynolds American Inc.’s Susan Cameron and Ross Stores Inc.’s Barbara Rentler.
Oracle’s new leadership arrangement may not be well received by investors. While Hurd and Catz have worked alongside each other for four years, neither executive is short on ego or afraid to voice opinions.
“That kind of structure is not optimal,” said Scott Kessler, an analyst at S&P Capital IQ. “At the end of the day, they’re responsible for their kind of parts of the organization, but one wonders from a strategic perspective who makes the ultimate decision.”
--With assistance from Cecile Daurat in Wilmington.
Register or login for access to this item and much more
All Information Management content is archived after seven days.
Community members receive:
- All recent and archived articles
- Conference offers and updates
- A full menu of enewsletter options
- Web seminars, white papers, ebooks
Already have an account? Log In
Don't have an account? Register for Free Unlimited Access