Oracle Corp.'s Larry Ellison stepped down as CEO of the software maker he founded, making way for a new generation of executives and ending 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 replace Mr. Ellison, the company said today. Mr. Hurd will run sales, marketing and strategy, while Ms. Catz will remain chief financial officer and oversee legal and manufacturing operations. Mr. Ellison will become chairman, replacing Jeff Henley, and also take on the title of chief technology officer.
Mr. Ellison, who turned 70 last month, guided the Redwood City, Calif.-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.
Mr. 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. Mr. 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's shares fell in extended trading after increasing less than 1% to $41.54 at the close in New York. The stock is up 8.6% this year, compared with an 8.8% gain in the Standard & Poor's 500 Index.
Beyond database software
Mr. Ellison is leaving the day-to-day operations of Oracle at a time when the software industry he helped promote 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 been less than 5% 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.
Over the past two-and-a-half years, Oracle has also spent a reported $3 billion dollars buying up marketing-technology companies and has begun targeting chief marketing officers as it looks to move beyond database software.
In fact, there's been a veritable arms race among Oracle, IBM, SAP and Adobe to buy up companies that work with marketers. And while many of them have very nice individual offerings, integration is still a work in progress. That's where Mr. Ellison expects to win: by leveraging Oracle's size and its considerable financial resources to make a seamless offering.
"Putting all of those pieces together is our strategy," Mr. Ellison told Ad Age in an article that ran earlier this week.
The CMO is just part of the equation. "Our whole strategy is to have this suite that spans marketing, sales, service, all the customer engagements," Mr. Ellison said.
Oracle today reported fiscal first-quarter earnings that fell short of analysts' estimates, with revenue up 2.7% 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.
Mr. Ellison remains Oracle's largest shareholder, holding 1.1 billion shares, or 25%, of the company. The next largest shareholder is BlackRock Inc., with a 4.2% share, according to data compiled by Bloomberg.
In a statement, Mr. Ellison emphasized there would be continuity at Oracle and that he would remain involved.
"Safra and Mark will now report to the Oracle board rather than to me," he said. "All the other reporting relationships will remain unchanged. The three of us have been working well together for the last several years, and we plan to continue working together for the foreseeable future."
Michael Boskin, Oracle's presiding director, said in the statement that Mr. Ellison had made it clear "he wants to keep working full time and focus his energy on product engineering, technology development and strategy."
One of the strategies Oracle mastered during Mr. Ellison's tenure was the art of binge acquisitions. Oracle has bought dozens of companies over the years, with Mr. 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 for $5.3 billion.
Mr. 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 Mr. Hurd or in his name. Upon Mr. Hurd's departure from Hewlett-Packard, Mr. 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, Mr. Hurd has taken charge of sales and spends much of his time meeting with customers and overseeing the company's corporate direction.
Ms. Catz, 52, joined Oracle as executive VP in 1999 and became the president in 2004. Before Mr. Hurd's arrival, Ms. Catz was regarded as the natural successor to Ellison. She 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.
The unusual leadership arrangement may not be well received by investors. While Mr. Hurd and Ms. Catz have worked alongside each other for four years, neither executive is short on ego or afraid to voice opinions.
--Bloomberg News, with contributions from Alex Kantrowitz