Oracle Shifts Exec Lineup

Oracle's executive-team changes raise questions about the company's future.

Changes in Oracle Corp.s executive lineup are adding a new note of uncertainty about the direction in which the worlds second-largest software developer is heading and causing concern among some large customers and investors.

The database and enterprise applications developer last week announced that Chief Financial Officer Jeff Henley was assuming the role of chairman from Oracles charismatic founder, Larry Ellison, who will remain CEO. The Redwood Shores, Calif., company also promoted two senior vice presidents, Safra Catz and Charles Phillips, to share the position of president. Henley will continue as CFO until a replacement is found.

The timing of Oracles executive shift was seen by some observers as a positive move in the companys battle to buy applications rival PeopleSoft Inc., given that the primary architects of the deal—Henley, Catz and Phillips—remain in place.

One large customer of Oracle applications saw the move to separate the board chairman from operations as a positive development. "That ability to separate focus on stock prices from customer relations and product direction is a positive step," said Bill Streb, manager of Oracle strategy, platform and projects at Xerox Corp., in Stamford, Conn. "That really was balled up in one person. Any one of those is more than a full-time challenge, and to try and share all three has been very, very difficult [for Oracle]. At times they appear to be slightly adrift on focus. They would get capabilities in place but not quite enough to do business.

"With separating the three jobs—chairman, CEO, president—youll now have people that can be more thorough, and the customers will be the benefactor," Streb said.

But the selection of Henley to lead the board upset some institutional investors.

"This makes absolutely no sense. ... The [chairman] should be an independent outsider, so [naming] an insider doesnt really do anything to enhance a shareholders interest or enhance the boards oversight of management," said Cynthia Richson, corporate governance officer at Ohio Public Employees Retirement System, which owns 7.7 million Oracle shares. "The other thing is that I understood that none of Mr. Ellisons responsibilities would change, so this is more of a cosmetic change as opposed to true governance."

Oracle database user Steve Vandivier, president and CEO of Avanco International Inc., in McLean, Va., applauded the move to put a great deal of responsibility on Henleys shoulders—a trusted presence on Wall Street and a stabilizing force at the company.

However, some users, such as Lucas Lukasiak, president of the Connecticut Oracle Users Group, said it remains to be seen whether Oracles new leaders can pinpoint the best long-term strategic paths for Oracles products. "If I were making a five- to 10-year investment in any new [Oracle] technology, I would want to see how this plays out a little first," said Lukasiak, in Hartford, Conn.

Many observers noted that Ellison elevated Catz and Phillips, who both came to Oracle from Wall Street, over other senior executives with more technology expertise. Xeroxs Streb, for example, was unaware of Catzs and Phillips specific backgrounds but said putting a president in place who does not have a technology background was disconcerting. "I feel comfortable that financial stability will be maintained by those individuals and they will continue to recognize the need to add solutions to customers that maintain the revenue stream, but I dont understand how they would bring product perspective," Streb said.