Update: Less than 24 hours after writing this analysis, a tersely worded statement landed in my In box confirming that Larry Ellison had married his longtime fiancee, novelist Melanie Craft, shortly before Christmas. “We have no additional comment or detail,” stated Oracle spokesperson Jennifer Glass, beyond the basic facts.
The wedding apparently happened on Dec. 19, and Ellison and Craft spent their honeymoon yachting around the Caribbean.
The timing of the wedding announcement couldnt have been worse for Oracle, since it coincided with the management reshuffle I detail below. Some analysts will point to the wedding as even further proof, along with relinquishing the chairmans title, that Ellison plans to pull back from Oracle. I dont buy it. Larrys been married three times before, and its doubtful that this fourth wife will cause him to change his behavior much. For more details on what this all means, my analysis of the management shake-up follows.
Big news on Monday for Oracle followers: Founder, CEO and Chairman Larry Ellison gives up the chairman title and, for the first time since Ray Lane left, appoints a president. Not just one, but two!
Uninformed observers might assume that this is the first sign that Ellison, approaching 60, is about to step away completely. And who could blame him—hes a world-class sailor, lives in an amazing Japanese palace in the Woodside hills and has left a strong legacy of Silicon Valley success.
But walking away—even near the top—isnt the Ellison way. So whats really going on? I spent some time with my Oracle insiders and uncovered the real truth. Heres what happened, and why.
Jeff Henley: Oracle CFO Jeff Henley, beloved by Wall Street, was promoted to chairman of the board, replacing Ellison. Sure, this means Ellisons stepping back a bit, but its really not that big of a deal. Henley wanted to spend more time with family, but investors were nervous about this adult influence leaving the company.
Ellison and Henley were already members of Oracles five-person board. Shifting the chairman title to the 58-year-old Henley lets Oracle keep Henley around, at the same time promoting him and cutting back his responsibilities. Henley wont relinquish the CFO title until another is brought on—from outside the company. Wall Streets happy, Ellison fobs off some of the less interesting parts of his job, and Henley gets an “attaboy” for a job well-done.
Safra Catz & Charles Phillips: These two are now co-presidents, reporting to Ellison, who remains CEO. Catz will continue to run global operations, while Phillips will run field operations, sales, marketing and consulting. Ellison hasnt found anyone yet he can trust with the reins of Oracle, but in these two, hes getting close. Katz has been a valuable lieutenant for the past five years, yet Phillips is a relative newcomer—joining Oracle from Morgan Stanley last May. Catz is already on the board, and now so too is Phillips.
Although this looks like a win for both execs, the move is fraught with peril. Very few co-president roles have been successful, and my take is this one will be a cat fight to the end. Look for one of the two to take over sole ownership of the presidency within a year.
Larry Ellison: So what does it mean for Larry? Even though he owns more than a quarter of the company, he now appears to have a boss—in Henley—for the first time. But since Henley has been on the board, and the board members are still mostly loyal to Larry, thats not such a big deal. This move is more about keeping Henley, Catz and Phillips happy than anything else.
But it also signals a shift for Ellison. Although it appears to be Ellisons first step toward irrelevancy and retirement, my sources say thats just not so. The programmer who built Oracle has realized—much as Bill Gates did a few years ago—that all that corporate stuff really isnt much fun. The real challenge, for the technically savvy, is to continue to build “insanely great” products year after year (to borrow a phrase from Ellison pal Steve Jobs). Ellison hears the siren song of software development, and thats what makes him really happy. Forget investor relations, HR policy, Sarbanes Oxley and the like. Larrys earned the right to go back to the lab, and thats just where hell be. It looks like, at least for the next few years, Larry will be just as engaged. But on building new products, combating open source and expanding the technology—instead of focusing on 10-Qs, the SEC and Californias Office of IT.
Losers: Along with Henley, Phillips and Katz, Oracle has two other key senior VPs: Sergio Giacoletto, who runs Europe, Middle East and Africa; and Keith Block, who runs North American sales and consulting. With Phillips leapfrogging the two—gaining the co-presidency and jumping onto the board—my reading of the tea leaves indicates that these two execs have fallen out of favor. Whether its a minor dust-up or if both will be leaving Oracle shortly remains to be seen.
In the end, this is about three things. First, it shows that Larrys gotten over the wrenching breakup with Ray Lane and is finally ready to trust someone else in the presidential role. But by selecting two co-presidents its clear hes just dating and not ready to commit.
Secondly, Oracle had to figure out some way to keep Henley on—hes the one guy Wall Street can really trust, and has since 1991. Chairman of the board is perfect, with a reduced schedule, yet vast influence.
And lastly, it does appear Larrys giving up control—in the same way Gates turned Microsofts reins over to Steve Ballmer. At 59, hes finally starting to feel comfortable with his role as a technologist. And for Oracle, thats a good thing. With Larry as chief architect, and a strong supporting cast of business leaders around him, Oracle might just beat back its newest set of challengers—including worldwide leaders like SAP, and upstarts like OpenSQL and PostgreSQL too.