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Oracle CEO shakeup: what it means for the company

Aaron Pressman
Larry Ellison, seen here speaking at the New Economy Summit in Tokyo on April 9, 2014, has stepped down as CEO of Oracle Corporation (AFP Photo/Toru Yamanaka)

Silicon Valley icon Larry Ellison, founder and CEO of Oracle (ORCL), is “stepping down,“ screamed headlines on Thursday night. Bring forth the postmortem analyses, ready the gold watch, cue the farewell parade.

Or not – seems like there’s an awful lot less than meets the eye to this story.

Oracle’s former co-presidents, Mark Hurd and Safra Catz, who used to report to CEO Ellison, get bumped up to the titles of co-CEO, but each continues to control separate pieces of the business. Hurd, the former Hewlett-Packard (HPQ) boss, runs sales, service and global business units. Catz, formerly the CFO at Oracle, will keep her portfolio of manufacturing, finance and legal.

And Ellison himself will stick around as executive chairman of the board and chief technology officer, the one area that reported directly to him under the old structure. Nomura analyst Rick Sherlund calls Ellison's new post "pretty consistent with his longstanding role in the company."

“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,” Ellison, the third richest person in the United States, said in a statement.

Meanwhile, back in the realm of real-world finance, Oracle also reported minuscule profit and revenue growth for its most recent quarter, missing Wall Street expectations for the sixth time in the past eight quarters. Revenue increased less than 3% to $8.6 billion, and adjusted profit of 62 cents a share was just 3 cents higher than a year ago. Wall Street had been expecting $8.8 billion and 64 cents a share.

What does it do?

So what exactly does the reshuffling of titles at Oracle do to reinvigorate the business? Not much, as seen in the share price, which has slumped 4% in early trading on Friday on the weak quarterly results. The database company Ellison founded in 1977 is struggling with the huge shifts in the computing industry toward cloud-based and mobile apps that have brought its growth nearly to a halt.

Overall revenue hasn’t increased by more than 4% in a quarter since the middle of 2011, when the acquisition of Sun Microsystems the year before was making the annual comparisons easier. For the past five years, Oracle shares have gained a total of 84%, trailing the 89% increase in the S&P 500.

And unlike Microsoft (MSFT), which this year handed the reins to a cloud expert, Satya Nadalla, Oracle’s leadership changes bring no such fresh approach or energy.

Still, Oracle is focused on growing its own cloud offerings, using Ellison’s favored strategy of acquiring smaller players, such as recent deals for MICROS Systems, a provider of cloud software for hotels and restaurants. Revenue from three major cloud segments (infrastructure, software and middleware), increased 31% in the most recent quarter but, at $475 million, remains a tiny portion of the overall picture.

That rate of growth is comparable to cloud competitors such as Workday (WDAY) and Salesforce.com (CRM), where revenue increased 74% and 38%, respectively, in their most recent quarters.

The question remains whether the Ellison-Hurd-Catz triumvirate team can build that nascent cloud business into the titan Oracle was in the old world of desktop computers and corporate servers.

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