Tuesday, September 7, 2010

Oracle Corp.: A Transition Near the Top

Why this is interesting? It is the strategy that we where implementing at Oracle in Australia in 1999. Most of Australia had already purchased pretty much every piece of software to run their enterprise and we needed to focus on verticals solutions and on customers rather than technology to add value and retain the customers.


North America Equity Research
Oracle Corp.: A Transition Near the Top - ALERT

Oracle announced the resignation of co-President Charles Phillips and the hiring of new co-President Mark Hurd, who was recently with HP. Mr. Hurd will essentially be assuming the functional roles of Mr. Phillips, with Sales & Marketing and vertically focused business units (vertical applications) reporting to him. Mr. Hurd will also have Support report to him
• Exit Mr. Phillips. We believe Mr. Phillips’ tenure at Oracle exceeded the expectations of many observers when he left a sellside analyst job over seven years ago to become an executive at the company. While his intellect and work ethic were never in question, a dearth of operational experience, especially at the level he entered Oracle, caused many to pause. In hindsight, we believe that Mr. Phillips was very influential in streamlining a bloated marketing organization at Oracle, and (along with other senior sales management) also helped to bring a new customer focus to the company. He also was instrumental in a new strategy to focus on vertical applications as new markets unto themselves, but also as a way to further penetrate the horizontal ERP and CRM application spaces, while also helping to boost technology sales. We wish Mr. Phillips well in his future endeavors.
• Enter Mr. Hurd. Mr. Hurd’s success at first Teradata, then parent NCR, and more recently at technology behemoth Hewlett Packard is legendary, as is his recently, well publicized exit of that latest role. It is our understanding that Mr. Hurd will assume the responsibilities vacated by Mr. Phillips (along with Support oversee), which is not necessarily aligned with our impression of his strengths. We view Mr. Hurd as a very hard-driving proponent of optimizing operational efficiencies. This is a function that we believe has been impressively spearheaded by co-President Safra Catz at Oracle.
• Our Assessment. Mr. Hurd is undoubtedly a talent whose efforts would benefit many companies, including Oracle, in our opinion. While the integration and operations of the recently acquired Sun assets appears to be going well, Mr. Hurd’s hardware experience can only help and may be exactly what Oracle can use at this time. Oracle’s recent push to provide incremental value through the combination of hardware and software into a single product (Exadata) is something he has successfully accomplished at Teradata. As far as any potential conflict with Ms. Catz (given similar strengths), we assume his hiring implies that she approved, and we do not expect this to become an issue beyond healthy banter within the executive ranks. Furthermore, we do not believe that this transition will materially affect the roles of what we view as the two most important executives at Oracle at this time – Mr. Ellison and Ms. Catz. In addition, our assessment is that Sales operations have largely been run by very able sales management at this time, which mitigates any risk related to this issue. Finally, we view the hiring of Mr. Hurd as opportunistic given recent events at HP, and do not believe this implies any near term succession planning, though it does bring someone into the fold that has a proven record of leading a large technology company.

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