(Adds comments from Ellison, Catz, Hurd, analyst)
By Noel Randewich and Bill Rigby
SAN FRANCISCO/SEATTLE, Sept 18 (Reuters) - Larry Ellison, co-founder and leader of Oracle Corp for almost four decades, stepped aside as chief executive on Thursday, to be replaced by co-CEOs Safra Catz and Mark Hurd, but stressed that nothing at the business software company will change.
The move comes earlier than expected by many investors, and appears designed to address concerns about the company’s direction under Ellison, 70, who has been the Oracle’s only CEO in its 37-year history.
“While there was some speculation Larry could step down, the timing is a bit of a head scratcher and the Street will have many questions,” said Daniel Ives, an analyst at FBR Capital Markets. “Investors have a mixed view of Safra and especially Hurd as co-CEOs given the missteps we have seen from the company over the past few years.”
Oracle shares fell 2 percent to $40.70 in after-hours trading after it reported the management shake-up and profit below Wall Street’s average forecast, hurt by weak hardware sales.
“I‘m going to continue doing what I’ve been doing over the last several years. They’re going to continue what they’ve been doing over the last several years,” Ellison said on a conference call with analysts, referring to Hurd, 57, and Catz, 52. “Mark and Safra have done a spectacular job and I think they deserve the recognition of their new titles.”
Catz, responding to an analyst who asked what the management shuffle would mean further down the company, said nothing will change.
“I want to make sure we are very, very clear. There will actually be no changes,” said Catz. “No changes whatsoever.”
The creation of two CEO roles, which has largely been unsuccessful when tried at other companies, raises questions of how Catz and Hurd will work together at the top.
“Co-CEO structures are typically not ideal,” said Bill Kreher, an analyst at Edward Jones. “They’re both very independent thinkers who have strong wills. At times they won’t agree. But they have worked closely together, and with Ellison. We don’t see the day-to-day changing.”
Hurd stressed that Oracle was not hierarchical and also stressed a lack of change.
“We’re pretty flat in terms of the way we run the place, and we want to keep it that way,” he told the conference call.
Under the new arrangement, Ellison, who co-founded the database company that became Oracle in 1977, will become executive chairman and chief technology officer.
Manufacturing, finance and legal functions at Oracle will continue to report to Catz, while sales and service units will continue to report to Hurd. Software and hardware engineering will continue to report to Ellison.
The major difference is that Catz and Hurd will now report to Oracle’s board, rather than to Ellison himself, although Ellison is now executive chairman of that board.
Ellison will keep working full time, Oracle said in a statement. His step back from the top job mirrors his friend Bill Gates at Microsoft, who stepped down as chairman of the software giant earlier this year but remains a board member and adviser to new CEO Satya Nadella.
Raised in a rough Chicago neighborhood, Ellison built Oracle into one of Silicon Valley’s most successful technology companies, whose databases have become the technology backbones of the world’s largest corporations.
Ellison took the company public in 1986, the same year as Microsoft, with revenue of $55 million. This fiscal year revenues are expected to top $40 billion.
Through dozens of acquisitions, Ellison widened Oracle’s portfolio of business software to include tools for customer service, human resources and business intelligence, investing tens of billions of dollars to acquire PeopleSoft, Siebel Systems and other tech companies.
But in recent years, Ellison stumbled. Investors widely criticized his $7.4 billion acquisition of Sun Microsystems in 2010 after sales of Sun servers and other equipment fell after the deal.
Ellison famously mocked cloud computing as “complete gibberish” in a 2008 tirade after a Wall Street analyst asked him to comment on the new phenomenon, a broad term referring to the delivery of computer services via the Internet from remote data centers.
Since his remarks, cloud computing has become a driving force in enterprise software and Oracle is struggling to build out its own cloud offerings to catch up with smaller rivals.
Ellison, who battled big rivals IBM and SAP for most of his tenure, appeared to change his tune this year, when he called Amazon.com and Salesforce.com the company’s most immediate threat. (Reporting by Bill Rigby and Noel Randewich; Additional reporting by Alexei Oreskovic, Deepa Seetharaman and Sarah McBride in San Francisco; Editing by Dan Grebler)