Last Thursday, former two-time college dropout Larry Ellison, now the world's fifth richest man, announced he was immediately resigning from his CEO position at Oracle (ORCL). The company, which he founded 37 years ago, has established itself as the premier business solutions provider since the late 1970s. However, in recent years, Oracle has struggled to adapt to the rapid expansion of cloud storage and evolving digital business infrastructure demands. Critical analysts blamed Ellison's extravagant lifestyle as the reason for Oracle's slowed growth, while others remained confident in his abilities. Regardless, investors are now left wondering, “how will Ellison's resignation effect Oracle's future?"
Firstly, it's important to examine Ellison's tenure as CEO, irrespective of Oracle's recent struggles. Ellison originally co-founded the company in 1977, with Bob Miner and Ed Oates, guided by the goal of developing a digital database system for businesses compatible with IBM’s existing product(s). After discovering that IBM would maintain the secrecy of its database program error codes, Oracle immediately targeted IBM as its main competitor (starting a feud that exists to this day). Oracle's business database products quickly grew in popularity, as it was one of a few developers offering "small" and reliable tech solutions. Ellison monetized these early digital databases to transform Oracle into a massive business conglomerate. Since 2004, Oracle has acquired a number of companies through buyouts (some quite hostile), including: PeopleSoft, Siebel Systems, BEA Systems, and Sun Microsystems (the creators of the Java program language).
With success comes fortune. As an individual, with a net worth of $46 billion, Ellison has developed a reputation as one of the most extravagant billionaires on Wall Street. Ellison notoriously purchased a 98% ownership stake in the Hawaiian island of Lanai (price estimates range from $500-$600 million). Moreover, until 2010, Ellison owned the tenth largest yacht in the world (worth a paltry $300 million). However, above all, he is probably most well known for leading (funding) Team Oracle, which won the world’s most prestigious sailing title within the past year. His critics repeatedly cite these “extracurricular activities” as the reason for Oracle’s recent stagnation. Also, for those of you wondering, Ellison is currently America’s third richest individual, behind only Bill Gates ($76 billion), founder of Microsoft (MSFT), and Warren Buffett ($63 billion), Founder and CEO of Berkshire Hathaway (BRK-A).
In stepping down as CEO, both Ellison's career at Oracle and his lavish personal life are now at the forefront of investor affairs. In other words, Ellison's departure marks the beginning of an uncertain era for one of Wall Street's most historically profitable tech companies.
As of late, Oracle has failed to adapt to the evolving digital database landscape, and has experienced decreasing sales. This is exemplified by the remarkably short tenure of Jill Rowley, a renowned Silicon Valley saleswoman whose time at Oracle lasted only a year after she “failed” to teach Oracle’s sales force how to effectively use social media. The company’s struggling sales operations has not only fostered investor disappointment, but has also brought into question Ellison’s abilities as a proactive, visionary leader (compared to revolutionary intellectuals like Steve Jobs and Elon Musk). Although Ellison has resigned as CEO and appointed two new CEOs, Mark Hurd and Safra Catz, many believe that Ellison will maintain firm control as Oracle's new Chairman.
For investors, Ellison’s transition should be positively viewed. Although Ellison was undoubtedly responsible for the early and rapid rise of Oracle, the company has since struggled to enact a modern sales model. By moving to more non-public role, Ellison is effectively paving the way for Hurd and Catz, two very capable leaders (albeit Hurd has a questionable history); both have more than enough experience to revive Oracle. In addition to being Chairman of the Board, Ellison will also act as “chief innovator,” and CTO. This is especially important for Oracle, as his position requires daily involvement in general proceedings, but recuses Ellison from participating in Oracle's restructuring process.