The surge in cloud business accelerates succession! Oracle welcomes the "dual CEO era"

According to the Zhitong Finance APP, after achieving significant accelerated growth in its cloud business and a substantial rise in stock prices, Oracle (ORCL.US) has accelerated its senior succession plan in recent months. In June of this year, the software giant promoted two executives—Clay Magouyrk and Mike Sicilia—to the positions of company presidents. According to a source familiar with the matter, Oracle's plan at that time was to elevate them to co-CEOs in one to two years. However, this moment has come sooner than expected. This Monday, Clay Magouyrk and Mike Sicilia were appointed as Oracle's new co-CEOs to capitalize on a series of positive developments and elevate a new generation of leadership during a significant transformation. In recent weeks, Oracle signed a large cloud services agreement with AI leader OpenAI, resulting in the largest stock price surge since 1992, and is finalizing plans to keep popular video app TikTok as a major cloud customer. Safra Catz, Oracle's former CEO and current executive vice chair of the board, stated during a conference call with analysts on Monday, "You want to complete such a transition when everything is going well for the company." The 39-year-old Clay Magouyrk and 54-year-old Mike Sicilia now must deliver on Oracle's substantial infrastructure agreements with clients like OpenAI, integrate AI into the company's vast software application portfolio, and protect Oracle's "cash cow" database business. Despite holding the same title, Clay Magouyrk's compensation is higher. According to disclosures in the company's regulatory filings, he will receive stock awards valued at $250 million, while Mike Sicilia will receive stock awards worth $100 million. This reflects the importance of Oracle's cloud infrastructure business. Wall Street expects this business to contribute the majority of the company's revenue by 2028. The recent success of this business is largely attributed to Clay Magouyrk, who has led Oracle's Cloud Infrastructure (OCI) since 2020 and is one of the earliest members of that department. He noted that the business has entered a phase of "hyper-speed growth." Clay Magouyrk has long reported directly to Oracle Chairman Larry Ellison. The 81-year-old Larry Ellison is a co-founder of Oracle and serves as the Chief Technology Officer, remaining a key decision-maker in the company more than a decade after stepping down as CEO. Those who have worked with Clay Magouyrk describe him as both efficient and prone to conflict. According to a lawsuit filed in 2021, he allegedly told an executive in front of a room full of executives that their behavior was "extremely foolish." The lawsuit claimed that OCI had a toxic work culture. His blunt management style is not uncommon in a company led by Larry Ellison Larry Ellison once described his leadership style as "ironic management." Mike Sicilia joined the company in 2009 through Oracle's acquisition of Primavera Systems. At Oracle, he focused on developing and selling applications targeted at specific industries, such as banking. Oracle insiders believe that Mike Sicilia is an experienced operations and talent leader. He plans to help customers adopt Oracle's full suite of products and integrate artificial intelligence into them. It is worth mentioning that the co-CEO model is quite controversial in the software industry. Marc Benioff of Salesforce (CRM.US) lost his two co-CEOs shortly after their appointment. Jennifer Morgan of SAP (SAP.US) also left less than a year after being appointed co-CEO, leaving Christian Klein as the sole CEO. KeyBanc analyst Jackson Ader wrote in a research report that given the significant delivery tasks facing OCI, the division of responsibilities announced by Oracle on Monday may be a good thing. In Oracle's case, Larry Ellison's continued presence may help stabilize decision-making authority. However, this situation will not last forever. After Mark Hurd's death at the end of 2019, Safra Catz became the sole CEO. Meanwhile, Wall Street may be concerned that Oracle will lose Safra Catz's highly regarded financial leadership, especially as Oracle is making significant investments in data center infrastructure. Reports indicate that Safra Catz continued to serve as CFO during her tenure as CEO. She was initially skeptical about the cloud infrastructure business due to the high operating costs of data centers and low profit margins. Current Executive Vice President of Operations Doug Kehring has been promoted to CFO to succeed Safra Catz. Jefferies analyst Brent Thill stated, "It remains uncertain whether the strong cost discipline established during Safra Catz's tenure will be broken. Investor concerns about profit margins being pressured due to AI data center expansions may resurface."