Although the CEOs were announced as equals, a SEC filing revealed one received more than twice the stock options.
When Oracle announced on Monday that it is replacing longtime CEO Safra Catz, who has held that role since 2014, with two executives sharing the CEO role, it was the divergent nature of the two executives’ backgrounds that prompted the most attention.
Some see the move as an effort by the board to hedge its bets between an all-in-on-AI play versus a focus more on Oracle’s core database business. They are waiting to see how market forces play out.
The new CEOs are Clay Magouyrk, previously president of Oracle Cloud Infrastructure, who joined the company in 2014 from Amazon Web Services; and Mike Sicilia, formerly president of Oracle Industries, whose specialties are in vertical applications and applied AI.
Unlike co-CEO announcements by other organizations, Oracle’s initial statement did not provide any exclusive jurisdictions for either executive, suggesting that they would be truly equals.
“Together, CEOs Magouyrk and Sicilia will continue to collaborate on building complete industry suites of AI applications on top of Oracle’s rapidly evolving AI Database and Cloud Infrastructure,” the statement said.
It then briefly quoted the new CEOs: “’We are excited to lead Oracle into the AI era, where technological innovation leads to extraordinary business opportunity and hyper-growth,’ said Magouyrk and Sicilia in a joint statement. ‘Our combined strengths in AI, cloud infrastructure, horizontal applications and industry applications, will enable Oracle to deliver the latest AI capabilities to our customers.’”
But a SEC filing from Oracle on Monday provided a clue that the cloud exec, Magouyrk, may have the larger role.
Magouyrk was given “a grant of stock options to purchase $250 million in shares of Oracle common stock with 80% of the grant consisting of time-based stock options and 20% of the grant consisting of performance-based stock options [PSOs],” according to the SEC filing, whereas Sicilia was given less than half of that. “Sicilia will receive a grant of stock options to purchase $100 million in shares of Oracle common stock with 80% of the grant consisting of time-based stock options and 20% of the grant consisting of PSOs.”
The filing added that for both executives, “the time-based stock options will vest over a four-year period subject to continued service and the PSOs will vest over a three-year performance period ending May 31, 2028, subject to the achievement of certain revenue metrics.”
Given the stock option awards, said Scott Bickley, advisory fellow at Info-Tech Research Group, “the lead horse there is Clay [Magouyrk].”
He added that board chairman Larry Ellison is 81 years old and “Larry eventually will take a step back.” Oracle watchers, he said, “would be betting on Clay” as Ellison’s replacement.
That comment plunges deeply into the Oracle management culture, which is overwhelmingly dominated by Ellison, who reportedly controls more than 40% of all Oracle shares.
Ellison “runs Oracle with an iron fist” and “runs that company single-handedly,” Bickley said. “It’s therefore hard to draw typical conclusions. It’s not a company that is run in a typical fashion.”
Akshara Naik Lopez, a senior analyst with Forrester, said she anticipates details to soon emerge about the different roles of these two executives.
But Lopez said that, despite the differences in background between them, there is a good reason why they were chosen.
“Clay and Mike are insiders and have experience working hand in hand,” Lopez said. “There is a reason they picked insiders. They wanted people who have shown that they can work together. I don’t think they are going to have much friction.”
Lauren Nelson, a VP/research director at Forrester, said she saw the Oracle moves as making sense.
“Clay has been quietly leading the revolution on the cloud side,” Nelson said.
While the new CEO roles and jurisdictions have not yet been differentiated, Nelson noted that an announcement may be imminent, suggesting that it may occur at the Oracle AI World show in mid-October.
She also said some of the lack of CEO jurisdictional differentiation might be because of the nature of AI versus cloud today. “There may be areas where they overlapped,” Nelson said.
Nelson speculated that the difference in the stock options given to each executive might relate to the size of the divisions they have been running. “It could be roughly in tune with the size of their different groups,” she noted.
Balaji Abbabatulla, VP/analyst with Gartner, said that he expects that the two CEOs “are not going to be working on the same decisions” and that there will soon be “more clarity across all of the reporting functions.”
The key point, he said, is, “Oracle is now an AI company, but that AI can mean very different things.”
He agreed with Nelson that the difference in the stock option grants might simply be the executives’ history rather than an indication of each individual’s new role.
Mike was made a president in June, Abbabatulla said, whereas Clay has held that rank since 2014. “That is a difference in tenure. I don’t know if that plays a role in how much stock is allocated.”
Adding to the executive dynamics is the fact that current CEO Catz was relieved of her CEO duties entirely and made Executive Vice Chair of the Oracle Board of Directors.
This might mean that Catz is next in line to succeed Ellison as chairman, but on the other hand, her new role wasn’t even mentioned until the sixth paragraph of the Oracle announcement.
During an analyst call shortly after the announcement, Catz said, “I’m still here and I’m an employee [of Oracle].” She said that the transition is being made now because Oracle has recently reported some very large potential new contracts. “We wanted to make the transition when things are going great,” she said.
Bickley said the likely impact on Oracle customers in the near term is minimal. But he stressed that Oracle is making its AI move very differently from others, which makes sense given Oracle’s different market position.
Unlike other hyperscalers such as Microsoft, Amazon, and Google, Oracle is content to hold onto its massive database installed base and simply add AI services for those enterprises, making its offerings stickier. This contrasts with most of its rivals that are trying to grow their AI installed base by either stealing customers from each other or bringing in a larger percentage of newcomers.
“Oracle has a massive installed base of legacy customers,” Bickley said. “They haven’t had to go after net new business.” They are, he noted, simply trying to move their legacy base to the cloud.
Specifically, he has seen Oracle avoid upcharging for AI, which is another differentiator from rivals. “Oracle’s pricing and terms [for AI] have been very generous as of late,” Bickley said.
