Last week Oracle, the world’s third largest software vendor, had an eight percent drop in its stock price after the company missed earning estimates.
Part of the research for are article I’m writing on the company involved digging into the organisational structure of the company and interestingly it has a pair of ‘co-presidents’ – Mark Hurd and Safra Katz.
Safra is the Chief Financial Officer who has a pretty powerful CV and seems well qualified for the job of controlling the finances of a $150 billion dollar company.
Mark on the other hand is my favourite IT executive, his tenure at HP is a case study in the entitlement culture of modern managerialism and no small reason for that company’s present day problems.
The analyst briefing (free subscription might be required) following Oracle’s disappointing reports betrays a little bit of tension between the two. First Safra;
We’re not at all pleased with our revenue growth this quarter. So it didn’t help that our quarter ended on the same day as the sequester deadline. What we really saw is the lack of urgency we sometimes see in the sales force as Q3 deals fall into Q4.
Since we’ve been adding literally thousands of new sales reps around the world, the problem was largely sales execution, especially with the new reps, as they ran out of runway in Q3.
It seems there’s a touch of ‘dog ate my homework’ in mentioning the US political sequester, but the message is clear – “what we really saw is the lack of urgency we sometimes see in the sales force.”
These are IT sales people we are talking about, ‘a lack of urgency’ is an insult to a group of people who have been known to work 120 hour weeks and sell their grandmothers if it means getting a fat commission.
Mark is in the poo. We quickly learn why when it’s his turn to speak,
We’ve added over 4,000 people to the Oracle sales force in the last 18 months. We’ve significantly expanded our customer coverage. We’ve seen material growth in our pipeline. But Q3 [conversion rates] were below what we expected, while our actual win rate went up.
An investor would hope there’s material growth in the sales pipeline when you’ve added 4,000 salespeople to your workforce.
In Oracle’s case though revenues have fallen .8% for the year and are only up 2% over the time Mark’s added all those go-getting Willy Lomans to the company’s payroll.
The interesting thing with Oracle’s figures is the company has spent nearly $400 million on restructuring costs over the last year, has hired over 4,000 new sales people and yet total operating costs, and margins, have barely moved in that time.
Which indicates somebody in Oracle is bearing the costs of Mark’s hiring spree.
During Hurd’s tenure at HP, he was notorious for penny pinching and cutting worker’s benefits. While staff were finding they were stuck in economy for international business meetings, Mark himself was staying at some of Europe’s best hotels and showing off his bank account to attractive employees.
Hopefully history isn’t repeating itself.
Probably the most perplexing thing with Oracle today are Mark’s and Safra’s roles of c0-Presidents. What on Earth are those roles?
Most telling with the co-Presidents is that they aren’t really in charge – if Larry Ellison, the CEO and founder, wakes up one morning and decides either Safra or Mark have to go then they’ll be out of the company well before lunchtime.
Along with carparking spots, inflated executive job titles are good indicator an organisation’s management is focusing on it’s perks, benefits and privileges rather than delivering for customers and shareholders.
Perhaps Oracle’s analysts and common stock holders should be focusing more on management’s behaviour more than the details of the company’s sales performance.
Blackberry used to have co-CEOs and look where that got them…
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