Is CEO Mark Hurd Worth His Salary?
Oracle was founded in 1977 by Larry Ellison, Bob Miner, and Ed Oates, all of whom are still actively involved in the company. Mark Hurd came on as CEO in September 2010 and has lead the transition from Oracle as a hardware and software provider into the cloud storage industry. Oracle brought in $37.04 billion in 2016 and boasts assets of around $112.18 billion. Hurd is currently responsible for 136,263 employees around the world.
In 2016, Mark Hurd earned around $41 million at the helm as one of Oracle's CEOs. His salary accounted for $950,000, with stock value amounting to $21 million along with stock options of $18 million. This was actually a 23 percent decrease from 2015, due to a one-time stock award he was given in 2014. This puts Hurd on the list of the 20 highest paid CEOs in the United States, and begs the question: Is he worth it? Here's a deep dive of Oracle, its finances, and its future in order to find out.
Oracle's Performance in 2017 Is Off to a Slow Start
In an analysis of the company's performance for Q1 fiscal 2017, Alex Konrad explained that Oracle's cloud software and cloud platform businesses were up 77 percent year-over-year, while its cloud infrastructure unit was up 59 percent. While this is certainly impressive, it doesn't account for the overall performance of the company. Oracle's new software licenses saw only a 2 percent growth, while its existing software licenses saw an 11 percent decrease and its hardware saw a 12 percent decrease. While cloud software is a $798 million company arm, existing software licenses account for $1.03 billion. This is what really hurt Oracle's early 2017 numbers. Overall, Oracle was just shy of its quarterly revenue goal of $8.7 billion, reaching only $8.6 billion.
Despite this miss, it's important to understand where the company as a whole is going, instead of simply reflecting on where it is. Oracle faces a major growth opportunity if it can stay relevant and ahead of its competitors.
Oracle Is Tapping Into Amazon's Cloud Storage Market Share
Oracle's ability to compete in the cloud services industry will determine its success in the next few years. The company is up against names like Amazon and Salesforce that also offer Cloud storage and support. However, Hurd isn't impressed by what his competitors have to offer. He recently made comments calling Amazon's infrastructure old — especially compared to Oracle's.
Hurd might have a point. In February 2017, Amazon Web Services (AWS) experienced an outage that lasted more than a day and affected almost 150,000 websites. This means Amazon's customers potentially lost millions in combined revenue due to lost sales and declines in traffic. If companies are going to invest in a cloud platform, it must be reliable and, ideally, new.
If Oracle can convince customers to move from Amazon and other competitors, then it could become a leader in the multi-billion dollar industry of cloud storage and support.
Software and Hardware Revenue Declines Are Expected
The data storage industry is currently in upheaval as brands switch from physical servers to cloud storage. Previously, companies have stored their information and hosted their websites in temperature-controlled rooms that held nothing but massive blocks of servers. Now, these servers are getting dismantled as more companies are switching to cloud storage. In fact, Mark Hurd believes 80 percent of corporate data centers will disappear by 2025.
"This is an irresistible force. This is not 'what if.' This is the way things are going to go," Hurd said at Oracle's CloudWorld conference, as Azcentek reports. "For the short term, it will cause chaos in our industry, the one Oracle competes in... The change will not be linear, but exponential."
Hurd went on to explain exactly what this timeline looks like in dollars: companies typically use 80 percent of their IT budget for maintenance, security, and compliance, which leaves only 20 percent for innovation and new projects. Considering that most companies plan their expenses five years ahead, getting a new project like cloud transitioning planned and executed will take many years — especially for large corporations. It's not unreasonable to assume that it will take almost a decade for most businesses to move into the cloud.
For Oracle, the timeline is shorter. It only has a few short years to become the top choice for cloud hosting, or it risks falling behind as companies choose providers that are more modern and easier to work with.
Political Changes Can Affect Oracle's Business
It's nearly impossible to blame any company for missing its revenue marks in 2016, which proved to be one of the most economically contentious years in the past decade. Britain rocked the markets with its shocking Brexit vote, and Trump's election in the United States caused stocks to yo-yo through the remaining year. Even as citizens cast their votes, markets were responding cautiously as consumers watched to learn the fate of their countries.
In many ways, the uncertainty isn't over. While Hurd told Diginomica that he has ambitions to work with the U.S. government to modernize its technology, vendors struggle to break into administrations when they change every few years. Furthermore, even if President Trump creates a stable economy in America, his policies could disrupt global markets and limit Oracle's international growth. Few CEOs could tell you what to expect over the next few years and whether their customers will be better off financially by 2020.
Some have asked whether Mark Hurd is worth his salary, and the best way to answer that isn't to look at how the company has performed this past year, but how the company will perform in the future. If Oracle is able to weather the storm of economic uncertainty and thrive against competitors like Amazon and Salesforce, then it will be because of steps taken by Hurd these past few years.
In 2016, Mark Hurd earned around $41 million at the helm as one of Oracle's CEOs. His salary accounted for $950,000, with stock value amounting to $21 million along with stock options of $18 million. This was actually a 23 percent decrease from 2015, due to a one-time stock award he was given in 2014. This puts Hurd on the list of the 20 highest paid CEOs in the United States, and begs the question: Is he worth it? Here's a deep dive of Oracle, its finances, and its future in order to find out.
Oracle's Performance in 2017 Is Off to a Slow Start
In an analysis of the company's performance for Q1 fiscal 2017, Alex Konrad explained that Oracle's cloud software and cloud platform businesses were up 77 percent year-over-year, while its cloud infrastructure unit was up 59 percent. While this is certainly impressive, it doesn't account for the overall performance of the company. Oracle's new software licenses saw only a 2 percent growth, while its existing software licenses saw an 11 percent decrease and its hardware saw a 12 percent decrease. While cloud software is a $798 million company arm, existing software licenses account for $1.03 billion. This is what really hurt Oracle's early 2017 numbers. Overall, Oracle was just shy of its quarterly revenue goal of $8.7 billion, reaching only $8.6 billion.
Despite this miss, it's important to understand where the company as a whole is going, instead of simply reflecting on where it is. Oracle faces a major growth opportunity if it can stay relevant and ahead of its competitors.
Oracle Is Tapping Into Amazon's Cloud Storage Market Share
Oracle's ability to compete in the cloud services industry will determine its success in the next few years. The company is up against names like Amazon and Salesforce that also offer Cloud storage and support. However, Hurd isn't impressed by what his competitors have to offer. He recently made comments calling Amazon's infrastructure old — especially compared to Oracle's.
Hurd might have a point. In February 2017, Amazon Web Services (AWS) experienced an outage that lasted more than a day and affected almost 150,000 websites. This means Amazon's customers potentially lost millions in combined revenue due to lost sales and declines in traffic. If companies are going to invest in a cloud platform, it must be reliable and, ideally, new.
If Oracle can convince customers to move from Amazon and other competitors, then it could become a leader in the multi-billion dollar industry of cloud storage and support.
Software and Hardware Revenue Declines Are Expected
The data storage industry is currently in upheaval as brands switch from physical servers to cloud storage. Previously, companies have stored their information and hosted their websites in temperature-controlled rooms that held nothing but massive blocks of servers. Now, these servers are getting dismantled as more companies are switching to cloud storage. In fact, Mark Hurd believes 80 percent of corporate data centers will disappear by 2025.
"This is an irresistible force. This is not 'what if.' This is the way things are going to go," Hurd said at Oracle's CloudWorld conference, as Azcentek reports. "For the short term, it will cause chaos in our industry, the one Oracle competes in... The change will not be linear, but exponential."
Hurd went on to explain exactly what this timeline looks like in dollars: companies typically use 80 percent of their IT budget for maintenance, security, and compliance, which leaves only 20 percent for innovation and new projects. Considering that most companies plan their expenses five years ahead, getting a new project like cloud transitioning planned and executed will take many years — especially for large corporations. It's not unreasonable to assume that it will take almost a decade for most businesses to move into the cloud.
For Oracle, the timeline is shorter. It only has a few short years to become the top choice for cloud hosting, or it risks falling behind as companies choose providers that are more modern and easier to work with.
Political Changes Can Affect Oracle's Business
It's nearly impossible to blame any company for missing its revenue marks in 2016, which proved to be one of the most economically contentious years in the past decade. Britain rocked the markets with its shocking Brexit vote, and Trump's election in the United States caused stocks to yo-yo through the remaining year. Even as citizens cast their votes, markets were responding cautiously as consumers watched to learn the fate of their countries.
In many ways, the uncertainty isn't over. While Hurd told Diginomica that he has ambitions to work with the U.S. government to modernize its technology, vendors struggle to break into administrations when they change every few years. Furthermore, even if President Trump creates a stable economy in America, his policies could disrupt global markets and limit Oracle's international growth. Few CEOs could tell you what to expect over the next few years and whether their customers will be better off financially by 2020.
Some have asked whether Mark Hurd is worth his salary, and the best way to answer that isn't to look at how the company has performed this past year, but how the company will perform in the future. If Oracle is able to weather the storm of economic uncertainty and thrive against competitors like Amazon and Salesforce, then it will be because of steps taken by Hurd these past few years.