As I noted recently, Oracle, the newly recognized AI Infrastructure company by the pubic markets, moved to bifurcate its CEO position to two senior folks. One to oversee the traditional enterprise software business, and the other younger one to lead the white hot AI Cloud Infrastructure business.
Though not part of the official ‘Mag 7’, Oracle with its new almost one trillion dollar market cap, is recognized in that company. Now as a near fifty year old company that’s central to the building of AI Infrastructure for the likes of OpenAI, TikTok/Bytedance, Apple and others in this AI Tech Wave.
“Oracle Corp. on Monday promoted Clay Magouyrk and Mike Sicilia to become co-chief executive officers, signaling the company’s focus on its rapidly expanding cloud computing business.”
“The 39-year-old Magouyrk was one of Oracle Cloud Infrastructure’s first employees after a stint at Amazon.com Inc. and rapidly climbed the ranks at Oracle. Sicilia, 54, was most recently president of Oracle Industries, where his experience included oversight of software applications for specific business sectors and the acquisition of health records business Cerner Corp.”
The move highlights the importance of the AI Cloud business, with Oracle establishing its position ahead of CoreWeave, the heretofore leader of the emerging AI ‘Neocloud’ massive data center building companies.
“The elevations underscore how Oracle is betting its future on cloud infrastructure, the business of building data centers that companies like OpenAI and Meta Platforms Inc. then use to deliver artificial-intelligence services to their customers. It has booked massive deals with such clients that will make the cloud division its largest unit by revenue in the coming years. It’s spending heavily to fulfill these commitments, and has seen its annual cash flow go negative for the first time since 1990.”
“Safra Catz, 63, who has led the company since 2014, will step back to become executive vice chair of the board. She expressed skepticism toward the cloud infrastructure business in OCI’s early days due to high costs of operating data centers and lower margins, Bloomberg has reported.”
This is worn ground for Oracle from a senior management perspective:
“While tech companies rarely split responsibilities at the CEO level, Oracle has experience with this structure. Catz was promoted to co-CEO in 2014, alongside Mark Hurd. After Hurd died in 2019, chairman Larry Ellison said he didn’t plan to name a second CEO to work with Catz.”
There is one other point of differentiation in the new management move:
“Though Magouyrk and Sicilia’s titles are the same, Magouyrk will be paid more. He will receive stock package worth $250 million, while Sicilia will receive one worth $100 million, the company said in a regulatory filing.”
“Clay’s years of experience leading Oracle’s large, fast-growing Cloud Infrastructure business has demonstrated his readiness for a CEO role.” Ellison said in a statement. “They are both proven leaders, and I am looking forward to spending the coming years working side-by-side with them.”
The moves enhance the company’s ability to deliver on its performance expectations set for the street:
“Oracle reaffirmed the financial guidance it provided earlier this month. It also said that Catz will no longer serve as the company’s principal financial officer. That will now be Douglas Kehring. Oracle’s stock was little changed after markets opened in New York. It has been up more than 85% this year, far outpacing the S&P 500 Index.”
Oracle is also going to be an important part of the upcoming US TikTok re-org:
“Separately Monday, the White House announced that Oracle will be key to a deal taking shape to sell the popular Chinese-owned app to a consortium of American investors. TikTok was a crucial early customer of Oracle’s cloud.”
“‘We believe that investors are already familiar with both Mr. Magouryk and Mr. Sicilia and that their promotions solidify the importance of the Cloud and Industry businesses as the growth levers for the company,’ wrote Kirk Materne, an analyst at Evercore ISI.”
This move has potential implications for all the other Mag 7s, especially Amazon, Microsoft and Google with their cloud businesses AWS, Azure and Cloud respectively. They all need to adjust for a very capable bottoms-up cloud player working with the top LLM AI clients further up the AI Tech Stack: OpenAI, TikTok/Bytedance, Nvidia, Meta, Apple and others.
As I’ve articulated before, Google in particular should consider spinning off part of Google Cloud for public investors, given that it’s number 3 in the cloud business, and is now facing a hungrier number 4. I’ve outlined that already before here.
A minority spin-off may not be a bad idea for Amazon AWS, Microsoft Azure as well. And possibly for Meta as it figures out how to further finance its aggressive multi-hundred billion dollar AI data center and power infrastructure investments being ramped up.
As I’ve explained before, AI Infrastructure spend is now bending the business models of traditional big tech software and ad media models, with lower margin infrastructure investments in Boxes 2 and 3 above, down from the more high margin Box 6.
Oracle is now a bigger dog to watch closer in this AI Tech Wave. And public investors have their relative pure play to track in AI Cloud Infrastructure in Oracle Cloud. Stay tuned.
(NOTE: The discussions here are for information purposes only, and not meant as investment advice at any time. Thanks for joining us here)
Spinning off GCP is probably too early now just as the market is really taking off. There’s plenty of synergies with Gemini: inference processing from TPUs and the massive Wiz acquisition suggests that Google is playing the long game w/ cloud compute.
Spinning off GCP is probably too early now just as the market is really taking off. There’s plenty of synergies with Gemini: inference processing from TPUs and the massive Wiz acquisition suggests that Google is playing the long game w/ cloud compute.