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Oracle Slashes Larry Ellison and Co-CEO's Pay Substantially (revised)


Trades from $3

Shares of Oracle Corporation (ORCL - Analyst Report) have witnessed a moderate rise over the last 12 months. The company’s stock provided a return of 8.8% compared to the S&P 500’s 12.0% over the period.

While emerging opportunities in the Software as a Service (Saas) and Platform as a Service (PaaS) drove the stock, litigation issues and sluggish on-premise revenues were a drag.

Meanwhile, in view of shareholders’ opposition to the company’scompensation practices, Oracle has slashed the packages of its top-tier executives. On Friday, the company announced that Larry Ellison, Oracle’s Chairman and Co-Founder drew $41.5 million during the last fiscal, which marks a 35% decline on a year-over-year basis. Additionally, both Co-Chief Executive Officers (CEOs) of the company, Mark Hurd and Safra Catz drew about $41 million during the last fiscal year, which marks a 23% decline on a year-over-year basis.   

The Pay Cut in Detail

We note that Ellison’s base salary of $1 per annum remained unchanged from the previous fiscal. However, as per the Securities and Exchange Commission filings, Ellison’s stock and option awards were reduced substantially. Similarly, co-CEOs Mark Hurd and Safra Catz’s base salaries remained unchanged at $950,000 per year. However, a reduction in the stock and option awards for both of them resulted in a drop in their overall compensation packages.

Failure to achieve the profit targets is being cited as the reason behind the cuts. Rewards in the form of cash bonuses could have amounted to $15 million.  

Our Take

We note that Oracle’s results for first-quarter 2017 were not so impressive. While the company witnessed strong revenue growth in the cloud space, its on-premise revenues were a drag. The company is gradually making the transition from a licensing to a cloud model, which can contribute to its long-term growth. However, the company’s financials will be dampened as a result. Moreover, Oracle seems to have hit a bad patch concerning litigation matters. Earlier this year, the company lost a JAVA APIs lawsuit against Alphabet Inc. (GOOGL - Analyst Report) owned Google and another one related to Itanium software to Hewlett Packard Enterprise Company (HPE - Snapshot Report) .

However, the emerging momentum in the SaaS and PaaS space coupled with the company’s investor friendly practices are likely to be positives for the stock in the long term.

Zacks Rank & Key Picks

At present, Oracle carries a Zacks Rank #4 (Sell).

A better-ranked stock in the broader technology space is Avid Technology, Inc. (AVID - Snapshot Report) sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Notably, Avid witnessed two positive estimate revisions in the last 60 days.

(We are reissuing this article to correct a mistake. The original article, issued earlier today, September 26, 2016, should no longer be relied upon.)