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Red Hat surprised Wall Street and many employees Thursday by naming a former Delta Air Lines executive as its new CEO. The appointment followed a secretive months-long search to replace current chief Matthew Szulik.
James Whitehurst, 40, who was the Atlanta airline's chief operating officer until August, takes over Jan. 1 at the Raleigh software company.
Szulik will remain Red Hat chairman. He asked the board of directors about six months ago to find a replacement CEO so he could spend more time attending to family health matters.
JOB: Will become president and CEO at Raleigh-based Red Hat on Jan. 1
AGE: 40
PAY: Starts at Red Hat with $700,000 base annual salary and is eligible to receive more in bonuses. He also will get options to purchase 500,000 Red Hat shares and 175,000 shares of restricted stock. Red Hat also will pay $150,000 in moving expenses. If he doesn't sell his house in Atlanta "within a commercially reasonable period of time," Red Hat will pay him another $150,000.
EXPERIENCE: Joined Delta Air Lines in 2002; quit as chief operating officer in August after being passed over for the Atlanta airline's CEO spot. Before joining Delta, he was a vice president at The Boston Consulting Group.
EDUCATION: Bachelor's degree in computer science and economics from Rice University in Houston, Texas; MBA from Harvard Business School.
(RED HAT, SEC FILING)
In a Web log post, Red Hat chairman and chief executive Matthew Szulik writes about his decision to step down as CEO and his career at the Raleigh software company. Here is an excerpt of “A Message From Matthew.” To read the full blog, click on the link at this story on http://www.newsobserver.com/business.
"My early days at Red Hat were sitting in small office with no door in
Durham, NC, across from the free soda machine. People by the hour would
stop and punch their selection for Mountain Dew or Coke. My challenge
was that I was tasked to go and raise venture money for this free
software company. And over the phone, in the middle of my sales pitch,
corporate types at Dell, IBM and HP and others would hear the constant
banging of soda cans dropping in the soda machine and would ask if there
were fights going on outside my office. So, after a while, I told the
prospective investors that YES there were fights going on. And yes,
these fights happened frequently. It’s how people at Red Hat settled
technical issues likes software bugs and features in new releases. Red
Hat was a real tough place to work. Dell, HP and IBM became investors
because they liked the fighting spirit of Red Hat."
"It became clear to me that I needed to direct the same level of attention and effort in support of my family ... that I have invested in Red Hat for nearly a decade," Szulik said during a conference call to discuss the management change and the company's strong third-quarter financial results.
In an interview after the call, Szulik declined to elaborate on who is ill but said he had kept Red Hat officials and friends "in the loop" about the situation.
"So when the decision came, [board members] ... were certainly disappointed, but I think they respected my decision," said Szulik, 51. "My intent was always to be at Red Hat until I was 62 1/2 and get the gold watch."
In selecting Whitehurst, Szulik said he wanted a leader with an open mind and a successful record in leading a global business.
While at Delta, Whitehurst helped manage a company with 55,000 employees and $17 billion in annual revenue. He helped the airline emerge from bankruptcy protection this year but was passed over for Delta's top job and stepped down in August.
Red Hat's board considered a "huge number" of candidates, both within the software industry and in other fields, said Red Hat board member W. Steve Albrecht.
"The board was thrilled with Matthew," Albrecht said. "Matthew would have been our choice to be CEO for years to come."
One Wall Street analyst questioned the secretive search process and said that few people were aware that the company had hired a national executive search firm several months ago.
"I've never seen a management change like this," said Katherine Egbert, an analyst with Jeffries & Co. in San Francisco.
She was particularly perplexed about why the incoming CEO did not participate in the conference call. "It was odd," Egbert said. "It's hard to know what the future direction of the company will be when you can't ask the new CEO."
Whitehurst couldn't be reached for comment Thursday. In a prepared statement, Whitehurst said that he is privileged to join an outstanding company. "Red Hat has changed the way people consume technology," he said.
Whitehurst starts with a base annual salary of $700,000, Red Hat reported in a filing submitted Thursday to the Securities and Exchange Commission. He also will receive stock options and is eligible for other bonuses.
He has a bachelor's degree in computer science and is "kind of a technology fanatic, really," Albrecht said. "He's been a star wherever he's gone."
Whitehurst takes over at a time when Red Hat is proving itself a contender in the global software market. Red Hat sells Linux software, which is used to run business computers, much like Microsoft's Windows.
Szulik became Red Hat's second CEO in 1999 and helped transform the company into the world's largest distributor of Linux software and one of Microsoft's fiercest rivals.
The company, which was founded in 1993, now employs 2,200. That includes about 500 at its headquarters on N.C. State University's Centennial Campus, which will be closed next week so workers can celebrate Christmas.
The company reported Thursday that third-quarter profit surged 39 percent from a year ago, to $20.3 million. Revenue rose 28 percent to $135.4 million. The results were boosted by stronger sales in Asia and Latin America, Red Hat finance chief Charlie Peters said.
Red Hat released the CEO news and financial results after the close of regular stock market trading, when the stock rose 53 cents to $18.79. The shares climbed as high as $20.20 in after-hours trading.
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