Nikesh Arora became the new CEO of Santa Clara, CA-based Palo Alto Networks (PAN) on Wednesday, June 6. He replaces existing CEO Mark McLaughlin, who will continue with PAN as vice chairman of the PAN board.
“Over the course of several quarters, I have been discussing succession planning with the Board and I couldn’t be more pleased that we have found a leader in Nikesh,” said McLaughlin, who has served as CEO since 2011.
Share price dipped slightly since the news became known at the beginning of the month, but at $197.07 (at the time of writing) it is still considerably up on the firm’s 52-week low of $126.56. It has been suggested that the market is slightly wary of Arora’s lack of cybersecurity experience. He is, however, a big business player with big business experience.
Arora’s former positions include chief business officer at Google (Fortune claims that Eric Schmidt once described him as “the finest analytical businessman I have ever worked with”); and COO at SoftBank (where he was ‘heir apparent’ to founder Masayoshi Son). He left SoftBank when Son decided to stay on for another decade. At Google, Fortune claims, “He helped instill discipline into the quirky Internet upstart, focusing its untamed energy into unstoppable commercial force.”
Arora is not concerned about his personal lack of cybersecurity experience. “The good news is I knew nothing about advertising or ad sales when I joined Google in 2004 and I think that worked out,” he told CNBC. In 2012, he was Google’s highest paid executive. He expects to work closely with both McLaughlin and PAN founder and CTO, Nir Zuk. “I may not have a background in security, but with my background as an engineer, I can sit down with Zuk to help guide the next generation of products we can offer,” he told recode.net.
Arora’s pay package is impressive — especially if he provides impressive growth to the company. His base salary is around $1 million per year, with a further $1 million as target bonus; plus $40 million of restricted stock vesting over seven years, and stock options valued at $66 million vesting in increments. “If the stock quadruples,” reports Business Today, “he is in for a windfall — he gets all of them.” BT calculates this will amount to $128 million.
“We wanted to make sure that Nikesh, as the new leader of the company, has strong skin in the game,” Asheem Chandna, a member of Palo Alto Networks’ board of directors and investor at Greylock Partners, told Fortune. “And we wanted to make sure Nikesh is rewarded if he creates multiples of value for shareholders.”
That leaves the question of how Arora will seek such dynamic growth for PAN. McLaughlin claims the transition from him to a new CEO has been planned for some time. He told CNBC that PAN is already focused on the new developing markets: cloud, machine learning and new-age software, and suggested that PAN will look very different in five years’ time.
“In looking for the perfect person to do that, we wanted somebody who is a very demonstrated business executive at scale and would bring those key attributes to the table to take us where the company’s going to be in five years.”
“I’m hoping, as we go forward,” added Arora, “we’ll strike partnerships not just with Alphabet and Google but also with the other big players in the space, be it Microsoft or Amazon or many of our partners in the cybersecurity space.” His intention is to apply the same principles of scale that he learned from his time at Google to Palo Alto Networks.
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