XERO FPO’s new CEO: Is it still a buy?

Cloud accounting software company XERO FPO (ASX: XRO) recently wrote to shareholders about the departure of founder and CEO Rod Drury, and his replacement, Steve Vamos. The departure of a founder is always a concern for an investor, especially if the founder has represented their company as well as I feel that Rod Drury represented Xero.

Mr Drury steps back from the CEO role at the end of this month and will become a non-executive director, with Steve Vamos taking over from April 1.

According to his LinkedIn, Mr Vamos has worked in major companies such as IBM (1979-1994), Apple Computer ANZ/Asia Pacific (1995-1998) and then in various roles at Microsoft including CEO of Microsoft Australia and VP of Worldwide Sales.

He’s also been a non-executive director at a number of companies including Medibank Private Ltd (ASX: MPL) and Telstra Corporation Ltd (ASX: TLS). He is very experienced and, reading between the lines, it looks as though running Xero will increasingly be about running a large corporation rather than designing new products, which is why Rod Drury is stepping down.

The question for shareholders is, what’s likely to change?

I think the answer is not much. At this stage, Xero appears to be running like a well-oiled machine and I think much of its future success will come from repeating a well-established process – developing new features and rolling out its product in new markets. The company should be able to fund itself from here, and Mr Vamos’ expertise with global sales at Microsoft will likely come in handy.

Should it go badly for some reason, as a director Mr Drury will be in a position to vote on the CEO, and, as a ~13% shareholder, will likely still exercise significant influence over the company.

As a result I think the company is in safe hands and I remain a happy Xero shareholder.

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Motley Fool contributor Sean O'Neill owns shares of Xero. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool Australia owns shares of Xero. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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