Observability platform provider New Relic Inc. caused a bit of a stir today with the sudden announcement that Chief Executive Officer Lew Cirne is stepping down, to be replaced by software industry veteran Bill Staples.

The news came as New Relic delivered fourth-quarter financial results that beat Wall Street’s expectations on earnings and revenue, though it had only limited growth to show for its efforts.

New Relic sells application and DevOps monitoring tools that help developers detect problems with their software applications. It’s basically a monitoring service for apps that runs in real time, helping DevOps teams gain a full understanding of any issues that could affect the performance of their apps.

The company has been sailing some choppy waters of late. Like many other tech firms, New Relic has struggled to transition to a cloud business model. In order to differentiate its value proposition better, the company last year announced a major overhaul of its product pricing, saying at the time that customers would end up paying less as a result.

That may have been a popular move with customers but perhaps not so much with investors. For all its efforts, the company remains unprofitable, and last month it made moves to address that with plans to lay off 7% of its workforce in the coming months.

New Relic also faces increasing competition from rivals in an observability space that’s rapidly becoming more crowded. There have been rumors of discontent too, with reports of Cirne (pictured, left) clashing with some of the company’s employees last year after attempting to shut down internal discussions on racial justice and the Black Lives Matter movement.

Staples (right) currently serves as New Relic’s president and chief product officer. He has risen rapidly through the company’s ranks since joining as its CPO in early 2020, having previously held executive roles at Microsoft Corp. and Adobe Inc.

Cirne, who founded New Relic in 2008, will take some time off in the summer before returning as the company’s executive chairman. He explained that when he first started to consider stepping down, he began looking at once for a “trusted partner” who could one day replace him as CEO.

“When we recruited Bill into the company, we thought that he would be the natural successor to me as CEO at the right time,” Cirne said in a statement. “With his immediate and profound impact on our platform and our Product organization, and now more broadly across the company with his inspiring vision, strategy and passion for our customers and their success, Bill has exceeded our highest expectations as a strategic thinker and operational leader, making now the right time to make this transition.”

Cirne was referring to Staple’s prominent role in defining the company’s new strategy on New Relic One, revamping the way that product is packaged and priced.

“This is a new chapter for me, a new experience to be a CEO of a public company with a billion-dollar-plus valuation, but I think the experience I have in the seat of our customers, as well as the experience I’ve had at Microsoft and Adobe, very large companies with very large stakes running large organizations has really prepared me well for this next phase,” Staples wrote in a blog post.

Pund-IT Inc. analyst Charles King said that although the news of Cirne’s departure is a surprise, it has obviously been well-thought-out, and is unlikely to cause much disruption.

“The fact that Cirne is staying on as executive chairman suggests no bad blood is involved,” King said. “Retrospectively, Staples’ hiring in early 2020 and being tasked with developing a new business model likely means that this succession was predetermined and the past 18 or so months has been a ‘tryout’ for both him and the board of directors.”

King added that one of the reasons for Cirne’s departure at the relatively young age of just 51 might be a desire to focus more on the company’s offerings, rather than dealing with the business side of things.

“Historically, company founders often learn what they need to succeed as longtime business leaders [on the job], but not everyone is cut out for it,” he said. “Cirne gets to go back to doing what he likes and the company gains a professional business leader. That should be good for New Relic, as well as its employees, customers and shareholders.”

Still, Cirne’s departure may still have come sooner than he had expected it to happen, another analyst, Holger Mueller of Constellation Research Inc., told SiliconANGLE.

“Executive changes at the top of large software vendors don’t happen by coincidence, and Cirne’s successor has been with the company for less than 18 months, with his responsibilities only being expanded to president since January,” Mueller said. “The timeline to me seems a little rushed, and one potential reason for that is the challenge New Relic has faced moving to its new license structure. It’s the right move to make at its core, but the execution could have been more flawless. But looking forward it’s good to see an experienced product leader at the helm.”

One of Staples’ most pressing tasks as he takes over the reins will be to try and get New Relic on a stronger growth trajectory and push it closer to profitability. For its fiscal fourth quarter, it reported a loss before certain costs such as stock compensation of 27 cents per share on revenue of $173 million.

That was better than expected, with Wall Street looking at a bigger loss of 45 cents per share on revenue of just $167.05 million. But New Relic’s revenue growth in the quarter of just 8% compared with a year ago may have disappointed investors. For the full year, New Relic posted a loss of 33 cents per share on revenue of $668 million, up 11% from a year ago.

Looking ahead, the company said it’s guiding for first-quarter revenue of $172 million to $174 million, which would represent growth of just 6% to 7%. Still, that’s better than expected, with analysts modeling revenue of just $169.31 million for the first quarter.

Photos: New Relic