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Marimba co-founder steps down from CEO position

Capping both a long march to profitability and a string of executive departures, Kim Polese kicks herself upstairs to make room for a CEO with more operations experience.

Capping both a long march to profitability and a string of executive departures, Marimba chief executive Kim Polese essentially kicked herself upstairs today to make room for a CEO with more operations experience.

Polese, 38, co-founded Marimba in 1996, took the company public in a spectacular debut 15 months ago and today presided over the dual announcements that the company had turned a profit and that she had stepped aside as CEO.

Long a media darling for being one of Silicon Valley's few female chief executives and prominent engineers, Polese first gained notoriety for her role in jump-starting Java, Sun Microsystems' cross-platform programming language. She subsequently launched Marimba in the then-red-hot market known as "push" technology, designed to send information directly to people's desktops over the Internet.

As push's fortunes went south and doomed other players, including PointCast, Polese repositioned Marimba and its flagship Castanet product to remotely manage corporate software over networks.

As a result, Polese was able to make a compelling case for Marimba's initial public offering, which soared 200 percent in its first day of trading. The stock currently is trading near its debut of $20, partly the victim of general deflation among Internet stocks and partly down because of concerns about Marimba's long-term prospects.

In its second-quarter earnings statement today, Marimba reported its first profits. Net earnings for the period were $1.3 million, or 5 cents a share, on revenues of $12.1 million.

The company has navigated perilous waters with Castanet. The product is the target of a patent-infringement suit by Novadigm, which recently secured a November trial date.

Marimba has vowed to fight the suit and in August filed its own patent infringement claim against Novadigm. Marimba has repeatedly warned investors that a decision in favor of Novadigm could cripple Marimba's Castanet-based revenue stream.

Partly allaying investors' fears, Marimba this quarter launched its second product line: server-management software dubbed Timbale.

Analysts credit Polese for leading the charge on all fronts.

"She's really led the company to hitting profitability a quarter ahead of plan and successfully launched two product lines," said Jack Ripsteen, an analyst with Chase Hambrecht & Quist in San Francisco.

Polese could not immediately be reached for comment. In a John Olsen statement, she acknowledged she was stepping aside to make room for an executive with more management experience. Marimba's new CEO is John Olsen, 49, who has served as president of the Design Realization Group of Cadence Design Systems, which he joined in 1993, and has worked at KPMG Peat Marwick and Electronic Data Systems (EDS).

"Now is the right time to bring in the operational strength to capitalize on the opportunities ahead," Polese said in the statement.

Polese's willingness to hand the reins to someone with more experience and interest in operations is not uncommon among the software industry's founding chief executives. Most notably, Microsoft founder Bill Gates this year relinquished his CEO title for that of "chief software architect."

Polese will remain at Marimba as chairman and chief strategy officer.

Analysts said Polese recognized she was better suited to be a start-up chief executive than the leader of a mature company.

"What she focused on and was good at was building the company from the early stages," said Chuck Phillips, an analyst with Morgan Stanley Dean Witter. "This day-to-day stuff is hard, and she enjoys the strategic side of it--thinking about markets and using her notoriety to benefit the company. It's not necessarily the best use of her time, structuring HR plans and so forth.

"In some companies the founder can go from start-up to very large company, but it's the exception rather than the rule," Phillips added.

While Polese's exit was not unexpected, analysts said that recent turnover at Marimba's executive level warranted some concern. News in April that the company was losing chief financial officer Fred Gerson sent shares plummeting 37 percent.

In May, Marimba lost Steve Williams, executive vice president for worldwide sales and chief operating officer. The company has warned investors that retaining executive talent remains a thorny problem.

"Our success depends largely on the skills, experience and performance of the members of our senior management and other key personnel," the company said in a quarterly report filed with the SEC in May. "If we lose additional key employees and are unable to replace them with qualified individuals, our business and operating results could be seriously harmed."

Morgan Stanley's Phillips agreed that Marimba's executive turnover is potentially worrisome.

"There certainly has been enough transition in the top ranks to raise a red flag," he said. "There's a whole new management team at this point, from research and development to business development, to the CEO to the CFO to the head of sales--it's all new people. It's a legitimate area of inquiry to ask what's happening there anytime you go through that many people that quickly."

Still, Phillips remains optimistic about Marimba's prospects and rates the company "outperform."

"Are they growing as fast as some of the other high fliers, like Vignette? Of course not," said Phillips. "But it's still high double-digit growth. The results are speaking for themselves."

News.com's Gwendolyn Mariano contributed to this report.