X.com CEO Gets the Boot

SAN FRANCISCO (05/17/2000) - Internet payment startup X.com Corp. lost its chief executive last week. Bill Harris, who had been CEO since last November, cleaned out his desk on Thursday. Founder Elon Musk will assume the role of CEO.

"We were sharing the CEO role, and the board thought it made sense to have one hand on the steering wheel," says Musk. "They thought that should be me."

Although Musk had a chairman title, he said he shared many of the responsibilities of CEO with Harris. Musk said he will maintain the CEO position for the time being.

Harris said this afternoon that he's "used to running things," and stepping down to another position was not something he was interested in doing. He has no immediate career plans. According to a source familiar with the company who wished to remain anonymous, Harris was asked to step down amid internal politicking and personality conflicts.

"From what I understand, there were personality conflicts at the top," the source says. "Some people threatened to leave if [Harris] didn't, and the board asked him to step down."

Harris was previously the CEO of Intuit, the maker of the Quicken financial-software family. When he left Intuit last September, Harris indicated that he no longer wanted to run such a large organization. Instead, he said he wanted to pursue a career at a startup. Musk hired Harris last November, assuming Harris' wealth of financial-services experience would be a perfect fit for X.com.

It turned out that Harris wasn't such a perfect fit. X.com has undergone a major transformation since last November. When the company was founded last year by Musk, who also founded Zip2, with venture-capital financing from Sequoia Capital, X.com was being pitched as a personal financial-services portal, offering individuals access to brokerage, banking, investment and loan services. The ploy to get consumers to sign up was a person-to-person electronic-payments system, which quickly caught on with auction-goers online.

X.com also launched a marketing campaign that included offers of $20 for new accounts and $5 extra for referrals. With no minimum balance required to open an account, the promotional deal helped bring in hundreds of thousands of new accounts. X.com was the first to market with a widely deployed personal-payments solution, a service that since has been adopted by many banks, credit-card companies and auction sites. In early March, X.com merged with its biggest competitor, a startup called PayPal, backed by Idealab Capital Partners. The move gave X.com an even greater foothold in the emerging market of person-to-person payments. Last month, the merged company raised $100 million, led by Madison Dearborn Partners in Chicago. The round included funding from existing shareholders of the two startups, in addition to a number of international investors. X.com currently has 1.8 million accounts. Musk says he is investing in international expansion, extending the service into mobile space and technology investments. All other Internet-based consumer banks, such as E-Trade Bank, WingspanBank and CompuBank, have in aggregate attracted less than one million accounts. X.com has not disclosed the amount of assets that those one million customers have deposited with it. X.com continues to attract 12,000 new accounts per day, but that rapid growth comes with a price. The company's payment system has suffered a number of outages during the past two days, as a result of a system upgrade.

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