Oracle looks to cloud for growth
Business Day - Oct 10th 2011, 09:09
World’s second-largest software maker aims to curtail big acquisitions and growth from within, relying on hardware sales and cloud-computing.
Oracle, the world’s second-largest software maker, aims to curtail big acquisitions and promote growth from within, relying on hardware sales and a new cloud-computing service to broaden use of its products.
After gobbling up more than 70 companies in a $40bn buying spree, any additional large deals would have to clear an "enormous hurdle", Oracle co-president Safra Catz said last week at a meeting with analysts in San Francisco.
The company instead will focus on what it already has, including the Sun Microsystems server business it purchased last year for $7,4bn.
Oracle is packaging its database and business applications into customised computers to entice customers. The company also is touting its new Fusion business applications and a service called the Oracle Public Cloud, which delivers software online via cloud computing.
"People realise (acquisitions are) is a big part of the Oracle growth story. On the other hand, no one wants to see a big, dilutive acquisition," says Bill Whyman, an analyst who covers the technology industry at ISI Group.
Large deals would create distractions for management, Oracle co-president Mark Hurd said at the meeting. The company would focus on "organic" growth from existing products in the current financial year. "We think we’re going to have a really strong year," said Mr Hurd, who joined Oracle last year after serving as Hewlett-Packard’s CEO.
Oracle embarked on its run of acquisitions in 2005 when it bought the human-resources software maker PeopleSoft.
The company has relied on deals to boost sales to $35,6bn in the financial year to May. Analysts estimate revenue this year will rise 8% to $38,6bn.
The company combined the features it acquired from PeopleSoft, JD Edwards and Siebel Systems into the Fusion apps, which Oracle made available last week at its OpenWorld conference, following six years of development.
Fusion software handles business tasks such as sales, human resources, finance and inventory management.
Customers will be able to run the more than 100 Fusion applications on their own computers or in Oracle’s data centres, through the Oracle Public Cloud. The cloud service would be available "within weeks", the company said.
Users can navigate the Fusion programs through the Oracle Social Network, which spotlights tasks that need completing and lets people share documents, CEO Larry Ellison said during a demonstration of the software last week.
The approach mimics some of the features of Salesforce.com’s Chatter, a social-networking service for business. A feud between Oracle and Salesforce escalated last week after Salesforce CEO Marc Benioff was scrubbed from a scheduled appearance at the OpenWorld show. Mr Benioff said it was because he criticised Mr Ellison for selling expensive computers instead of just promoting online services.
"I pissed Larry off so badly that he cancelled my keynote," Mr Benioff said.
Oracle, which ranks second to Microsoft in worldwide software sales, has seen its stock climb 9% over the past 12 months. The shares fell 10c to $29,91 on Friday on the Nasdaq Stock Market.
Oracle is also introducing new hardware that it developed with Sun technology. Earlier this week the company unveiled two computer systems, one with faster data-analysis capabilities and another for organising information from the web, as it aims to win market share from Hewlett-Packard, IBM and Germany’s SAP.
Shifting into the cloud helps Oracle keep pace with rivals that are delivering more software via the internet.
It also steps up Oracle’s competition with cloud-computing pioneers, including Salesforce.
"This is a really clear sign that they’re in the cloud now — there’s no confusion," says Brent Thill, an analyst at UBS in San Francisco. He recommends buying Oracle’s shares.
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