It is absolutely no secret that Oracle is struggling at the moment with its cloud technology department since the competition is quickly gaining ground and is poised to surpass the IT giant. In the past we saw Charles Phillips, Oracle’s president being removed and now he actually leads the revolution in the cloud industry with his CEO position at inspiring startup Infor. Oracle lags in cloud-based services so it decided to buy a market share by acquiring NetSuite Inc. for $9.3 billion.
Oracle is constantly trying to move away from selling the software that is traditionally installed on corporate clients, who now want to receive such services through the use of the internet. Oracle did declare that the cloud division only accounted for a small 10% of total sales. With this in mind, buying netsuite makes sense as it is among the first of the cloud-service companies. That, in theory, should help with the competition with Salesforce, SAP, Microsoft and even Infor.
The fact that NetSuite is pioneering the cloud is something that will become very valuable for Oracle. Acquisitions are definitely necessary for the company as they try to build a long term strategy that is going to cover the lacks that exist in cloud computing today.
The acquisition is not a surprise for everyone in the cloud industry. That is mainly because of the close ties between Larry Ellison, Oracle CEO, and NetSuite. What many were not aware of is that Ellison and different members of his family now own a little over 45% of the common stock NetSuite has.
The premium that is paid by Oracle is 19%, totaling to an amount of $109 per share. We thus have a merger that is only the latest that appeared in the cloud industry. Microsoft bought LinkedIn, Salesforce bought Demandware and Symantec bought Blue Coat Systems. Infor made many different acquisitions and it seems like every single larger company in the IT market is trying to get a part of the cloud market. Many big deals are going to appear and Salesforce can actually become a really big target for Oracle.
Oracle is capable of offering an adequate amount to buy Salesforce and all depends on whether or not it can develop the cloud technology that it needs on its own. Some time ago the executives working at Oracle were attacked by specialists because they were not taking advantage of the potential that the cloud offered. This was around the same time that Amazon.com embraced the technology. Oracle is now quite behind on what it can offer and it is just now revamping the product lineup while stepping up the necessary acquisitions.
NetSuite marks the second largest purchase that Oracle did. The only one that was higher was PeopleSoft Inc’s hostile takeover for $10.3 billion in 2005. While there is still a possibility that the deal with NetSuite will not go through, sources say that this is not actually the case as the deal is too good to pass out on.