Who's Next On Oracle's Shopping List?
by Jeff Moad, MA Editorial Staff
Posted on Wednesday, February 1, 2006 9:30:00 AM EST
In recent remarks to securities analysts following release of Oracle's second-quarter earnings, Ellison said his company will need to continue to make what he called strategic acquisitions if it expects to meet its financial goals. Oracle, Ellison said, has committed to achieving 20 percent earnings-per-share growth for the next five years. "We don't think we can get there for the full five-year plan without some strategic acquisitions," Ellison said. He predicted that for the five-year period about half of Oracle's growth will come through acquisitions, while the other half will come organically.
So who will Oracle target for acquisition? While Ellison offered few details, expert observers say Oracle is likely to continue to target markets such as retail, government, and financial services, where key rivals -- specifically SAP -- have not yet staked out dominant positions. Oracle is also likely to make technology-driven acquisitions intended to bolster its Fusion Middleware product line. But, experts say, Oracle is not expected to specifically target manufacturing or to again engage in blockbuster buys of big enterprise application vendors such as it did with PeopleSoft, which Oracle bought last January for $11 billion, and Siebel, which, pending government approval, it will buy for $5.85 billion.
"On the enterprise application side, there just aren't that many large companies left to be acquired," says Bob Mick, vice president of emerging technologies at ARC Advisory Group (Dedham, MA).
Oracle, which last year bought software and service vendors in the financial services and retail markets, is likely to continue to focus its acquisition efforts on those market spaces rather than core manufacturing, says Jim Shepherd, vice president of research at AMR Research (Boston). "Oracle has made it clear that they want acquisitions that can position them in markets where SAP hasn't already established dominant share," Shepherd says. "I'd be surprised to see them make big acquisitions in manufacturing like consumer products and oil and gas because SAP is already so strong there."
One possible exception, according to experts, is the aerospace and defense vertical. No dominant ERP vendor has emerged in that sector, and Oracle's pending buy of Siebel will bring several large A&D customers. According to Ray Want, senior analyst at Forrester Research (Cambridge, MA), Oracle could target ERP vendor IFS AB, which has several large aerospace and defense customers, or make an offer for the Enterprise One A&D software suite owned by the Boeing Company (Chicago). Neither IFS nor the Boeing Co. has indicated any interest in a sale.
Oracle also would be unlikely to seek out the acquisition of a software vendor in the manufacturing execution system (MES) space, says ARC's Mick. While Oracle's E Business Suite does cover some MES functionality, stepping more directly into the MES market through acquisition would cast a shadow on Oracle partnerships with other MES software vendors. "There's a question whether Oracle would want to do that," Mick says.
Less doubtful is Oracle's continued interest in vendors of middleware technology, experts say. In his statement to securities analysts, Ellison said Oracle believes it can take over the top middleware market share position from IBM. Oracle's most recent acquisitions have focused on the identity management piece of its Fusion Middleware stack, and it's likely that the company will make more investments in similar technologies, says Forrester's Wang.
"I wouldn't be surprised to see them invest in a business intelligence vendor or a company with products in the activity monitoring space," Wang says. Oracle could also finally act on its long-rumored interest in middleware rival BEA Systems Inc. (San Jose, CA), if only to claim its customer base. Oracle's interest in BEA, however, appears to have cooled, says AMR's Shepherd.
This article originally appeared in the February 2006 issue of Managing Automation magazine.
Link: managingautomation.com |
