Oracle: Cloudy With a Chance of M&A

Oracle: Cloudy With a Chance of M&A


June 20, 2014 2:00 p.m. ET

Oracle ORCL -3.98% closed its fiscal year on a bum note. But the software giant left little doubt that it intends to get big in the cloud—and quickly.

The transition won’t be an easy one. Oracle’s stock fell Friday on the heels of its fiscal fourth-quarter report, in which it missed earnings and revenue forecasts. In part, the shortfall resulted from some customers choosing to subscribe to Oracle’s cloud offerings as opposed to licensing the software. This means less revenue being booked up front because recognition is spread out over time.

That dilemma won’t change overnight, as cloud services still represent only about 4% of revenue. But the company has set its sights high, with Chief Executive Larry Ellison proclaiming on Thursday that he is “focused like a laser” on making Oracle the largest cloud software firm in the next few years.

That is ambitious.‘s CRM -0.64% revenue in its last fiscal year was $4.1 billion. Oracle’s two cloud segments made about $1.6 billion for the year ended in May.

How will Oracle try to close this gap? If history is anything to go by, the answer is: by opening its wallet.

Rumors surfaced this week that Oracle is close to buying Micros SystemsMCRS +0.80% for more than $5 billion. It also picked up LiveLOOK, a maker of collaboration software, on Friday for an undisclosed sum. Oracle has averaged about nine acquisitions a year from 2003 to 2013. According to data provider Dealogic, 11 of those deals have been in the $1 billion-plus category.

Oracle has nearly $39 billion in cash, and cloud companies are a little cheaper now, with stocks in the Bessemer cloud-computing index down an average of 14% over the past three months. Valuation multiples are still high in absolute terms. But Mr. Ellison isn’t known to pinch pennies when he sees something he wants.


About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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