Oracle selling $10B in bonds, giving hint to buying spree
There may be more deals yet to come after Oracle's $5.3 billion purchase of Micros
IDG News Service - Oracle is selling $10 billion in bonds, in a move that could signal the vendor is planning to ramp up its already steady pace of acquisitions.
The proceeds of the bond sale will be used for stock repurchases, payment of cash dividends, debt repayment and future acquisitions, including the pending $5.3 billion deal for Micros Systems, Oracle said in a statement Tuesday.
It's the second-largest dollar-denominated bond sale this year, after Apple's $12 billion bond sale in April, according to Bloomberg.
An Oracle spokeswoman declined to comment on the types of deals Oracle may pursue. Howver, it's a safe bet that Oracle will stick mostly to software, since software is where the growth is, and that's what Oracle needs to satisfy Wall Street.
While Gartner recently cut its 2014 global IT spending outlook, its projections for enterprise software remained essentially unchanged. Software's growth rate also well outpaced other categories in the revised outlook, at 6.9 percent.
Here's a look at some of the acquisition targets Oracle may have in mind.
Going vertical in the cloud
Micros sells software and hardware to the retail and hospitality industries. It's a safe bet that future Oracle purchases will also target vertical markets, analysts said.
"There are a number of SaaS manufacturing ERP players out there, for instance Kenandy, KeyedIn Solutions, Plex and Rootstock, but there'd likely be work to replatform most of them to Oracle infrastructure," said independent enterprise software analyst China Martens via email.
Another possible area would be SaaS (software as a service) ERP (enterprise resource planning) for professional services, Martens added. "Does Oracle have everything it needs within Fusion Applications already or are there some elements it could acquire?"
Health care could be yet another avenue for Oracle to pursue, according to Forrester Research analyst Paul Hamerman. Oracle has already made significant investments in that market with the acquisitions of Relsys and Phase Forward several years ago, and might be ready to pull the trigger again.
Meanwhile, in its recent fourth-quarter and year-end earnings announcement, Oracle trumpeted that it had become the industry's second-largest cloud software vendor after Salesforce.com, with about a $2 billion annual revenue run rate.
Co-President Mark Hurd followed that up in an event with analysts saying Oracle intends to take the number-one slot. Given that Salesforce.com has estimated it will reach roughly $5.3 billion in revenue during its current fiscal year, Oracle may have to spend big on cloud acquisitions if it's going to close the gap.
Internet of things
Oracle hasn't made an overly strong effort to position itself as a player in the "Internet of things" market, but may use a splashy acquisition or two to get the job done.
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