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Wednesday, August 03, 2005

Oracle Marches On

One more acquisition this year by Oracle saw it continuing its acquisition spree by taking a controlling interest in India headquartered banking software enterprise i-flex Solutions(India’s most well known product company) for a price just under a billion dollars. Oracle had earlier indicated that it could be looking at telecom & public sectors for potential vertical centric acquisitions. The approach confirms oracle’s desire to buy and integrate vertical specific leading edge solutions - Those products shall support & compliment Oracle's databases and general business applications. Together, Oracle & iFlex are a good fit. Substantial number of i-flex's customers use Oracle databases. I- flex's products are based on industry-standard technologies, and Oracle Fusion project alignment should see more value coming out of this acquisition. iflex gains a big way in having Oracle as the new parent - Global big banks/ Local banks would obviously feel more comfortable with an oracle tag for their product. Oracle gains substantial hold in the banking industry - a good host for packaged applications. By nature, banks are very conservative and risk averse and they may find oracle brand comfortable. This latest oracle move reflects its strategy to look for verticalised buyouts where it does not have inherent significant strength. Oracle gains well engineered, architecturally compatible applications with globally good customer base and a significant amount of domain expertise.
Big banks use to generally design and build their own applications and generally ERP package vendors have found banking difficult to penetrate.Iflex’s product is a core banking solution with more than 500 customers. Oracle salesgroup now has a winner at hand – with a well known product and good technology. Valuation at about 10x revenue may appear high –but we have to give it - the nature of the bought out entity is different and called for a different style of acquisition. Oracle has enough experience in doing product development out of its india based facilities and may not find it a problem in aligning Iflex's engineering team with that of Oracle. There may not be many product level integration issues owing to this acquisition.

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