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Sunday, December 11, 2005
While oracle is all set to announce closure of the Siebel deal, I wanted to quickly assess the progress made by it from a market perspective( my private views, like all posts are in this blog.) - obviously the internal progress card within Oracle would look much better.It is common knowledge that most high tech mergers fail, barring some exceptions. Forbes points out that after spending 14 billion and acquiring 13 odd companies, oracle's stock appears as a petrified one quoting under 13$ - previous peak 15$ in 2002. In the last two years-since the acquisition spree started in earnest-sales are up 24%, net income is up 26% and the company's cash flow from operations is up 18%. The stock has never been this cheap since 1990 on a pure P/E [price-to-earnings ratio] basis, says an analyst. Chuck Phillips thinks that the perception of risk around the acquisitions is much higher than [the risk] actually is and points out the size of the acquisitions were small relative to that of Oracle. He says oracle moves extraordinarily fast to integrate these deals, targeting 30 days at the most for the "vast majority of the decisions." Despite all of the deals- Oracle's core product remains its database. Database sales, lumped together with middleware software for reporting purposes, rose only 4% in the previous quarter, to $1.8 billion, with the value of new software licenses sold not growing at all. Database business is also seeing heightened competition. Some of its acquisitions are definitely value accretive.Applications account for about one-third of the sales, while it has doubled accounting for software sales from acquired entities, WR Hambrecht thinks that if we take the the combines sales of all three companies & compare for same quarter last year, the applications business actually shrank for Oracle. Oracle has a huge integration challenge ahead but has promised its worried customer base to provide long-term support for new and existing versions of its applications. One unintended consequence seems to be that hosting solutions grow in the wake of Oracle acquisitions. Interestingly whats the price for acquiring marketshare in enterprise market - I % share is 1 Billion USD!!
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