Oracle's Acquisitions Paying Off
Wednesday, June 27, 2007; 4:40 PM
SAN FRANCISCO -- The $25 billion bill that Oracle Corp. has run up buying smaller business software makers looks like money well spent so far.
In the latest validation of a spending spree that began 2 1/2 years ago, Oracle's fiscal fourth-quarter profit climbed 23 percent to $1.6 billion, or 31 cents per share.
Oracle shares rose 53 cents, or 2.8 percent, to $19.69 Wednesday. The stock had fallen 32 cents to $19.16 Tuesday.
The performance during the three months ended in May extended a hot streak that has helped boost Oracle's market value by about $30 billion since the company's flamboyant chief executive, Larry Ellison, finally wrapped up a hostile takeover of PeopleSoft Inc. in late 2004.
Determined to build a one-stop shop for business software, Oracle has completed about 30 acquisitions at a total cost of about $25 billion, including the PeopleSoft deal. Ellison assured analysts in a conference call Tuesday that Oracle will remain on the prowl in the months ahead.
Besides eliminating some of its competition, the aggressive expansion has enabled Oracle to close the competitive gap separating it from Germany-based SAP AG, the longtime leader in business applications software _ the computer coding that automates a wide range of administrative tasks.
SAP's worldwide share of the $81 billion business applications market rose to 9.4 percent in 2006 from 9.2 percent in the previous year, while Oracle's share climbed to 5.8 percent from 4 percent, according to the latest information from International Data Corp.
"Oracle has the wind at its back," said Albert Pang, an IDC research director. "The only question is if they can keep executing."
If recent trends continue, Forrester Research analyst Ray Wang thinks Oracle could catch SAP in two to three years.
While invading SAP's turf in business application, Oracle has widened its lead in the database software market that still accounts for most of its revenue.
Redwood Shores-based Oracle ended 2006 with a 47 percent share of the database market, according to Gartner Inc. That was more than the combined total of the two next closest competitors, IBM Corp. and Microsoft Corp., which held shares of 21 percent and 17 percent, respectively, Gartner said.
The gains are propelling Oracle's profits, which have surged by at least 20 percent in six consecutive quarters. Management has already promised to boost its earnings by at least 20 percent annually during the next two years, too.