M & A climax: Oracle 9.3 billion acquisition of cloud computing company NetSuite
On July 29, according to Reuters, commercial software maker Oracle will buy NetSuite for $9.3 billion in cash to help Oracle increase its market share in the fast-growing cloud computing business.
NetSuite shares rose 18% in early trading, rising to $108.05, slightly lower than Oracle's $109 per share cash offer. Oracle shares rose slightly to $41.01.
Rodney Nelson, an analyst at the international authoritative rating agency Morningstar, said, "This transaction is definitely expensive for Oracle, but it is understandable. Especially in the current situation, we see software as a service. (software-as-a-service) company sales have increased by at least 10 times."
Both Oracle and NetSuite products are applications that help organizations automate back-end and management operations.
Oracle stores enterprise-class software and data on remote servers and provides related cloud services to companies that cannot afford to buy servers and hire technical maintenance personnel.
Because traditional software license sales are facing difficulties, Oracle's response is similar to competitors such as SAP, Amazon and Microsoft, which focus on shifting business to cloud computing.
The acquisition will also help Oracle struggle to catch up with competitors such as Workday and Salesforce. Oracle is currently actively trying to develop and sell more cloud computing business software.
Some analysts at investment firm Jefferies said the deal gave Oracle a great opportunity to enter the mid-market of enterprise applications immediately, but others pointed out that "quotations seem too high."
Oracle has acquired companies such as Textura and Opower to enhance its competitiveness in the cloud computing market.
After the end of the first full fiscal year, Oracle will include the transaction in the adjusted earnings.
NetSuite's second-quarter earnings report showed strong performance, with revenue up 30% year-on-year to $230.8 million, and adjusted net income exceeded expectations.
A regulatory filing from NetSuite shows that Oracle CEO Larry Ellison and his family hold about 40% of NetSuite. Oracle said the transaction was led by an independent board committee.
NetSuite was founded in 1998. Oracle said that NetSuite is the pioneer in the field of cloud computing and the first company dedicated to providing business applications on the Internet. NetSuite CEO Zach Nelson worked for Oracle from 1996 to 1998 and was responsible for Oracle's global marketing business.
In June of this year, according to Oracle, its cloud computing software and platform services accounted for 8% of total revenue.
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