Blog Coverage Oracle on Cloud Nine as It Buys NetSuite

LONDON, UK / ACCESSWIRE / July 29, 2016 / Active Wall St. blog coverage looks at the headline from Oracle Corp. (NYSE: ORCL) as the company has strengthened its arsenal in the fast growing cloud computing space by buying pioneer NetSuite Inc. (NYSE: N) for $ 9.3 billion. This will give a huge boost to Oracle’s market position in the cloud computing space. Register with us now for your free membership and blog access at: http://www.activewallst.com/register/.

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Oracle offered $ 109 per share in cash, which is at 19% premium of NetSuite’s closing price of $91.57 on Wednesday, July 27, 2016.

Cloud Focus

Oracle which has been offering its software products to large corporations globally had been gradually shifting towards cloud based products. Cloud based products account for nearly 8% of Oracle’s overall revenues for 2015. As demand for its older products lose sheen, this move will help Oracle face competition head-on.

San Mateo, California based NetSuite was founded in 1998 and pioneered the cloud computing revolution by becoming the first company to deliver business applications over the internet. NetSuite’s current market capitalization is $7.37 billion before the deal was announced.

Oracle and NetSuite both offer enterprise-resource planning (ERP) software solutions to its clients which helps them automate backend and administrative operations from technology to human resources. Cloud computing space has become competitive as demand increases exponentially. The buying of NetSuite has been Oracle’s sixth acquisition in the current year in a bid to increase its competitiveness in the cloud space. Oracle’s acquisitions in 2016 include enterprise company Ravello Systems in February, construction industry software maker Textura in April, and utility software maker Opower in May. Oracle’s direct competitors in the cloud-based services market are Salesforce, Workday, Microsoft, and Amazon.

Deal reunites former colleagues and friends

The deal also brings together Co-founder and Executive Chairman of Oracle Larry Ellison and NetSuite’s chief executive, Zach Nelson, who worked together for Oracle’s global marketing from 1996 to 1998. Incidentally, as per the annual proxy statement filed in April 2016, entities owned by Larry Ellison and his family are the largest investors in NetSuite holding 40% of its shares.

Oracle CEO, Mark Hurd, said: “Oracle and NetSuite cloud applications are complementary, and will coexist in the marketplace forever. We intend to invest heavily in both products—engineering and distribution.”

“NetSuite will benefit from Oracle’s global scale and reach to accelerate the availability of our cloud solutions in more industries and more countries,” said Zach Nelson, Chief Executive Officer of NetSuite, “We are excited to join Oracle and accelerate our pace of innovation.”

Potential Conflict of interest

Analysts close to the deal feel that as Larry Ellison has controlling interest in both Oracle and NetSuite, it raises questions about potential of conflicts of interest. Press release issued by Oracle did not address this point, however, it mentioned that the deal would be finalised only if a majority of NetSuite’s shares not owned by Mr. Ellison and his family approve the deal. The approval from other shareholders may be given as Oracle’s offer is quite generous and is nearly nine times the next 12 months’ projected revenue.

Stock Performance

Share prices for Oracle was up 0.64%, closing the trading session at $ 41.19. Oracle’s stock has gained 14.06% since the beginning of the year.

NetSuite on Thursday, July 28, 2016 reported strong second-quarter results with revenue up 30% to $230.8 million. Its shares closed the trading session up by 18.39% trading at very close to the deal price at $ 108.41. NetSuite’s stock has jumped 28.11% on a year to day basis.

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