Tags: Oracle | Ellison | Micros | Growth

Oracle CEO Ellison Talks with Micros in Hunt for Growth

Tuesday, 17 June 2014 05:52 PM

Oracle Corp. Chief Executive Officer Larry Ellison is on the hunt for new growth — and he’s turning to the hotel and restaurant industry to find it.

Oracle is negotiating to buy Micros Systems Inc., which sells software and services for hotels, restaurants, and retailers, for more than $5 billion, said people familiar with the matter, who asked not to be identified discussing a private matter. The companies are in exclusive talks, though the two sides could still fail to reach an agreement, said the people.

Ellison is looking to acquisitions to fuel expansion after 10 quarters of sluggish sales growth. While the 69-year-old CEO built up the Redwood City, California-based company to be the premier provider of database software that is installed on customers’ server computers, Oracle was late to the market for Internet-based cloud software. It’s now rushing to remake itself as a provider of gear and programs to underpin clients’ shift to Web-based computing.

“Oracle was clearly late to the cloud,” said Daniel Ives, an analyst at FBR Capital Markets & Co., who rates Oracle the equivalent of a buy. “They are starting to make changes, but this would be another step in terms of recognizing what they need to do.”

Deborah Hellinger, a spokeswoman for Oracle, declined to comment. Peter Rogers, executive vice president of investor relations at Micros, didn’t immediately return calls seeking comment.

Shares of Columbia, Maryland-based Micros closed up 15 percent at $66.33 in New York Tuesday, after soaring as much as 22 percent earlier in the day, their biggest gain since February 2009. Oracle rose 0.4 percent to $42.32.

Specific Industries

Oracle has long been an acquisition machine under Ellison. As rivals including Salesforce.com Inc. that specialize in cloud computing have risen to the fore, Oracle has turned to purchasing firms that make software for specific industries, such as retail and hospitality, to diversify its offerings.

Oracle has spent $50 billion to acquire about 100 companies in the past decade. Of those, more than 20 have been geared at specific industries, including the 2010 acquisition of clinical- trial software maker Phase Forward Inc., and purchases of retailer-software makers ProfitLogic Inc. and Retek Inc. in 2005. In December, Oracle agreed to buy marketing-software maker Responsys Inc. for about $1.5 billion to court chief marketing officers.

Steady Growth

Micros’s revenue totaled $1.29 billion in its fiscal 2013 and it has been growing in the low double-digit range for the past three years. The company is projected to generate $1.37 billion in fiscal 2014, which ends late this month, according to data compiled by Bloomberg.

Micros, which had more than 6,300 employees as of 2012, said on its website that more than 330,000 of its systems are installed in table and quick service restaurants, motels, hotels, casinos and other locations in more than 180 countries. Peter Altabef, a former Dell Inc. executive, has been CEO of Micros since January 2013.

Other players in the hospitality software market include Epicor Software Corp. and Infor Inc. Infor is run by former Oracle president Charles Phillips.

An acquisition of Micros would be Oracle’s largest since the $5.7 billion takeover of Sun Microsystems Inc., announced in 2009, data compiled by Bloomberg show.

At a $5 billion purchase price, Micros would be valued at 29 times earnings of $168 million, in the year through March. That compares with a median of 31 times earnings paid in 40 takeovers of U.S. software companies in the last five years, data compiled by Bloomberg show. In the four deals for which data is available, Oracle paid a median multiple of 82.5 times earnings, the data show.

Near Miss

Oracle came close to acquiring Micros about six years ago, according to one person with knowledge of the matter. Micros Chairman Tom Giannopoulos, who was CEO at the time, flew from Maryland to California to sign a deal, only to have the transaction fall through at the last minute, this person said.

Oracle will report its fiscal fourth-quarter earnings on June 19. In the previous quarter, license and loud-subscription revenue fell short of analysts’ estimates. The company is projected to report that profit, excluding some items, rose to 96 cents a share as sales increased 5 percent to $11.48 billion for the quarter ended May 31.

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Oracle Corp. Chief Executive Officer Larry Ellison is on the hunt for new growth - and he's turning to the hotel and restaurant industry to find it. Oracle is negotiating to buy Micros Systems Inc., which sells software and services for hotels, restaurants, and retailers.
Oracle, Ellison, Micros, Growth
Tuesday, 17 June 2014 05:52 PM
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