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Oracle Plans Busy Acquisition Future by David R. Brousell • Sign up to receive ME Daily News Alerts • POSTED on Thursday, September 25, 2008 3:51:06 PM |
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Oracle Corp., which has spent $34 billion to buy 50 companies over the past few years, has aggressive plans to continue its acquisition strategy over the next five years, company President Charles Phillips said yesterday.
Speaking at a session for executives at OpenWorld, Oracle's annual user and partner conference in San Francisco, Phillips said that Oracle completed a new five-year plan last summer that calls for a continuation of a strategy that has seen Oracle acquire such companies as PeopleSoft, J.D. Edwards, Siebel Systems, and BEA Systems in recent years.
Phillips suggested that over the next five years, the level of acquisition activity could be similar to what Oracle has accomplished in the past 44 months.
"There is plenty of acquisition opportunity in the industry," Phillips said. "We have access to innovation around the world because of our balance sheet and acquisition strategy." In a sense, he said, Oracle "is the IPO market for the software industry."
In a keynote speech earlier this week, Phillips also discussed Oracle's acquisition strategy, saying the company's approach of acquiring companies and technology, as well as developing new technologies on its own, has resulted in success for Oracle's three-pronged product strategy in databases, middleware, and applications.
"Software is a fixed-cost business, and scale is key," he said.
In his remarks to the executive group today, Phillips did not indicate what types of technologies or companies Oracle would seek to acquire going forward. But Oracle did announce earlier this week the formation of two new business units to pursue opportunities in the insurance and health sciences industries, segments, Phillips claimed, in which arch-rival SAP "is lacking."
Oracle is not lacking for cash with which to continue its aggressive acquisition strategy. In its most recent fiscal quarter ended Aug. 31, 2008, improved profit margins helped push the company's cash and cash equivalents on hand to the $8 billion mark.
Separately yesterday, Oracle introduced what it called its first hardware product in the company's 31-year history, a storage server that can be integrated with Oracle database server to deliver high-performance analytical query performance.
Oracle actually introduced two new hardware products. The first, the Exadata Storage Server, works with Oracle database servers to boost query performance through a combination of on-board intelligence and parallel query optimization. The Exadata Storage Server offers 12 terabytes of storage, two on-board Intel processors, and a 1 gigabyte-per-second InfiniBand channel connecting the storage server to customers' existing Oracle database servers.
More important, the Exadata Storage Server is able to speed performance by taking over some of the query function usually performed by the database server. Using the Intel processors and parallel query capabilities developed by Oracle, the Exadata Storage Server performs some of the query searches and passes only relevant results, rather than entire disk blocks, to the database server, reducing interconnect traffic. This, said Oracle CEO Larry Ellison in introducing the Exadata Storage Server yesterday, allows the product to deliver query performance up to 10 times better than other storage servers. Oracle did not reveal pricing for the Exadata Storage Server, which is available now.
Oracle also introduced what it called the Database Machine, a pre-configured combination of the Exadata Storage Servers and Oracle database servers in one box. The Database Machine includes a grid of up to eight database servers with 64 Intel processors plus 14 Exadata Storage Servers with 168 terabytes of storage capacity and a total interconnect bandwidth of 14 gigabytes per second. In early tests, Ellison said, customers have experienced performance improvements of up to 30 times compared with other storage server/database server combinations. The Database Machine, he said, will sell for about $650,000.
Oracle is producing the Exadata Storage Server and the Database Machine in combination with partner Hewlett-Packard Co.
The Exadata Storage Server is expected to compete with other high-performance storage server products from vendors such as EMC Corp.
The Database Machine will compete with high-performance data warehouse servers from vendors such as Teradata and Netezza Inc.
Ellison said the new hardware products signal a move by Oracle to become a vendor of broader technology solutions, not only software.
"My guess is that we will be more of a systems company than a software company," he said in remarks to executives at Oracle OpenWorld. Ellison said Oracle would rely on partners such as HP to build hardware.
Also yesterday, Ellison, in a question-and-answer session with the same executive group, was asked whether Oracle would consider a single licensing model for companies with multiple software products.
Ellison said he has been encouraging Oracle's sales organization to offer organizations what he called a "universal licensing agreement," which could encompass multiple products and run for a number of years before being renegotiated. But he said this idea had not yet been property articulated and communicated.
Ellison also weighed in on a number of other subjects, including the software-as-a-service market. Saying that Oracle has been involved in the SaaS market for about 10 years, he predicted it would take many years yet before the SaaS model was a significant player in the software market.
"We didn't start making money in SaaS until the fourth quarter of last year [Oracle's fiscal year]," he said. "I expect that Oracle will be the largest SaaS provider in the world. But it will be 20 more years — certainly more than 10 — before SaaS" is significant.
Responding to a question about how computing might be organized in the future, Ellison said that such legacy models as mainframes, minicomputers, and PCs continue to persist, and he was critical of such current ideas as so-called cloud computing.
"All of the [computing] waves are still with us," Ellison said. "Sometimes I think we're in the women's fashion industry. Cloud computing will not take over the world. I don't even know what it is. The industry has enormous investments in existing systems. There is nothing on the horizon that will replace everything."
Jeff Moad contributed to this article.
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