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Oracle Focusing On Organic Growth Rather Than Acquisitions

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Oracle users can run more than 100 different Fusion applications on their own computers or in Oracle’s data centers, accessible through the cloud. (Photo: Roger Kirby)
Oracle users can run more than 100 different Fusion applications on their own computers or in Oracle’s data centers, accessible through the cloud. (Photo: Roger Kirby)

BUSINESS

  • Oracle set to concentrate on existing products after making over 70 acquisitions since 2005
  • CEO Larry Ellison launches new Oracle Public Cloud and 100+ Fusion business applications at At OpenWorld 2011
  • Oracle stock up by 9% over past year

After spending more than $40 billion over the past few years to acquire more than 70 companies, Oracle has now decided to focus on internal growth. While not completely ruling out any new large deals, Oracle co-President Safra Catz told analysts at a meeting in San Francisco that these would have to clear an “enormous hurdle” and that the Redwood City-based firm would instead be concentrating on increasing hardware sales and introducing a new cloud-computing service.

Starting with its purchase of the human-resources software company PeopleSoft in 2005, Oracle has acquired a string of companies as a strategy for boosting sales, which topped $35 billion for the fiscal year ending in May and are predicted to reach more than $38.5 billion this year, a rise of 8%.

Other big-name Oracle acquisitions include the Sun Microsystems server business (purchased for $7.4 billion last year), JD Edwards and Siebel Systems.

Launch of Oracle Public Cloud and Fusion Business Applications

Some features of the products that came from the acquisition of the latter two firms, together with PeopleSoft, will be combined into Oracle’s new Fusion business applications, which were introduced at the firm’s OpenWorld 2011 conference earlier this month.

Oracle users will be able to run more than 100 different Fusion applications, which handle common business tasks such as sales, human resources and finance, either on their own computers or in Oracle’s data centers, accessible through the cloud.

The cloud is an important part of Oracle’s new strategy. In his keynote speech at OpenWorld 2011, CEO Larry Ellison also launched Oracle Public Cloud, the firm’s cloud-oriented middleware products and marketing strategy. This move will help Oracle keep up with its competitors, which are now delivering more and more software over the internet.

The company was already quite capable of running applications and databases in its data centers, according to UBS AG analyst Brent Thill, but had so far failed to get this message across to its customers and “needed to close more of a marketing gap than a functionality gap.”

Exceeding Analyst Expectations

This approach seems to be working, with Oracle performing well despite a troubled world economy. Over the past year or two, Oracle has regularly met or even exceeded analyst expectations. “They have a clear strategy, and they have a really good management team to execute it,” said JMP Securities analyst Pat Walravens.

Oracle is second only to Microsoft in terms of global software sales, and the firm has seen its stock rise by 9% over the last year.

With over 3,000 speakers (including nearly 2,000 customer and partner speakers), no fewer than 100,000 online attendees, and over 2,000 sessions which took place across eight venues, the OpenWorld 2011 event was the company’s largest yet.

Key Statistics – Global Software Market (source: Ovum Research)

  • Microsoft is likely to continue to lead the global software market in 2011, with a market share of around 20% and 2010 revenues of $62 billion, followed by Oracle, IBM and SAP.
  • After a relatively stagnant year in 2010, the global software market is predicated to grow to $267 billion in 2011, an increase of over 8%.
  • The market looks set to see an annual compound growth rate of just below 8% over the next four years, reaching a total value of $358 billion.
  • Between 2010 and 2015, analysts predict the applications software market will grow by just below 7% and the infrastructure software market by around 8%.

By S. W. Mudie for
S. W. Mudie has been working in and writing about technology for over ten years. Originally from Scotland, he now lives in Paris, France.

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