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Bloomberg's Rana on Oracle Buying Cloud Market Share (Audio) · Bloomberg Intelligence

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  Speaker 1: business flash. You're listening to taking stock with pim Fox
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  Speaker 1: and kapolee knews on Bloomberg Radio. The race is on
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  Speaker 1: an Oracle took a big step today buying net Suite
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  Speaker 1: in a deal valued at about nine point three billion dollars.
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  Speaker 1: Netsuites products include customer relationship management software that will help
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  Speaker 1: Oracle compete against the likes of Salesforce, dot Com and Microsoft.
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  Speaker 1: Joining us now is on rog Rana. He's senior analyst
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  Speaker 1: of software and I t services for Bloomberg Intelligence on Rock. Welcome.
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  Speaker 1: Thank you. Now we know Oracle has been heading in
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  Speaker 1: this direction as you were just telling me. Uh. In fact,
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  Speaker 1: Larry Allison was a h investor in net Suite along
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  Speaker 1: the way, so not exactly a surprise. How important is
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  Speaker 1: this for Oracle? It's fairly important for Oracle to be
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  Speaker 1: much more aggressive in the cloud applications space. Um, they
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  Speaker 1: have been behind salesforce, they have been behind work day
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  Speaker 1: when it comes to applications that are sold through the cloud. Now,
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  Speaker 1: the history is both SAP and Article has dominated this
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  Speaker 1: place for the last twenty plus years selling on premise applications.
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  Speaker 1: Now with this new way of selling applications through the cloud.
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  Speaker 1: You know, the three largest companies have been sales course
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  Speaker 1: worked in net suite and you know a few smaller
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  Speaker 1: ones and the growth is all in the cloud area.
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  Speaker 1: So as Article is trying to move their product portfolio
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  Speaker 1: from on premise to the cloud, you know this kind
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  Speaker 1: of fits into their uh, you know, grow organically as
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  Speaker 1: well as through acquisition strategy. On a rug, just to
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  Speaker 1: describe CRM customer relationship management, we're talking about being able
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  Speaker 1: to manage a salesforce and their interaction with current clients
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  Speaker 1: but also potential clients. Doesn't really matter whether it's in
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  Speaker 1: the cloud or wherever it is, just has to work.
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  Speaker 1: Net suite do they bring small and mid size businesses
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  Speaker 1: to Oracle in a way that is almost you know,
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  Speaker 1: one of the reasons why you want to buy that sweet,
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  Speaker 1: so that a couple of things first. In the CRM space,
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  Speaker 1: you know, the big goodll Obviously Salesforce, dot Com, um
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  Speaker 1: next wee does not do that. The net Sweet is
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  Speaker 1: in the e r P space, which is your financial accounting,
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  Speaker 1: financial management and things like that, and only for the
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  Speaker 1: small to midside, mostly for the small to midsize customers.
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  Speaker 1: As you said, UM, so far we really don't have
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  Speaker 1: a bohemoth like Salesforce for CRM or work Day for
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  Speaker 1: HR applications um in in the e r P space,
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  Speaker 1: most of those are on premise applications that were deployed
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  Speaker 1: by s a P. Now Article has a product which
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  Speaker 1: is a cloud based the RP system. But what I
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  Speaker 1: think will happen with this this place is you have
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  Speaker 1: the next SWEET product. You have the financial and the
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  Speaker 1: sales and marketing arm of of Article, which now you
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  Speaker 1: can go and start selling this product to the to
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  Speaker 1: the large enterprises. How much does this mean for Oracle's
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  Speaker 1: bottom line? See again, it's it's more of a strategic
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  Speaker 1: move because again it's not going to add that much
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  Speaker 1: to the you know, earnings or to the to the
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  Speaker 1: top line. But really what you're going to see is,
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  Speaker 1: you know, you know, a few years later when most
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  Speaker 1: of the applications that people are using would be cloud based.
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  Speaker 1: Article wants to be a part fit at that point.
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  Speaker 1: You don't want to be left behind, which is partially
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  Speaker 1: the reason why you see a lot of cloud acquisitions
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  Speaker 1: in the space. SAP has been acquiring a lot of
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  Speaker 1: entities for the past few years. Article actually has been
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  Speaker 1: a lot a little you know, quieter on on the
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  Speaker 1: acquisition front compared to these some of the other companies. Well,
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  Speaker 1: I'm just looking at the performance of the stock of
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  Speaker 1: Oracle today. Investors must like the deal because the shares
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  Speaker 1: are higher by about three quarters of a percent. Shares
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  Speaker 1: of net Suite are higher by more than eighteen percent.
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  Speaker 1: Any chance that anybody else is going to come in
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  Speaker 1: and make a competing bid for net Suite. I mean,
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  Speaker 1: I'm leading you on because I want you to tell
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  Speaker 1: me who's the biggest shareholder of net suite. It's lady
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  Speaker 1: is one of the biggest area, one of the biggest shareholders.
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  Speaker 1: But the thing is, I think that the valuation for
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  Speaker 1: this particular deal, let close to eleven plus times revenue,
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  Speaker 1: is one of the more expensive ones on the market.
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  Speaker 1: So it's not as if you know, he's he's getting
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  Speaker 1: a bargain over here, uh um, you know, in this deal.
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  Speaker 1: So I know it will be very tough for somebody
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  Speaker 1: else to come in and you know, either top the
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  Speaker 1: price or try to get it with so much of
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  Speaker 1: you know, voting power that Larry has. Is there a
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  Speaker 1: risk of a disruptor of a whole other approach to this,
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  Speaker 1: this kind of uh task inside a company that you know,
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  Speaker 1: or a call the spends way to keep up, but
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  Speaker 1: someone else it's going to leap frog ahead. It's going
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  Speaker 1: to be tough only because you have a lot of
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  Speaker 1: customer relationships and your systems are already ingrained to what
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  Speaker 1: you do, whether it's supply chain, whether you're serial accounting,
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  Speaker 1: I mean you're that's the lifeline of a particular business,
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  Speaker 1: so it's not just easy to uproot it. And which
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  Speaker 1: is partly the reason why the on premise business is
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  Speaker 1: still relatively stable for a SAP is because it's just
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  Speaker 1: not easy to rip it about. I want to thank
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  Speaker 1: you very much for coming and sharing all this information
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  Speaker 1: with us. On A. Rag Arana is a senior analyst
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  Speaker 1: of software and I T services for Bloomberg Intelligence, providing
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  Speaker 1: factors that affect business operations are terminal. Customers can access
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  Speaker 1: this function at b I go on or speaking about
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  Speaker 1: Oracles nine point three billion dollar purchase of net Suite,
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  Speaker 1: shares of net Suite higher right now by more than
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  Speaker 1: eighteen shares of Oracle up by three quarters of represent
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  Speaker 1: and the shares of Salesforce dot Com up more than
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  Speaker 1: one percent. This is taking stock. I'm pim Fox, my
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