We talked a while back about the fact that we thought that the rash of major tech acquisitions isn’t going to be cooling off just yet. Recent comments by Oracle founder and CEO, Larry Ellison seem to support just that. In responding to an analyst question at a recent event Ellison said that he was more interested in acquiring companies with promising and attractive technology than companies that provide services like consulting and the like.
Oracle, the world’s No. 3 software maker, has made its fortune through its enterprise standard database products that almost every major company that you can think of uses to manage databases and automate their businesses. However, as of late Oracle has shifted from looking to further optimize its core database business to acquiring companies that will allow it to become a one-stop shop by providing what us techies refer to as the “entire stack”. They recently moved into the high end server market with their $7.5 billion acquisition of Sun Microsystems earlier this year and they have already found a way to make the acquisition positive to their balance sheet. It’s notable because that’s something that Sun could never seem to do as an independent company.
“Our focus is to build our (intellectual property) portfolio. … You could see us buying chip companies,” Ellison said. “Silicon is very important, software IP is very important.”
Oracle very quickly combined technology acquired through Sun with their existing database software and released the Exadata X2-8 database appliance and Exalogic, a new product to help companies manage so-called “cloud” computing.
Oracle is a major force in the tech industry but most people don’t know them because they don’t make any consumer facing products but they make the software that is absolutely vital to all those companies that do make consumer facing products and that is where the big bucks are. Think about it, think about how rich your favorite rapper or athlete is and then think about how rich the record company owners and team owners are and you start to get the idea. If you asked the average person what the most valuable tech companies are they would probably say names like Microsoft, Facebook, Dell, HP and Apple, but of all those companies only Microsoft and Apple are worth more than Oracle from a market capitalization standpoint. But Oracle isn’t satisfied with that and though it will be very hard for them to catch Microsoft they are intent on widening the gap between them and everybody else.
Oracle wants to further increase its grows margins going forward, this is an exceptional goal considering that their current gross margins have consistently been above 70 percent which is almost unheard of. Even in a down economy Oracle posted a 25% increase in software sales in its first fiscal quarter, easily trumping analyst forecasts.
The thing you have to love about Oracle is that they are about the bottom line, don’t care what anyone else thinks and are unapologetic about it.