June 5 (Bloomberg) -- Oracle Corp. Chief Executive Officer Larry Ellison has spent $33.5 billion buying the software maker's way into markets for telecommunications, retail and financial-services programs.

To keep his promise to double sales to $50 billion by 2012, Ellison needs to find a target in another big-spending industry, says Sarah Friar, an analyst at Goldman, Sachs & Co., and the likely choice is health care.

``If you're chasing dollars, there's probably nothing bigger than health care,'' said Friar in San Francisco. ``The software that health-care companies use is archaic. That's a big opportunity for Oracle.''

It's also not a new idea for Ellison. The 63-year-old architect of 40 takeovers since 2005 had considered the sector five years ago. Oracle's board reviewed a list of potential acquisitions that included Cerner Corp.

The health-care software maker with programs for handling electronic medical records, accounting and billing now has a market value of $3.88 billion. While Oracle hasn't made a public bid for Cerner, it has already bought the two largest companies on the target list -- PeopleSoft Inc. and BEA Systems Inc. The board's April 2003 presentation was released during the federal antitrust lawsuit that tried to stop Oracle from buying PeopleSoft.

Deborah Hellinger, a spokeswoman for Redwood City, California-based Oracle, didn't respond to requests for comment.

Health-Care Spending

In the U.S. alone, technology spending by health-care companies will jump 16 percent to $50.2 billion by 2011, according to researcher Gartner Inc. in Stamford, Connecticut. Hospitals and physicians' offices will account for almost two- thirds, based largely on a switch to electronic record keeping from paper. Insurance companies will make up the rest.

Analysts haven't published any recent reports about Oracle's plans for heath-care software. Friar first advised buying Oracle shares in April 2007, when the stock was 25 percent lower than today. She also recommended shares of Microsoft Corp. ahead of the software maker's first and second- quarter earnings, correctly predicting increases in the stock.

``If Oracle made a large push into the health-care space, it would be viewed very positively,'' said Daniel Niles, CEO of Neuberger Berman Technology Management in San Francisco. Neuberger Berman LLC, the parent company, added 7.96 million Oracle shares in the first quarter, bringing its holding to 36.3 million, according to data compiled by Bloomberg. ``Health care is a growth industry, especially as more technology is used to tie medical data together.''

Oracle rose 27 cents to $23.18 at 4 p.m. New York time in Nasdaq Stock Market trading. The shares have advanced 2.7 percent this year.

Miss Estimates

In March, Oracle reported sales that missed analysts' estimates as clients pushed back purchases amid a spluttering U.S. economy. BEA, bought for $8.5 billion in April, was Oracle's last obvious target of significant size, according to Peter Goldmacher, an analyst at Cowen & Co. in San Francisco. Now, analysts such as Goldmacher say Oracle will get creative with acquisitions to spur growth.

In health care, the most likely targets are companies that make software for analyzing and managing medical data, such as Cerner, Eclipsys Corp. and closely held Epic Systems Corp., said Jim Kumpel, an analyst at Friedman, Billings, Ramsey & Co. in Arlington, Virginia.

Competitor Edge

Oracle competitors also see the opportunity. Two years ago, Microsoft bought Azyxxi to add programs that compile patient records. Last month, Google Inc. opened a Web site that lets people manage their medical information, working with hospitals such as the Cleveland Clinic.

Ellison's challenge is the complexity of the health-care market, where software needs to be customized for different hospitals and has to comply with dozens of state and federal regulations.

``It's a complicated market. It's a slow-moving market,'' said Todd Weller, an analyst at Stifel Nicolaus & Co. in Baltimore. ``But there's a lot of spending.''

Cerner, based in Kansas City, Missouri, may be Oracle's best target, Kumpel said.

``Cerner -- by living and breathing health care -- has an understanding of the workflows, the challenges and the quirks of the health-care system that is unique,'' Kumpel said.

Oracle Technology

Cerner's software runs on Oracle's technology, making it a logical purchase, said Marc Holland, an analyst at Health Industry Insights, a researcher in Framingham, Massachusetts.

Cerner doesn't comment on merger and acquisition speculation, spokeswoman Kay Hawes said. Cerner shares, which have dropped 15 percent this year, rose $2.16, or 4.7 percent, to $48.17 on the Nasdaq.

A cheaper option is Atlanta-based Eclipsys, Holland said. The stock, which is traded on the Nasdaq, has fallen 16 percent this year, giving the company a market value of $1.15 billion. The shares rose 78 cents, or 3.8 percent, to $21.22.

Nonetheless, Eclipsys, which sells software to manage patient data and billing, has programs better suited to Microsoft technology, Holland said. Eclipsys spokesman Jason Cigarran declined to comment.

Closely held Epic Systems, based in Verona, Wisconsin, may be attractive because its patient-record software is more up-to- date than Cerner's and is easier to install, Holland said.

``Epic has absolutely no interest in being acquired,'' said Stephen Dickmann, its chief administrative officer. ``Being private is one of our strongest assets.''

Ellison would need to prove that moving into health-care would boost profit, said Tony Ursillo, an analyst with Boston- based Loomis, Sayles & Co., which bought 11.6 million Oracle shares in the first quarter. Cerner's operating margin was 15 percent last quarter, while Oracle's margin, including acquisition and other costs, was 35 percent.

``I'd want any purchase to be accretive, like with BEA,'' Ursillo said. ``But I'd definitely give them the benefit of the doubt if they stay consistent with their usual approach.''

To contact the reporter on this story: Rochelle Garner in San Francisco at rgarner4@bloomberg.net.

Last Updated: June 5, 2008 16:18 EDT