Breaking News

Tweet TWEET

Le Cirque Software Need Helps Prompt Oracle’s Micros Deal

June 23 (Bloomberg) -- FBR Capital Markets Senior Analyst Daniel Ives discuss Oracle to buy Micros for 5.3 billion dollars with Trish Regan on “Street Smart.” (Source: Bloomberg)

To understand why Oracle Corp. (ORCL) agreed to buy Micros Systems Inc. (MCRS) for $5.3 billion, take a peek inside one of New York’s top restaurants, Le Cirque.

Inside the hushed, white-tableclothed establishment that is frequented by socialites and businesspeople, the hostess seats customers for Le Cirque’s $165 six-course dinner depending on whether a reservation came through OpenTable Inc. If the booking was through the online system, the hostess seats patrons at a table assigned by OpenTable’s table-management tool.

Related: Oracle Skips Expensive Targets to Buy Micros

Then from the moment the diner sits down, Micros’s point-of-sale service kicks in, collecting orders and other information until the final credit-card swipe. Selections are relayed to the kitchen and bar, where chefs and bartenders get busy preparing appetizers and cocktails. It’s all part of a push by Le Cirque’s parent company, Le Cirque International LLC, which owns about a dozen fine-dining establishments worldwide, to embrace technology starting five years ago -- a trend Le Cirque plans to extend, said Co-Chief Executive Officer Carlo Mantica.

“The restaurant industry is a laggard in technology adoption,” Mantica said in an interview. “We’re at a brink of a disruption and technology will see greater and greater adoption in the next five to 10 years.”

Photographer: Andrew Harrer/Bloomberg

Oracle yesterday said it was purchasing Micros -- which counts restaurants as key customers -- in its biggest acquisition since its $5.7 billion takeover of Sun Microsystems Inc. in 2010. Close

Oracle yesterday said it was purchasing Micros -- which counts restaurants as key... Read More

Close
Open
Photographer: Andrew Harrer/Bloomberg

Oracle yesterday said it was purchasing Micros -- which counts restaurants as key customers -- in its biggest acquisition since its $5.7 billion takeover of Sun Microsystems Inc. in 2010.

Deals Boom

Restaurants like Le Cirque and their growing appetite for technology are now helping to spur a deals boom for providers of software and other services to the market. Oracle yesterday said it was purchasing Micros -- which counts restaurants as key customers -- in its biggest acquisition since its $5.7 billion takeover of Sun Microsystems Inc. in 2010. Earlier this month, Priceline Group Inc. agreed to buy OpenTable for $2.6 billion to add restaurant bookings to its travel business. Google Inc. last month also brought on the staff of Appetas Inc., a startup that helps restaurants build better websites.

The activity is ramping up as the opportunity for technology providers with restaurants is set to grow. More than half of fine-dining operators plan to spend more on customer-facing technology such as mobile applications this year, with half of casual-dining operators and 41 percent of family-dining establishments anticipated to do the same, according to a 2013 survey by the National Restaurant Association.

The total point-of-sale software market in the U.S. has also expanded 3.3 percent annually from 2009 to a projected $1.3 billion this year, according to Ibisworld.

Photographer: Andrew Harrer/Bloomberg

Men walk near a Micros sign outside the Micros Systems Inc. headquarters building in Columbia, Maryland, U.S.. Oracle Corp. agreed to buy Micros Systems for $5.3 billion as Chief Executive Officer Larry Ellison seeks to reignite slowing growth by adding software for hotels and restaurants. Close

Men walk near a Micros sign outside the Micros Systems Inc. headquarters building in... Read More

Close
Open
Photographer: Andrew Harrer/Bloomberg

Men walk near a Micros sign outside the Micros Systems Inc. headquarters building in Columbia, Maryland, U.S.. Oracle Corp. agreed to buy Micros Systems for $5.3 billion as Chief Executive Officer Larry Ellison seeks to reignite slowing growth by adding software for hotels and restaurants.

Restaurant Rush

As a result, more technology companies are rushing to position themselves with offerings for restaurants. NetSuite Inc. sells financial software to restaurants like Australia’s Guzman y Gomez Mexican dining chain. Intuit Inc. markets its QuickBooks small business accounting software to restaurants. Others such as G4Technologies Corp. have developed specific tools for dining companies, such as its AccuBar beverage-tracking system to help restaurateurs figure out when they need to order more wine or stock up on liquor.

“It’s still a very untapped market,” said Dave Grimm, founding partner of Centennial, Colorado-based G4Technologies, of the restaurant industry. That’s set to change, he said, as “technology is such a part of everyone’s lives, people are going to wonder how they ever ran a restaurant without it.”

Open Door

For big technology companies like Oracle and Priceline, purchasing a restaurant-specific business also helps widen the door for them to sell other parts of their product line-up to the establishments. Oracle has acquired several retail-specific software companies in the past few years to build up its offerings to restaurants, hotels and other hospitality providers. The Micros deal was also a relative bargain at 17 times Micros’s earnings before interest, taxes, depreciation and amortization, compared with the median multiple of 22 for Internet and software acquisitions, according to data compiled by Bloomberg.

Photographer: David Paul Morris/Bloomberg

Oracle Co-President Mark Hurd said in a statement about the deal yesterday, “We anticipate delivering compelling advantages to companies within the hospitality and retail industries with the acquisition of Micros.” Close

Oracle Co-President Mark Hurd said in a statement about the deal yesterday, “We... Read More

Close
Open
Photographer: David Paul Morris/Bloomberg

Oracle Co-President Mark Hurd said in a statement about the deal yesterday, “We anticipate delivering compelling advantages to companies within the hospitality and retail industries with the acquisition of Micros.”

“We anticipate delivering compelling advantages to companies within the hospitality and retail industries with the acquisition of Micros,” Oracle Co-President Mark Hurd said in a statement about the deal yesterday.

Oracle bought Micros with this potential in mind, said Christine Dover, a research director at IDC. Oracle could create a platform that integrates services -- including software for accounting, point of sale, workforce scheduling, and inventory management -- into a single solution, she said.

Oracle, based in Redwood City, California, declined to comment beyond its statement yesterday. Micros, headquartered in Columbia, Maryland, didn’t respond to a call for comment.

Technology Hurdles

Restaurants have been slow to incorporate new technology, partly because the dining market is fragmented and filled with mom-and-pop operations that buy from suppliers at their own pace. In addition, some establishments have resisted the cost of new software. Almost 75 percent of dining operators described implementation expenses as the biggest factor preventing them from adding more consumer-facing tools, according to the National Restaurant Association’s 2013 survey.

“Small business owners are not tech savvy and they’re not necessarily coming from a tech background,” Daniel Bohlen, owner of East Village Asian Diner in San Diego, said in an interview. “I think there’s a lot of missed opportunity by not offering reasonably priced services for small businesses.”

Accelerating Shift

Yet the attitudes are changing now as more restaurants deal with the impact of mobile applications like GrubHub Inc. and other food-ordering services and technology, said software providers and restaurateurs.

“Restaurant companies are realizing that it may seem like the oldest of the old-school industries -- you buy some ingredients and cook them -- yet all of these industries are getting disrupted by the cloud,” said Andy Lloyd, general manager of commerce products at NetSuite. Oracle’s CEO Larry Ellison has been one of NetSuite’s big backers.

The shift is set to accelerate, said Melissa Autilio Fleischut, CEO of the New York State Restaurant Association.

“Compared to 10 years ago, when the only technology being used was a POS system, now we see a majority of restaurant members using online ordering and social media with some early adopters exploring mobile payment applications, scheduling software and bitcoins,” she said in a statement.

To contact the reporter on this story: Jing Cao in New York at hcao38@bloomberg.net

To contact the editors responsible for this story: Pui-Wing Tam at ptam13@bloomberg.net Reed Stevenson

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.