Oct. 7 (Bloomberg) -- Oracle Corp., the world’s second-largest software maker, aims to eschew big acquisitions and promote growth from within, relying on hardware sales and a new cloud-computing service to broaden use of its products.
After gobbling up more than 70 companies in a $40 billion buying spree, any additional large deals would have to clear an “enormous hurdle,” Oracle co-President Safra Catz said yesterday at a meeting with analysts in San Francisco.
The company instead will focus on what it already has, including the Sun Microsystems server business it purchased last year for $7.4 billion. Oracle is packaging its database and business applications into customized computers to entice customers. The company also is touting its new Fusion business applications and a service called the Oracle Public Cloud, which delivers software online via cloud computing.
“People realize M&A is a big part of the Oracle growth story -- on the other hand, no one wants to see a big, dilutive acquisition,” said Bill Whyman, an analyst who covers the technology industry at ISI Group Inc.
Large deals would create distractions for management, Oracle co-President Mark Hurd said at yesterday’s event. The company will focus on “organic” growth from existing products during the current fiscal year, he said.
“We think we’re going to have a really strong year,” said Hurd, who joined Oracle in 2010 after serving as Hewlett-Packard Co.’s chief executive officer.
Oracle, based in Redwood City, California, embarked on its run of acquisitions in 2005 when it bought the human-resources software maker PeopleSoft Inc. The company has relied on deals to boost sales to $35.6 billion in the fiscal year ended in May. This year, revenue is projected to rise 8 percent to $38.6 billion, according to analysts’ estimates compiled by Bloomberg.
The company combined the features it acquired from PeopleSoft, J.D. Edwards and Siebel Systems into the Fusion apps, which Oracle made available this week at its OpenWorld conference, following six years of development. Fusion software handles business tasks such as sales, human resources, finance and inventory management.
Customers will be able to run the more than 100 Fusion applications on their own computers or in Oracle’s data centers, through the Oracle Public Cloud. The cloud service will be available within weeks, the company said.
Users can navigate the Fusion programs through the Oracle Social Network, which spotlights tasks that need completing and lets people share documents, CEO Larry Ellison said earlier this week during a demonstration of the software. The approach mimics some of the features of Salesforce.com Inc.’s Chatter, a social-networking service for businesses.
A feud between Oracle and Salesforce escalated this week after Salesforce CEO Marc Benioff was scrubbed from a scheduled appearance at the OpenWorld show. Benioff said it was because he criticized Ellison for selling expensive computers instead of just promoting online services.
“I pissed Larry off so badly that he canceled my keynote,” Benioff said at a press conference this week.
Oracle, which ranks second to Microsoft Corp. in worldwide software sales, has seen its stock climb 9 percent over the past 12 months. The shares fell 10 cents to $29.91 today on the Nasdaq Stock Market.
Oracle also is introducing new hardware that it developed with Sun technology. Earlier this week, the company unveiled two computer systems, one with faster data-analysis capabilities and another for organizing information from the Web, as it aims to win market share from Hewlett-Packard, International Business Machines Corp. and SAP AG.
Shifting into the cloud helps Oracle keep pace with those rivals, which are delivering more software via the Internet. It also steps up Oracle’s competition with cloud pioneers, including Salesforce.
“This is a really clear sign that they’re in the cloud now -- there’s no confusion,” said Brent Thill, an analyst at UBS AG in San Francisco. He recommends buying Oracle’s shares. While the company already had the technical capability to run applications and databases in its data centers, it hasn’t delivered that message to customers until now, Thill said.
“They needed to close more of a marketing gap than a functionality gap,” Thill said.
Fusion apps mainly compete with software from Salesforce and SAP. Customers will be able to visit an Oracle website and sign up to run their apps and database software as an online service through a browser. Oracle plans to keep companies’ data separate from others’ information to bolster security.
The shift to a cloud-based subscription model won’t hurt profits or rankle buyers, Oracle said.
The cloud service is built on industry-standard technology that customers understand, Ellison said this week at OpenWorld. He didn’t speak at yesterday’s analyst meeting, following the death of Steve Jobs, a personal friend.
“Just because you go to the cloud doesn’t mean you forget everything you learned about information technology over the last 20 years,” Ellison said.
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