Oracle Co-CEO Catz Turns Eye to Deals in Applications

Oracle Corp.’s Safra Catz, who was named Chief Executive Officer last month along with Mark Hurd, may be turning her dealmaking eye toward applications companies, where the software maker lags behind.

“We’re No. 1 in database, we’re No. 1 in middleware, but we’re No. 2 in applications,” Catz, 52, said yesterday in an interview in San Francisco. “At Oracle, silver medal is first loser.”

As part of the Sept. 18 management shift that promoted Catz and Hurd, Oracle founder Larry Ellison, who had led the company since its inception in 1977, stepped down as CEO to become chairman and chief technology officer. Oracle’s board appointed Ellison’s two proteges as CEOs. Before her elevation, Catz helped drive the company’s aggressive acquisition strategy, including a battle to purchase PeopleSoft Inc. in 2005 and this year’s deal to buy Micros Systems Inc.

The executive changes are taking place at a delicate time in Oracle’s business. The Redwood City, California-based company is grappling with a shift in the enterprise-software industry, as cloud-computing technologies take hold. Oracle’s core business has been selling software designed to run on equipment owned by the customer, and by charging a license fee. Cloud technologies let companies rent software without having to invest in gear or commit to a license. Applications are the programs that run on top of operating systems that perform specific functions, such as managing expenses or calendars.

Cloud Computing

Oracle last month reported fiscal first-quarter profit and sales that missed analysts’ projections and also forecast revenue and profit for the second quarter that fell short of estimates. Oracle is pouring money into its cloud division to boost that business, in order to offset a slowdown in sales of new software licenses.

In a sign of Oracle’s adjustment to cloud computing, the company this week has emphasized its commitment to the new technologies at its OpenWorld conference in San Francisco. In a keynote address on Sept. 28, Ellison said Oracle’s cloud service will match rival Amazon.com Inc.’s pricing and that the company’s newest cloud product includes tools for building analytics, mobile, identity and social features into software.

“We have a new, much-upgraded cloud platform,” Ellison said at the time. “We are just getting started.”

In yesterday’s interview, Catz said Oracle focuses on acquisitions that give it exactly what it needs at the right price -- and if there’s no company that fits the bill, the company can invest the money in research and development instead.

R&D Alternative

“When we do acquisitions, we decide what we want. We decide what fills a hole. And if the price is too high, our alternative is the $5 billion we spend on R&D every year,” she said. “We’re not well-known for overpaying, because at Oracle we always have an alternative.”

Catz singled out rival SAP SE’s planned acquisition of Concur Technologies Inc. for $7.4 billion -- announced the same day as her promotion -- as a deal that was overpriced.

“Concur is only a tiny module,” Catz said. SAP “spent all their money on it. I literally went down to my car and thought, oh my God, SAP bought Concur -- maybe tomorrow they’ll buy Dairy Queen. It was the best thing that happened to me on the day I was named CEO of Oracle,” she said.

German software maker SAP is paying about 11 times Concur’s 12-month revenue, and analysts said at the time the company is paying a high price. According to data compiled by Bloomberg, it was the third-most expensive acquisition of a North American software maker valued at greater than $1 billion in the past five years.

SAP declined to comment on Catz’s remarks.

New Titles

With Oracle’s new management structure, executives have stressed that very little at the company will change besides titles, given that Catz, Hurd and Ellison have all been working together for the past four years. Hurd will focus on sales, marketing and strategy, with Catz concentrating on finance, manufacturing and legal, the company has said.

“No role and title change has anything to do with a change in the direction of Oracle,” Hurd said at a press conference at OpenWorld this week.

Catz is the 25th female CEO in the S&P 500 Index. She is the fourth to start her CEO role this year, after General Motors Co.’s Mary Barra, Reynolds American Inc.’s Susan Cameron and Ross Stores Inc.’s Barbara Rentler.

Catz, who was born in Holon, Israel, worked at investment bank Donaldson Lufkin & Jenrette before joining Oracle in 1999. She has helped drive Oracle’s aggressive acquisition strategy, which includes purchasing PeopleSoft in 2005. She now co-teaches a course at Stanford University on mergers and acquisitions.

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