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Mergers and Acquisitions

Oracle acquires cloud pioneer NetSuite for $9.3B

Sanghamitra Kar
29th Jul 2016
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Oracle has acquired NetSuite, the first cloud company, for $9.3 billion in a cash deal, which works out to roughly $109 per share.

Founded in 1998, NetSuite pioneered cloud computing technology and helped businesses in exploring the then uncharted internet by providing various applications.

Oracle

In the recent past, Oracle has been focusing on its cloud business and is rapidly expanding in the market. Earlier, it spent more than $1 billion and acquired Textura and Opower to beef up ahead of the competition. The company is currently facing strong competition from Salesforce, Mircosoft and Amazon, which have been building their cloud businesses by managing all their customer operations on the cloud. 

“Oracle and NetSuite cloud applications are complementary and will coexist in the marketplace forever. We intend to invest heavily in both products—engineering and distribution,” said Mark Hurd, Chief Executive Officer, Oracle.

The deal will be closed by the end of 2016, subject to regulatory and shareholder approval. Till then, NetStuite will operate as a separate entity.

The statement from Oracle said that the negotiation was led by a Special Committee of Oracle’s Board of Directors, which unanimously approved the transaction.

With the completion of this acquisition, which will see two companies that provide enterprise-resource planning software come together, Oracle’s Chairman Larry Ellison and NetSuite’s Zach Nelson will once again work together. Nelson had managed Oracle’s marketing operations in the 90s.

In the second quarter, NetSuite’s revenue grew by 30 percent, but its losses also widened to $37.7 million from $32.3 million last year, reports WSJ.

Oracle’s clash with the Titan

The cloud company has been entangled in a six-year long legal battle with Google over Java, which was used in Google’s Android operating system. According to Oracle, Google has largely benefited from utilising Oracle-owned Java on Android, and so Oracle is seeking approximately $9 billion in damages, and is also seeking an injunction against Google's future use of Java in Android, which would give Oracle more leverage to negotiate an ongoing royalty.

Other Major Deals

In 2015 and 2016, we have written and read about a few major acquisitions. These game changing acquisitions from the corporate world include Microsoft buying Linkedin, which has surely put Microsoft back in the game, and SoftBank’s acquisition of Sprint Corporation in a transaction valued at $21. 6 billion. On Monday, Verizon Communications acquired Yahoo for approximately $4.83 billion in cash.

Implications of the acquisition

This acquisition will surely turn heads in the cloud world and will see several parties contemplating what comes next. With this acquisition, Oracle has stepped up and assured others that it is nowhere near lagging behind Microsoft. The capabilities of the two companies together will complement each other, but it remains to be seen what changes and advancements it can bring about to seriously compete with the already growing cloud businesses of AWS and Microsoft. 

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