Oracle's $5.3 billion purchase of Micros Systems gives it a instant footprint in hospitality and retail industries, highlights how e-commerce may be the next big battleground for tech giants, and indicates that the enterprise giant is going to have to go shopping to fuel growth.
A cynic would say that Oracle bought Micros to deflect from a series of disappointing quarters, a cloud strategy that is still forming, and concerns about application growth. Summit Research analyst Richard Williams quipped in a research note:
One of Wall Street’s age-old golden rules says that 1) Don't miss the quarter; 2) If a miss is likely, refer to rule #1; and 3) If a miss can’t be avoided, do a deal.
The bigger picture is that commerce---front-end hardware, software and multichannel---is becoming a key battleground for enterprise giants. IBM gets it and has been focused on e-commerce, especially the mobile variety, as does NetSuite and a bevy of others. In Micros' annual report, it cites competitors such as NCR, Par Technology and Agilysys in restaurants; Softbrands, an Infor affiliate, Sabre and Northwind in hotels; and SAP, Oracle, IBM, Demandware and eBay Enterprise in retail.
Financially, Oracle can justify the deal. Its biggest acquisition since the $7 billion purchase of Sun Microsystems should go much better. Oracle said Micros will add to earnings and analysts say the acquired company is well run. Oracle will package Micros with its Art Technology Group (ATG) e-commerce platform.
FBR analyst Daniel Ives said:
We believe this could kick off the next "arms race in the cloud", specifically in e-commerce. SAP acquired hybris, a provider of e-commerce solutions last year, and now Oracle is following suit despite already having a large enterprise class system in ATG. With many SaaS vendors still well off of their near-term highs and several larger vendors still sitting on large piles of cash, we see a market ripe for consolidation.
Here's how Oracle sees Micros fitting in with hotels, restaurants and retail. Micros carries the day in hotels and restaurants and is more of a complement to Oracle in retail.
Add it up and Oracle's Micros deal is really about trench warfare with rivals industry by industry. SAP is targeting industries and Salesforce is taking a similar approach. The aim is to get industries on a platform---cloud, hardware and software---and then dominate them and collect the cash. What remains to be seen is whether these large enterprise players will be seen as true innovation partners that can transform industries.
In any case, Oracle and SAP will duel in most verticals. SAP CEO Bill McDermott recently said:
We are renewing our focus on industry. As you all know from covering SAP, we have been a market leader in 25 different industries. We are redoubling our focus on industries like retail, like banking, like healthcare, like public sector because we see a huge opportunity particularly on the backbone of HANA and we want HANA to be the business platform standard in the world, so we are very open to the ecosystem of partners that want to run their clouds on HANA.
Oracle president Mark Hurd had a similar riff:
Oracle has successfully helped customers across multiple industries, harness the power of cloud, mobile, social, big data and the internet of things to transform their businesses. We anticipate delivering compelling advantages to companies within the Hospitality and Retail industries with the acquisition of Micros.