Wall Street fans Oracle-EMC acquisition rumors

Following CEO Larry Ellison's earlier admission of wanting to own a data storage company, EMC's share price climbed nearly 5 percent Thursday based on speculations it is in Oracle's sights, according to reports.
Written by Kevin Kwang, Contributor on

When EMC's share price spiked nearly 5 percent during Thursday's market trading, Wall Street fanned rumors the storage maker has caught the eye of Oracle, pointing to CEO Larry Ellison's professed interest in buying a "prominent" data storage company, according to various reports.

The Wall Street Journal said EMC shares went up 4.88 percent to US$21.29 on Thursday based on speculation that Oracle is considering an acquisition of the storage vendor.

Quoting Wedbush analyst, Kaushik Roy, the report noted that rumors had been "floating around" about the acquisition amid ongoing speculation over further consolidation in the storage sector, fuelled in part by the recent 3Par and Netezza acquisitions by Hewlett-Packard (HP) and IBM, respectively.

Ellison had earlier revealed at the company's OracleWorld convention in September that he would "love to have" a prominent player in the data storage sector. He was, however, then coveting EMC rival NetApp, saying that 60 percent of NetApp's business is storing Oracle's databases, reported The Wall Street Journal.

Roy then also noted that the sector was attracting attention because of the growing demand for specialists to manage complex data storage challenges, as well as the potentially high margins in the sector.

"It's about managing data and retrieving it and protecting it," he added. "You can't just buy a few hard drives from [U.S. consumer electronics chain] Best Buy and be done with it."

Another analyst, Citigroup's Walter Pritchard, also said in a Barron's report that "filling out the systems stack" of hardware and infrastructure would be a key focus for Oracle in future mergers and acquisition activities.

Elaborating on EMC, Pritchard noted that the storage giant comes with VMware, the "leader" in server virtualization software that Oracle's Ellison had highlighted as a critical component in cloud computing. Oracle's executive vice president for hardware, John Fowler, had also described storage as "the most interesting area for innovation".

"EMC would bring scale and intellectual property to Oracle's storage offerings]," Pritchard surmised. "With additional firepower on board in the form of former HP CEO Mark Hurd, Oracle has the likely ability to take on an even larger hardware acquisition [than Sun Microsystems]."

However, he did note that since Oracle is in direct competition with EMC in the data warehouse and transactional storage market, the former would want to assess how both companies fare against each other over the next year before it gives any serious thought in buying EMC.

When contacted, EMC said it does not comment on rumors or speculation while Oracle also declined to respond.

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