Why Oracle's Larry Ellison shelled out $9bn for NetSuite

Big Red paid nearly another PeopleSoft for cloud provider

Analysis NetSuite's 18-year run as an independent ERP SaaS provider is over after shareholders approved Oracle's $9.3bn acquisition of the firm.

Larry Ellison scraped up a narrow majority of unaffiliated shares to land one of Silicon Valley's early SaaS pioneers.

Ellison got 53.21 per cent of unaffiliated shares, 21,775,553. Oracle's former chief technology officer owns 45 per cent of NetSuite's shares, which were excluded from the required total.

Oracle's win was broadcast on 5 November after the deadline for its offer expired on 4 November. The deal is expected to close on 7 November. It was due to close earlier, but was thrown off track when NetSuite's largest unaffiliated shareholder, T Rowe Price Associates, objected.

In a detailed letter to NetSuite's board dated 6 September, T Rowe Price resisted an Oracle purchase, suggesting the deal had been a little too cosy-cosy.

T Rowe Price claimed NetSuite's management had failed to investigate alternatives to Oracle and alleged a "conflict of interest".

The reason NetSuite CEO Zack Nelson decided to get out is that shareholders eventually are curious given that enterprise cloud and ERP SaaS are so buoyant.

With 16 quarters of 20-30 per cent growth, why did NetSuite's management check out? Why would management, if T Rowe Price is to be believed, not just seek sale but draw up a remarkably small list of buyers. One. Name of "Oracle". And why would Oracle not just spend but splash out so handsomely?

Oracle is paying $9.3bn on NetSuite, nearly as much as it spent on the much bigger PeopleSoft in 2004 – a firm not just making more revenues than NetSuite – $10bn versus $741m for 2015 – but also not losing money, unlike NetSuite, $34m at last quarter.

NetSuite is also Oracle's largest cloud purchase to date, following a string of infrastructure and plumbing deals to build the Oracle cloud. Surrendering to the largest single shareholder seemed the best bet for a management which seemingly decided it wanted out. And it looks as though shareholders came round.

Analysts are predicting untold riches in enterprise cloud and ERP-as-a-Service, thanks to the underlying switch from buying on-prem licences. IDC reckons the enterprise SaaS market will be worth $23.8bn by 2018, a CAGR of 17 per cent from 2013. Forester calculates SaaS ERP is growing annually at 25 per cent just as on-prem is declining. Currently, SaaS ERP is less than 10 per cent of the $45bn ERP market.

And it has been a reasonably clear run for firms like NetSuite and others such as Workday, who are rushing in to fill a vacuum left by the big names, which first occupied a state of denial and then responded to cloud only slowly. 2017, however, has seen things become a lot less certain.

ERP giant SAP claims to have a strong mid-market and SMB presence, but its own SaaS efforts in this field – characterised by Business ByDesign – have been somewhat less than stellar. BBD has something like 3,000 customers and is now closed to new customers. SAP is pushing an ERP-on-Hana strategy, but its uptake has been on prem.

SAP is trying to reboot, however. The firm has appointed former Concur chief executive Steve Sing to lead a revamp of its mid-market strategy. Sing, SAP executive board member and president of business networks and applications, joined SAP in January 2015 when his expense-management company was bought for $8.3bn.

Next page: Other approaches

Other stories you might like

  • Zuckerberg sued for alleged role in Cambridge Analytica data-slurp scandal
    I can prove CEO was 'personally involved in Facebook’s failure to protect privacy', DC AG insists

    Cambridge Analytica is back to haunt Mark Zuckerberg: Washington DC's Attorney General filed a lawsuit today directly accusing the Meta CEO of personal involvement in the abuses that led to the data-slurping scandal. 

    DC AG Karl Racine filed [PDF] the civil suit on Monday morning, saying his office's investigations found ample evidence Zuck could be held responsible for that 2018 cluster-fsck. For those who've put it out of mind, UK-based Cambridge Analytica harvested tens of millions of people's info via a third-party Facebook app, revealing a – at best – somewhat slipshod handling of netizens' privacy by the US tech giant.

    That year, Racine sued Facebook, claiming the social network was well aware of the analytics firm's antics yet failed to do anything meaningful until the data harvesting was covered by mainstream media. Facebook repeatedly stymied document production attempts, Racine claimed, and the paperwork it eventually handed over painted a trail he said led directly to Zuck. 

    Continue reading
  • Florida's content-moderation law kept on ice, likely unconstitutional, court says
    So cool you're into free speech because that includes taking down misinformation

    While the US Supreme Court considers an emergency petition to reinstate a preliminary injunction against Texas' social media law HB 20, the US Eleventh Circuit Court of Appeals on Monday partially upheld a similar injunction against Florida's social media law, SB 7072.

    Both Florida and Texas last year passed laws that impose content moderation restrictions, editorial disclosure obligations, and user-data access requirements on large online social networks. The Republican governors of both states justified the laws by claiming that social media sites have been trying to censor conservative voices, an allegation that has not been supported by evidence.

    Multiple studies addressing this issue say right-wing folk aren't being censored. They have found that social media sites try to take down or block misinformation, which researchers say is more common from right-leaning sources.

    Continue reading
  • US-APAC trade deal leaves out Taiwan, military defense not ruled out
    All fun and games until the chip factories are in the crosshairs

    US President Joe Biden has heralded an Indo-Pacific trade deal signed by several nations that do not include Taiwan. At the same time, Biden warned China that America would help defend Taiwan from attack; it is home to a critical slice of the global chip industry, after all. 

    The agreement, known as the Indo-Pacific Economic Framework (IPEF), is still in its infancy, with today's announcement enabling the United States and the other 12 participating countries to begin negotiating "rules of the road that ensure [US businesses] can compete in the Indo-Pacific," the White House said. 

    Along with America, other IPEF signatories are Australia, Brunei, India, Indonesia, Japan, South Korea, Malaysia, New Zealand, the Philippines, Singapore, Thailand and Vietnam. Combined, the White House said, the 13 countries participating in the IPEF make up 40 percent of the global economy. 

    Continue reading

Biting the hand that feeds IT © 1998–2022