WEBVTT - Bloomberg's Rana on Oracle Buying Cloud Market Share (Audio)

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<v Speaker 1>business flash. You're listening to taking stock with pim Fox

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<v Speaker 1>and kapolee knews on Bloomberg Radio. The race is on

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<v Speaker 1>an Oracle took a big step today buying net Suite

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<v Speaker 1>in a deal valued at about nine point three billion dollars.

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<v Speaker 1>Netsuites products include customer relationship management software that will help

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<v Speaker 1>Oracle compete against the likes of Salesforce, dot Com and Microsoft.

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<v Speaker 1>Joining us now is on rog Rana. He's senior analyst

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<v Speaker 1>of software and I t services for Bloomberg Intelligence on Rock. Welcome.

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<v Speaker 1>Thank you. Now we know Oracle has been heading in

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<v Speaker 1>this direction as you were just telling me. Uh. In fact,

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<v Speaker 1>Larry Allison was a h investor in net Suite along

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<v Speaker 1>the way, so not exactly a surprise. How important is

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<v Speaker 1>this for Oracle? It's fairly important for Oracle to be

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<v Speaker 1>much more aggressive in the cloud applications space. Um, they

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<v Speaker 1>have been behind salesforce, they have been behind work day

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<v Speaker 1>when it comes to applications that are sold through the cloud. Now,

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<v Speaker 1>the history is both SAP and Article has dominated this

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<v Speaker 1>place for the last twenty plus years selling on premise applications.

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<v Speaker 1>Now with this new way of selling applications through the cloud.

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<v Speaker 1>You know, the three largest companies have been sales course

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<v Speaker 1>worked in net suite and you know a few smaller

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<v Speaker 1>ones and the growth is all in the cloud area.

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<v Speaker 1>So as Article is trying to move their product portfolio

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<v Speaker 1>from on premise to the cloud, you know this kind

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<v Speaker 1>of fits into their uh, you know, grow organically as

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<v Speaker 1>well as through acquisition strategy. On a rug, just to

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<v Speaker 1>describe CRM customer relationship management, we're talking about being able

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<v Speaker 1>to manage a salesforce and their interaction with current clients

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<v Speaker 1>but also potential clients. Doesn't really matter whether it's in

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<v Speaker 1>the cloud or wherever it is, just has to work.

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<v Speaker 1>Net suite do they bring small and mid size businesses

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<v Speaker 1>to Oracle in a way that is almost you know,

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<v Speaker 1>one of the reasons why you want to buy that sweet,

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<v Speaker 1>so that a couple of things first. In the CRM space,

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<v Speaker 1>you know, the big goodll Obviously Salesforce, dot Com, um

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<v Speaker 1>next wee does not do that. The net Sweet is

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<v Speaker 1>in the e r P space, which is your financial accounting,

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<v Speaker 1>financial management and things like that, and only for the

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<v Speaker 1>small to midside, mostly for the small to midsize customers.

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<v Speaker 1>As you said, UM, so far we really don't have

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<v Speaker 1>a bohemoth like Salesforce for CRM or work Day for

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<v Speaker 1>HR applications um in in the e r P space,

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<v Speaker 1>most of those are on premise applications that were deployed

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<v Speaker 1>by s a P. Now Article has a product which

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<v Speaker 1>is a cloud based the RP system. But what I

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<v Speaker 1>think will happen with this this place is you have

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<v Speaker 1>the next SWEET product. You have the financial and the

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<v Speaker 1>sales and marketing arm of of Article, which now you

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<v Speaker 1>can go and start selling this product to the to

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<v Speaker 1>the large enterprises. How much does this mean for Oracle's

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<v Speaker 1>bottom line? See again, it's it's more of a strategic

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<v Speaker 1>move because again it's not going to add that much

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<v Speaker 1>to the you know, earnings or to the to the

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<v Speaker 1>top line. But really what you're going to see is,

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<v Speaker 1>you know, you know, a few years later when most

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<v Speaker 1>of the applications that people are using would be cloud based.

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<v Speaker 1>Article wants to be a part fit at that point.

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<v Speaker 1>You don't want to be left behind, which is partially

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<v Speaker 1>the reason why you see a lot of cloud acquisitions

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<v Speaker 1>in the space. SAP has been acquiring a lot of

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<v Speaker 1>entities for the past few years. Article actually has been

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<v Speaker 1>a lot a little you know, quieter on on the

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<v Speaker 1>acquisition front compared to these some of the other companies. Well,

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<v Speaker 1>I'm just looking at the performance of the stock of

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<v Speaker 1>Oracle today. Investors must like the deal because the shares

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<v Speaker 1>are higher by about three quarters of a percent. Shares

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<v Speaker 1>of net Suite are higher by more than eighteen percent.

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<v Speaker 1>Any chance that anybody else is going to come in

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<v Speaker 1>and make a competing bid for net Suite. I mean,

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<v Speaker 1>I'm leading you on because I want you to tell

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<v Speaker 1>me who's the biggest shareholder of net suite. It's lady

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<v Speaker 1>is one of the biggest area, one of the biggest shareholders.

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<v Speaker 1>But the thing is, I think that the valuation for

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<v Speaker 1>this particular deal, let close to eleven plus times revenue,

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<v Speaker 1>is one of the more expensive ones on the market.

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<v Speaker 1>So it's not as if you know, he's he's getting

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<v Speaker 1>a bargain over here, uh um, you know, in this deal.

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<v Speaker 1>So I know it will be very tough for somebody

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<v Speaker 1>else to come in and you know, either top the

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<v Speaker 1>price or try to get it with so much of

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<v Speaker 1>you know, voting power that Larry has. Is there a

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<v Speaker 1>risk of a disruptor of a whole other approach to this,

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<v Speaker 1>this kind of uh task inside a company that you know,

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<v Speaker 1>or a call the spends way to keep up, but

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<v Speaker 1>someone else it's going to leap frog ahead. It's going

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<v Speaker 1>to be tough only because you have a lot of

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<v Speaker 1>customer relationships and your systems are already ingrained to what

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<v Speaker 1>you do, whether it's supply chain, whether you're serial accounting,

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<v Speaker 1>I mean you're that's the lifeline of a particular business,

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<v Speaker 1>so it's not just easy to uproot it. And which

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<v Speaker 1>is partly the reason why the on premise business is

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<v Speaker 1>still relatively stable for a SAP is because it's just

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<v Speaker 1>not easy to rip it about. I want to thank

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<v Speaker 1>you very much for coming and sharing all this information

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<v Speaker 1>with us. On A. Rag Arana is a senior analyst

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<v Speaker 1>of software and I T services for Bloomberg Intelligence, providing

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<v Speaker 1>real time and unique research as well as context and

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<v Speaker 1>a variety of industries as well as markets and government

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<v Speaker 1>factors that affect business operations are terminal. Customers can access

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<v Speaker 1>this function at b I go on or speaking about

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<v Speaker 1>Oracles nine point three billion dollar purchase of net Suite,

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<v Speaker 1>shares of net Suite higher right now by more than

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<v Speaker 1>eighteen shares of Oracle up by three quarters of represent

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<v Speaker 1>and the shares of Salesforce dot Com up more than

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<v Speaker 1>one percent. This is taking stock. I'm pim Fox, my

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<v Speaker 1>co host Kathleen Hayes, and this is Bloomberg. Where does

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<v Speaker 1>Hillary Clinton go? And next We're going to be speaking

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<v Speaker 1>with Irene Finnel Hanegman from Columbia University about Clinton's platform

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<v Speaker 1>and what it means for the economy.