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Speaker 1: A dot Net. I'm Charlie Pellett and that's a Bloomberg
Speaker 1: business flash. You're listening to taking stock with pim Fox
Speaker 1: and kapolee knews on Bloomberg Radio. The race is on
Speaker 1: an Oracle took a big step today buying net Suite
Speaker 1: in a deal valued at about nine point three billion dollars.
Speaker 1: Netsuites products include customer relationship management software that will help
Speaker 1: Oracle compete against the likes of Salesforce, dot Com and Microsoft.
Speaker 1: Joining us now is on rog Rana. He's senior analyst
Speaker 1: of software and I t services for Bloomberg Intelligence on Rock. Welcome.
Speaker 1: Thank you. Now we know Oracle has been heading in
Speaker 1: this direction as you were just telling me. Uh. In fact,
Speaker 1: Larry Allison was a h investor in net Suite along
Speaker 1: the way, so not exactly a surprise. How important is
Speaker 1: this for Oracle? It's fairly important for Oracle to be
Speaker 1: much more aggressive in the cloud applications space. Um, they
Speaker 1: have been behind salesforce, they have been behind work day
Speaker 1: when it comes to applications that are sold through the cloud. Now,
Speaker 1: the history is both SAP and Article has dominated this
Speaker 1: place for the last twenty plus years selling on premise applications.
Speaker 1: Now with this new way of selling applications through the cloud.
Speaker 1: You know, the three largest companies have been sales course
Speaker 1: worked in net suite and you know a few smaller
Speaker 1: ones and the growth is all in the cloud area.
Speaker 1: So as Article is trying to move their product portfolio
Speaker 1: from on premise to the cloud, you know this kind
Speaker 1: of fits into their uh, you know, grow organically as
Speaker 1: well as through acquisition strategy. On a rug, just to
Speaker 1: describe CRM customer relationship management, we're talking about being able
Speaker 1: to manage a salesforce and their interaction with current clients
Speaker 1: but also potential clients. Doesn't really matter whether it's in
Speaker 1: the cloud or wherever it is, just has to work.
Speaker 1: Net suite do they bring small and mid size businesses
Speaker 1: to Oracle in a way that is almost you know,
Speaker 1: one of the reasons why you want to buy that sweet,
Speaker 1: so that a couple of things first. In the CRM space,
Speaker 1: you know, the big goodll Obviously Salesforce, dot Com, um
Speaker 1: next wee does not do that. The net Sweet is
Speaker 1: in the e r P space, which is your financial accounting,
Speaker 1: financial management and things like that, and only for the
Speaker 1: small to midside, mostly for the small to midsize customers.
Speaker 1: As you said, UM, so far we really don't have
Speaker 1: a bohemoth like Salesforce for CRM or work Day for
Speaker 1: HR applications um in in the e r P space,
Speaker 1: most of those are on premise applications that were deployed
Speaker 1: by s a P. Now Article has a product which
Speaker 1: is a cloud based the RP system. But what I
Speaker 1: think will happen with this this place is you have
Speaker 1: the next SWEET product. You have the financial and the
Speaker 1: sales and marketing arm of of Article, which now you
Speaker 1: can go and start selling this product to the to
Speaker 1: the large enterprises. How much does this mean for Oracle's
Speaker 1: bottom line? See again, it's it's more of a strategic
Speaker 1: move because again it's not going to add that much
Speaker 1: to the you know, earnings or to the to the
Speaker 1: top line. But really what you're going to see is,
Speaker 1: you know, you know, a few years later when most
Speaker 1: of the applications that people are using would be cloud based.
Speaker 1: Article wants to be a part fit at that point.
Speaker 1: You don't want to be left behind, which is partially
Speaker 1: the reason why you see a lot of cloud acquisitions
Speaker 1: in the space. SAP has been acquiring a lot of
Speaker 1: entities for the past few years. Article actually has been
Speaker 1: a lot a little you know, quieter on on the
Speaker 1: acquisition front compared to these some of the other companies. Well,
Speaker 1: I'm just looking at the performance of the stock of
Speaker 1: Oracle today. Investors must like the deal because the shares
Speaker 1: are higher by about three quarters of a percent. Shares
Speaker 1: of net Suite are higher by more than eighteen percent.
Speaker 1: Any chance that anybody else is going to come in
Speaker 1: and make a competing bid for net Suite. I mean,
Speaker 1: I'm leading you on because I want you to tell
Speaker 1: me who's the biggest shareholder of net suite. It's lady
Speaker 1: is one of the biggest area, one of the biggest shareholders.
Speaker 1: But the thing is, I think that the valuation for
Speaker 1: this particular deal, let close to eleven plus times revenue,
Speaker 1: is one of the more expensive ones on the market.
Speaker 1: So it's not as if you know, he's he's getting
Speaker 1: a bargain over here, uh um, you know, in this deal.
Speaker 1: So I know it will be very tough for somebody
Speaker 1: else to come in and you know, either top the
Speaker 1: price or try to get it with so much of
Speaker 1: you know, voting power that Larry has. Is there a
Speaker 1: risk of a disruptor of a whole other approach to this,
Speaker 1: this kind of uh task inside a company that you know,
Speaker 1: or a call the spends way to keep up, but
Speaker 1: someone else it's going to leap frog ahead. It's going
Speaker 1: to be tough only because you have a lot of
Speaker 1: customer relationships and your systems are already ingrained to what
Speaker 1: you do, whether it's supply chain, whether you're serial accounting,
Speaker 1: I mean you're that's the lifeline of a particular business,
Speaker 1: so it's not just easy to uproot it. And which
Speaker 1: is partly the reason why the on premise business is
Speaker 1: still relatively stable for a SAP is because it's just
Speaker 1: not easy to rip it about. I want to thank
Speaker 1: you very much for coming and sharing all this information
Speaker 1: with us. On A. Rag Arana is a senior analyst
Speaker 1: of software and I T services for Bloomberg Intelligence, providing
Speaker 1: real time and unique research as well as context and
Speaker 1: a variety of industries as well as markets and government
Speaker 1: factors that affect business operations are terminal. Customers can access
Speaker 1: this function at b I go on or speaking about
Speaker 1: Oracles nine point three billion dollar purchase of net Suite,
Speaker 1: shares of net Suite higher right now by more than
Speaker 1: eighteen shares of Oracle up by three quarters of represent
Speaker 1: and the shares of Salesforce dot Com up more than
Speaker 1: one percent. This is taking stock. I'm pim Fox, my
Speaker 1: co host Kathleen Hayes, and this is Bloomberg. Where does
Speaker 1: Hillary Clinton go? And next We're going to be speaking
Speaker 1: with Irene Finnel Hanegman from Columbia University about Clinton's platform
Speaker 1: and what it means for the economy.