Oracle Sees Bright Horizons with Sun

Oracle hopes the deal will help more than double revenue within five years.
Posted October 16, 2009
By

- Reuters



SAN FRANCISCO (Reuters) - Oracle Corp CEO Larry Ellison talked up his company's prospects after a planned purchase of Sun Microsystems Inc, saying he hopes the deal will help more than double revenue within five years.

Ellison, who co-founded the company 32 years ago and built it into the world's No. 2 maker of business software, said his purchase of ailing Sun, the No. 4 computer server maker, will transform his company.

He plans to customize Oracle's software with Sun's hardware, selling specialized computers and storage devices that offer better performance than ones using hardware and software from other companies.

Investors have not embraced the deal, worrying that Sun will distract Oracle executives and hurt Oracle's margins. But Ellison asked investors to back his plan.

"We can't be copycats and win. You can't be the seventh mover and take the lead," he told more than 100 analysts and investors in San Francisco.

He said that while Oracle's margins will initially shrink following its purchase of money-losing Sun, he expects he will be able to run the business "very, very profitably."

Ellison also told the group he planned to remain aggressive in making acquisitions, saying there were some "terrific" candidates to choose from. He said he will consider buying other software and hardware companies.

Jefferies & Co analyst Ross MacMillan said that Ellison was persuasive in addressing investor concerns about the Sun acquisition.

"It was a very upbeat day," MacMillan said.

The software giant is also making a big bet on Web-based computer programs, a fast-growing segment of the tech sector that it has been slow to enter.

Senior company executives said that they will release a suite of 43 Web-based software modules to help corporations manage tasks from accounting and human resources to sales and procurement.

That will give Oracle the broadest selection of so-called cloud-based business management applications for large corporations of any major technology company. Rivals such as Salesforce.com Inc and SAP AG currently offer a limited selection of such products focused on software for managing sales activities.

Senior Vice President Anthony Lye said in an interview that the products will be released next year as part of Oracle's highly anticipated new line of Fusion Apps software.

Customers will have the option of buying programs to run in their own data centers or purchasing Web-hosted services from Oracle, he said. He spoke to Reuters on the sidelines of the investor conference.

Oracle is embracing cloud-based software as researchers forecast brisk sales growth for the sector, even as the overall tech market slumps. Such products are also known as Software as a Service, or SaaS.

Gartner Research expects 2009 SaaS sales to surge 22 percent to a record $8 billion. The firm expects the market to grow at average annual rates of 19 percent through 2013, far above the 5 percent growth for the overall business management software market.

Fusion Apps is one of the most closely watched in Oracle's 32-year history. Ellison has staked his reputation on the success of the product, investing five years and billions of dollars on its development.

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