As news of the SEC complaint filed against Goldman Sachs (NYSE: GS) is pushing everything else off the news feeds, this morning’s purchase of drug software company by Oracle Corp. (NASDAQ: ORCL) of Phase Forward Inc. (NASDAQ: PFWD) for $17/share in cash deserves a little attention too. The offer represents a premium of 30% to Phase Forward’s Thursday closing price, and totals about $685 million.
Phase Forward shares are up about 28% on more than 40X normal volume after the announcement. The deal has already spawned two potential lawsuits against Phase Forward for failing to consider other offers for the company and selling out too cheap.
Phase Forward sells software that drug companies and research institutions use to track clinical trials beginning at Phase 1 on through drug safety monitoring. Phase Forward’s managers and employees will be absorbed into Oracle’s Health Sciences Global Business Unit. In its most recent quarterly report, Phase Forward reported revenues of about $59 million and EPS of $0.13. Analysts are expecting about $57 million in revenues for the quarter ending in March and EPS of $0.12.
The acquisition follows close on the heels of Oracle’s successful acquisition of Sun Microsystems for about $5.6 billion. That deal gave Oracle a foothold in server and storage business, and it is not a stretch to see how the company could have its eye on becoming an IT mega-vendo. If Oracle can integrate its many software products with a turnkey hardware solution, it will join a number of other technology companies that are aiming at the same target audience.
Cisco Systems (NASDAQ: CSCO), IBM Corp. (NYSE: IBM), and Hewlett-Packard (NYSE: HPQ) come to mind immediately. In order for Oracle to play in that ballpark it needs to acquire more and more varied solutions and capabilities. That’s a tall order, even for a company like Cisco, with nearly $40 billion in cash and short-term investments, more than double Oracle’s $17 billion war chest. IBM has a big head start in the mega-vendor sphere, and H-P is currently a strong second.
Oracle gets a strong vote of confidence from Scott McNealy, founder and chairman of Sun until last January. In an interview with Fortune magazine, McNealy lauds Oracle CEO Larry Ellison as a “great capitalist … [who]has found a way to extract every dollar he can from customers from every product he offers.”
McNealy also notes that unlike himself, Ellison is not into sharing technology, much like another high-powered technology executive, Apple’s (NASDAQ: AAPL) Steve Jobs. McNealy says that Apple is “beyond proprietary, and the consumer has no idea that they are checking into the roach motel.” McNealy, who never figured out a way to monetize Sun’s Java programming language, claims he balanced his own “raging” capitalism with a commitment to open source. That didn’t work out too well.
If Oracle is going to succeed at being a mega-vendor then it needs to be able to integrate the software it now controls as quickly as it can to the Sun server and storage platforms and get those products out to market before its competitors can respond. That won’t be easy, but then Oracle has really never done anything easy.
Paul Ausick
Take This Retirement Quiz To Get Matched With A Financial Advisor (Sponsored)
Take the quiz below to get matched with a financial advisor today.
Each advisor has been vetted by SmartAsset and is held to a fiduciary standard to act in your best interests.
Here’s how it works:
1. Answer SmartAsset advisor match quiz
2. Review your pre-screened matches at your leisure. Check out the
advisors’ profiles.
3. Speak with advisors at no cost to you. Have an introductory call on the phone or introduction in person and choose whom to work with in the future
Take the retirement quiz right here.
Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.
Editors' Picks
