Guest blog by Verlin Youd, Global Technology Solutions executive and Managing Director of VPY llc, an industry strategic advisory firm focused on retail.
Oracle buys Micros for Oracle for $5.3 billion. They have just fired the first shot in what is sure to be the latest battle of acquisitions in the retail and hospitality solution space. I won’t cover the details of this deal, as they can be found at http://goo.gl/txLo5h and in plenty of other places online. As Oracle has done in the past, they have kicked off another round of industry buying as they did in May of 2005 by buying Retek, followed quickly by acquiring ProfitLogic and 360Commerce over the next several months. Watch out for fast followers, purchases by the normal cast of characters, including SAP, IBM, NCR, JDA, and more. Although speculation on these subsequent acquisitions would be entertaining, I’ll save that for discussions over a beverage or two.
Here’s the real question with Oracle spending $ 5.3 Billion for Micros, “Is it a smart move or not?” Here’s the way I see it. I am sure there are differing opinions and I’d love to hear them, so please post comments.
There are some positives to be had for the $ 5.3 Billion spent:
- Someone needs to create some excitement in the retail solution space, by making a big move. The last big moves were in April 2012 when IBM sold their Retail Store Solution (RSS) business to Toshiba for $ 850 million to create Toshiba Global Commerce and November of 2012 when NCR bought Retalix for $ 650 million. The retail industry needs this kind of activity to keep energy high and focus on solutions that matter to consumers daily.
- Oracle is acquiring a solid, if not exciting, player in the retail and hospitality industry. Although revenue has been flat over the last three years, analysts are projecting 18% earnings growth over the next few years.
- Micros has delivered some solid and widely installed solutions. Although not recently known for innovation, Micros has a reputation for delivering solutions that work day in and day out.
- Micros have a lot of installed clients, especially in hospitality. This should provide fertile ground for cross-selling other Oracle solutions that can help retail businesses deal with today’s ever challenging retail environment.
- Oracle certainly has the classic opportunity to leverage “synergies” in shedding duplicate resources in everything from corporation functions like finance, human resources, and real estate to sales, support, and consulting along with product and roadmap rationalization.
Now for the negatives of spending $ 5.3 Billion for Micros:
- $ 5.3 Billion is a LOT of cash. Could they have bought it for less? Again, IBM sold its market-leading Retail Store Solutions (RSS) unit, arguably the most successful retail hardware & software business in the last 20 years, to Toshiba for $ 850 million, even with IBM’s RSS annual revenue’s estimated to be in the same ballpark as Micros annual revenues.
- Oracle now owns a new, and truth be told, messy solution portfolio; an amalgamation of legacy and new solutions, including some bits and pieces of products and services picked up in various buys and sells. It is impossible to overestimate the significant challenge of rationalizing the Micros portfolio, not only with the existing Oracle Retail portfolio, but also with the broader Oracle portfolio as a whole.
- There are higher growth solution and investments that could have been made. Micros’ projected profit growth of 18% over the next few years is not bad for a legacy solutions business, but flat revenue growth is not good at all. With Micros’ stagnating revenues, there are plenty of other industry solution investments that could provide much higher returns, and “synergies” for that matter. What if Oracle had invested the same amount in consolidating solution providers with leading edge, cloud-based, SaaS solutions in video analytics, customer experience, channel integration, mobility, and workforce management, just to name a few. For the same investment, they could have disrupted several budding solution areas, delivered something truly innovative and changed the face of retail for the next decade or more, while leveraging their own foundational technologies and solutions.
- The other firms that will now launch into acquisition mode have a great chance to outshine this move by Oracle. How about SAP buying Toshiba Global Commerce? What about NCR buying JDA? What about IBM buying SAS? Maybe Wincor buying Epicor? What about someone being smart enough to create a new business through the acquisition of 10-15 more innovative and fast growing retail solution businesses? I could write a post just on the possibilities…
- Did I mention, $ 5.3 Billion is a LOT of money?
In the end, the deal will be done, integration will occur, the blocking and tackling of making it work financially will be accomplished by the teams that Oracle uses to do this regularly. But to be honest, that just doesn’t sound very exciting and doesn’t really seem like Larry Ellison and Oracle’s style. It will be fun to watch the purchases to follow by others. However, it still leaves me asking, “Really? $5.3 Billion. Really?”
Verlin Youd is the managing director of VPY llc, an industry strategic advisory firm, when he’s not fully occupied in an executive role in a leading industry solution provider. He is an active evangelist of industry-focused solutions and services globally and his prior experience includes senior executive positions at attune Consulting, SCOPIX, SAP, Motorola, Symbol Technologies, Systech Retail Systems, and IBM. He can be reached at http://www.linkedin.com/in/vyoud/ or https://twitter.com/VPYoud
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