Should Oracle Start Another Buyout Binge Today?

Sometimes I worry about Oracle (Nasdaq: ORCL  ) .

The company always seems healthiest with a very large acquisition freshly tucked under its belt. And that appetite is getting out of hand. Oracle has spent more than $4 billion at the buyout mall over the last year, and that's still not enough to keep the needle moving.

Well, you know what they say -- starve a fever and feed a cold. Maybe Oracle just needs another huge meal to get back on its feet again.

In the just-reported fourth quarter of 2012, Oracle boosted its total revenue by a measly 1% year over year. Software sales jumped 7% but hardware swooned by 16%. $4 billion worth of new operations would be game-changing for many companies, but it's barely enough to keep Oracle treading water.

In all fairness, two of Oracle's three largest buyouts in the past year only closed in the middle of the fourth quarter and never had a chance to do much good for this period. CEO Larry Ellison stated that these two additions, RightNow Technologies and Taleo, transformed Oracle into the second-largest software-as-a-service vendor in the world. That's presumably behind SaaS expert salesforce.com (Nasdaq: CRM  ) , which sports a $2.4 billion sales run rate versus Oracle's segment bookings "approaching $1 billion" today.

The fourth quarter's $10.9 billion of total sales matched Wall Street's estimates, and $0.82 in non-GAAP earnings per share beat the average analyst target by 5%. Fighting currency-related headwinds, that's a 10% annual earnings jump. So I have to applaud the company's tight grip on the operational reins, even in the face of modest sales growth. Management took pains to point out that these results happened in spite of the fiscal drama going on in Europe.

So Oracle muddled its way through some tough economic times but still relies on huge acquisitions to keep the growth engines running. Management just approved another $10 billion of share buybacks, which seems opportunistic in light of a share price that crashed hard six months ago and never really recovered.

But with a buyout track record like Oracle's and the less-than-stellar value most buyback programs really bring, I'm pretty sure that Ellison would have been better off earmarking that $10 billion check for another splashy buyout bid. That's just how Oracle rolls.

By hook, by crook, or by big-ticket buyouts, Oracle is bound and determined to stake a territory in the booming big-data market. But there are even stronger and more specialized players in that sector. This free report shows you the only stock you need to profit from the new technology revolution in data mining and business intelligence.

Fool contributor Anders Bylund holds no position in any of the companies mentioned. Check out Anders' holdings and bio, or follow him on Twitter and Google+. The Motley Fool owns shares of salesforce and Oracle. Motley Fool newsletter services have recommended buying shares of salesforce. The Motley Fool has a disclosure policy.

We Fools may not all hold the same opinion, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


Read/Post Comments (1) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1919940, ~/Articles/ArticleHandler.aspx, 10/21/2014 8:29:48 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement