US Technology sector is known for their high profile acquisition and many company busted due to those acquisition as unexpected downturn took Man Corporation by Surprise. Time Warner acquisition of AOL is one of the example where over inflated valuation dented Time Warner quarterly result post Internet bubble bust.
Then came out the hardware bust where in IBM, Sun Micro systems were forced to sell their business to reduce their losses as many software companies entered into collaborative Solution offering end to end services.
When whole world were busy in firing and downsizing their business; Visionary Larry Ellison initiated aggressive acquisition initiative. Oracle Management strategy were simple and that is identify, monitor their growth for few quarter, execute friendly or hostile acquisition, Realign the acquired business, made it profitable but insured that Oracle do low to mid size acquisition and ensured that their cash flow should take care of negative impact on their result and quickly repay any debt taken from the market. It helped Oracle to be the leader and trendsetter of Industry now instead of merely database solution provider.
They also moved quickly to cloud based services in order to ensure that they do not lose their long term servicing contract and at the same time ensured exponential growth in their cloud based software business.
Whereas Dell recently went for Mega Merger deal with EMC corporation in order to safeguard to their long term profitability as their PC and other Business is under tremendous pressure. They are trying to innovate new product line and also received very good reviews but it is taking more time than expected to achieve expected result. Dell eyed EMC as it will give them storage, Cloud and VM ware which is cash cow. Dell is in net debt post they went Private and now have to arrange around $50Bn to ensure seamless closure of acquisition. The$20 Bn bond floated by Dell received thumbs up from the Bond market but at the same time it carries multiple hidden threats. The volatile Storage market must be stable in order to enable the merged organization to service their debt. It would be multiyear process when they will out of net debt. Even though both the organization are trying to sell some of the noncore assets in order to generate around $15Bn in cash to reduce the cash burden but at the same time they have to take the major layoff way and subsequent one time charge to fulfil their commitment.
In my point of view,
“Oracle strategic move is concrete whereas Dell trying to do it in one shot. In that scenario; if Dell manages to pull up things then they are king else they will disappear in next few years. I only pray that recession should not hit the US, Japan, Europe and China Economy must lift at the earliest“.
On the other side,
Oracle is gaining market share and boosting their cash hoards every quarter along with right and left acquisition in a tactical way which they feel that will plug the unplugged component in their portfolio. Fantastic move by Larry and I will not surprised if they convert Oracle into default component in everybody life.
Originally published at www.linkedin.com.
Article Written By — Devendra Prasad