Oracle wants to proclaim it far and wide: it knows all about supporting business operations. The leader in enterprise software (70% of its sales), it also provides hardware and services to help companies improve their processes. Best known for its focus on databases, it offers aid in areas such as managing business data, collaboration and application development, customer relationship management, and supply chain management. In recent years the company has aggressively used acquisitions to expand, such as its entry into the hardware business with the purchase of Sun Microsystems. No single country outside the US accounts for more than 10% of sales, but combined, international customers represent nearly 60% of sales.
While rival Microsoft started as an operating system (OS) software company before horning in on the business process applications business, Oracle has, for the most part, avoided doing the reverse. Its forays into OS territory, with Solaris and Linux, focus on servers and workstations rather than PCs, as a support to its core business.
Oracle's software generally starts above the OS level, going from database to middleware and finally on to user applications. Middleware consists of applications such as Java, virtualization software, and service-oriented architecture that form the bridge between operating systems and user applications. On the front lines are its user applications, which have grown with major brands such as Siebel (customer relationship management), PeopleSoft (human capital management), and JD Edwards (financials).
Formed in 2010 with the Sun acquisition, Oracle's entry into the hardware business was a strategic move to provide a differentiated product by engineering hardware and software that are optimized to work together. Oracle increases its competitive advantage, however, by also working to ensure its hardware systems work easily even with competitor software, like those from Germany-based rival SAP. Hardware offerings mainly consist of servers and storage products, and includes the Solaris OS as well as Linux systems that also support its focus on database, middleware, and applications.
Finally, Oracle's services business offers consulting in a variety of related areas such as business and IT alignment and enterprise architecture, as well as helping customers not only choose, but implement, integrate, and enhance the products they need. The company hasn't been left in the dust on cloud services, either, offering monitoring, security, management, and more, whether remotely through its data centers or onsite.
The company's strong licensing sales and distributed geographic presence have allowed Oracle to grow sales and net income year over year through the global economic downturn while many competitors faltered. As well as the company has done in recent rough times, the more than 40% increase in fiscal 2011 wasn't, as one would guess, typical. That year's exceptional performance was due mainly to the Sun acquisition of 2010 finally having a full year's impact. Revenues for fiscal 2012 (ended May) were up a more modest 4%, climbing to more than $37 billion, with net income rising 17% to nearly $10 billion, continuing a profit margin that hovers close to 25%. Software did the heavy lifting, growing nearly 10%, though it was virtually cancelled out by a dip in hardware systems sales, in contrast to its 2011 coming out.
In mid-2013 Oracle announced major partnerships with two rivals in an effort to enhance its cloud-based offerings. Under an agreement with Microsoft, the world's top software maker will run Oracle database software in its Windows Azure cloud platform; the collaboration also calls for other mixing of software. Under a nine-year agreement with salesforce.com, Oracle will integrate some of its programs with salesforce.com products and salesforce.com will increase its own use of Oracle products.
Mergers and Acquisitions
In recent years the company has faced a similar pleasurable dilemma encountered by peer Microsoft: what to do with a mountain of cash (about $15 billion at the end of fiscal 2012). One response has been acquisitions, collectively spending billions on complementary businesses and products, with the majority occurring in the US.
In early 2013, for some $1.7 billion, Oracle agreed to buy Massachusetts-based Acme Packet, maker of products under the Net-Net name that allow companies to send data securely across the Internet. It is the company's biggest push into the market for equipment that transports Internet data and moves it into the IP networking space (where Cisco is dominant).
In 2012 Oracle bore down on social media and the cloud, looking to combine its sales, service, commerce, data management, and analytics tools with social media software acquisitions to create a comprehensive social relationship management platform. The company bought Collective Intellect, a developer of cloud-based software used to monitor, understand, and respond to consumer conversations on social media platforms such as Facebook and Twitter. The purchase complements another 2012 acquisition, that of Vitrue, a developer of a cloud-based social marketing campaign application. Later that year it agreed to purchase cloud-based marketing automation software maker Eloqua for some $871 million.
Also in 2012 Oracle bought Skire, a provider of cloud-based management of capital projects, facilities, and real estate. In another 2012 acquisition, Oracle agreed to acquire SelectMinds, which provides social talent sourcing and corporate alumni management applications to organizations looking to use the Web to tap into the social connections of employees for new hire referrals.
The company is also looking to expand its network virtualization products through acquisitions. In 2012 Oracle agreed to buy Xsigo Systems, a provider of networking technology used by enterprise customers to simplify infrastructure in the cloud using software to connect any server to any network and storage. The purchase will extend Oracle's VM for server virtualization product line with Xsigo's network virtualization to give the company a more complete offering of virtualization capabilities for cloud environments.
Despite what its acquisition record may suggest, most of Oracle's products are developed internally, spending billions of dollars ($4.5 billion in each of fiscal 2011 and 2012), more than 10% of revenues, each year on R&D. Much of its R&D goes into ensuring its core database products continue to dominate that market, as well as toward investments to ensure that technology from various acquisitions is successfully integrated into its sprawling landscape of products. Still, acquisitions are not a passing fad at Oracle, but an integral part of its strategy.
Co-founder and CEO Larry Ellison owns more than 22% of the company, a holding that (along with other assets) routinely places the flashy and outspoken billionaire among the world's richest people.