Archive for September 24th, 2010

Oracle Plans to Acquire Chipmakers, Industry-Specific Software – Bloomberg

Oracle Plans to Acquire Chipmakers, Industry-Specific Software – Bloomberg.

Oracle Corp., building on a run of more than 65 acquisitions during the past five years, is looking to purchase semiconductor companies and makers of industry- specific software, Chief Executive Officer Larry Ellison said.

“You’re going to see us buying chip companies,” Ellison, 66, said yesterday at Oracle’s annual meeting in San Francisco. Acquiring chipmakers would further Oracle’s push into computer hardware, initiated in January with its purchase of Sun Microsystems Inc., a server manufacturer.

Ellison said he wants to follow the approach of Apple Inc. CEO Steve Jobs by owning more of the intellectual property that underpins computer chips. Apple has bought semiconductor makers to help develop devices such as the iPad and iPhone. Oracle already acquired some chip knowhow from Sun, which makes servers based on its own chip design, Sparc, while also using personal- computer chips from Intel Corp.and Advanced Micro Devices Inc.

Oracle may buy a semiconductor company with technology for servers, said Doug Freedman, an analyst at Gleacher & Co. in San Francisco. Potential targets include AMD, International Business Machines Corp.’s chip division and Nvidia Corp., he said.

“You’ve got to think it’s focused on enterprise hardware, on the server,” he said. “AMD jumps off the screen.”

Drew Prairie, a spokesman for Sunnyvale, California-based AMD, said the company doesn’t comment on rumors or speculation. Hector Marinez, a spokesman for Santa Clara, California-based Nvidia, also declined to comment. Lori Bosio, a representative of Armonk, New York-based IBM, didn’t return messages left after business hours yesterday.

Software Deals?

Oracle also plans to buy more makers of software focused on certain industries, Ellison said. By zeroing in on specific areas, the company aims to stand out from rivals such as SAP AG.

“We want to play in every important industry,” he said.

Oracle, based in Redwood City, California, fell 8 cents to $27.12 yesterday in Nasdaq Stock Market trading. The shares have climbed 11 percent this year.

Oracle, the world’s second-largest software company, had $23.6 billion in cash and short-term investments at the end of its fiscal first quarter. The company also hired former Hewlett- Packard Co. CEO Mark Hurd as co-president Sept. 6, leading analysts to predict that Oracle may acquire more hardware companies. HP is the world’s biggest computer maker.

As Oracle scouts for acquisition targets, it’s also working to make its hardware business more profitable by decreasing sales of lower-priced systems. Hardware sales yielded a gross profit margin of 48 percent in the first quarter, compared with 72.5 percent for the company as a whole.

Doubling Sales

Oracle plans to double the size of its hardware business, which generated $1.7 billion last quarter, Ellison said during a conference call last week.

The company is selling customers more high-end computer systems that contain computing power, storage, network connectivity and software designed to work together. Oracle introduced two such systems this week: Exalogic and a new version of its Exadata computer.

“I would be stunned if 10 years from now, most data centers didn’t rely on these engineered systems,” Ellison said. “We’re betting that this is the future of computing.”

To contact the reporters on this story: Aaron Ricadela in San Francisco at aricadela@bloomberg.netIan King in San Francisco atianking@bloomberg.net

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