Oracle to Splurge Big Money on Micros

Edited by Vani Rao

Strategic acquisition to help Oracle focus on hospitality industry

It seems to be raining M&As this year, heralding the revival of the economic growth after a slow start to the year. Expensive technology acquisitions have bagged headlines in the first half of 2014 with the purchase of popular, fast-growing companies such as OpenTable Inc. and WhatsApp Inc. Joining the other high-profile takeovers, technology giant Oracle Corp. (NYSE:ORCL) announced on June 24, 2014, that it has agreed to buy Columbia, Maryland-based Micros Systems Inc. (NASDAQ:MRCS) for $5.3 billion.

B 1Micros, Oracle’s biggest acquisition since its $5.7 billion takeover of Sun Microsystems Inc. in 2010, is a provider of software for the hospitality and retail verticals. It mainly caters to the software needs of Starwood Hotels, Ikea, SeaWorld and London’s Wembley Stadium, as well as restaurants like TGI Friday’s and Ruth’s Chris Steakhouse. Micros develops software for revenue management, point-of-sale operations, and fraud prevention in the hospitality industry. It is also trying to boost sales in the cloud as well as develop applications for use in mobile phones and tablets.

“We anticipate delivering compelling advantages to companies within the hospitality and retail industries with the acquisition of Micros,” Oracle Co-President Mark Hurd said in a statement about the deal yesterday. In recent years, cloud, mobile, and big data have a significant impact on every industry. This in turn has encouraged companies to upgrade their technology in order to compete effectively in the market place. With the Micros acquisition, Oracle sees a huge opportunity in the market for application software for retailers and hotels.

Restaurants Embrace Technology

B 2The number of M&As in the hospitality industry for technology providers is expected to increase during the year as restaurants have embraced technology like never before. Earlier this month, Priceline Group Inc. (NASDAQ: PCLN) agreed to buy OpenTable for $2.6 billion to offer restaurant bookings in its travel business. Google Inc. (NASDAQ:GOOG) added on the staff of Appetas Inc., a startup that helps restaurants build better websites, in an “acqui-hiring” deal. According to a 2013 survey by the National Restaurant Association, many restaurants plan to increase their spending on customer-facing technology such as mobile applications this year, with half of casual-dining operators and 41% of family-dining establishments anticipated to go the same way. Moreover, it is estimated that the total point-of-sale software market in the US will expand to $1.3 billion this year.

As a result, there is a big rush among technology companies to cater to the software needs of restaurants. NetSuite Inc. sells financial software to Australia’s Guzman y Gomez Mexican dining chain, while Intuit Inc. sells its QuickBooks small business accounting software to restaurants. G4Technologies Corp. provides its AccuBar beverage-tracking system to help restaurants manage their inventory. While technology occupies an important place in almost all industry verticals, the restaurant industry shows huge untapped potential for software firms. Further, the hotels, restaurants and leisure industry is witnessing rapid growth, making it the right time to invest here.

Source: Bloomberg
Source: Bloomberg

Rise in Appetite for Restaurants

For big technology companies like Oracle, acquiring a restaurant-based business will help it sell other product suites as well. Oracle has acquired several retail-specific software companies in the past few years to build up its offerings to restaurants, hotels, and other hospitality providers.

Whether to enhance shareholder value, attain tax efficiencies, or for strategic reasons, Oracle, which is faced with stagnating growth, is now focusing on some big ticket deals to drive growth in areas such as big data, cyber security and the cloud. Having made a late entry to the cloud-computing market, Oracle has acquired more than a dozen companies since the beginning of 2013, according to Bloomberg. In December 2013, it agreed to buy Responsys Inc. for $1.5 billion, followed by Acme Packet Inc. for about $2 billion. Oracle also announced the purchase of Eloqua Inc. in 2012.

 

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