Oracle seals $5.3bn deal for Micros Systems – but analysts say it should be buying SaaS

By Graeme Burton
24 Jun 2014 View Comments

Software giant Oracle has finally sealed its long-rumoured $5.3bn deal to acquire Micros Systems, a hospitality and retail systems vendor, as it bids to reinvigorate the company's growth.

Micros Systems, founded in 1978, has grown at low double-digit percentages in recent years and its business is split about 50-50 between point-of-sale terminals and software for restaurants and retail, and management software for hotels. The company enjoys steady recurring revenues and is also an Oracle database reseller.

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Micros Systems' customers include Burger King, Ben & Jerry's, and Hilton, Hyatt and Marriott hotel chains in the US. In the UK, where it acquired Torex Retail in 2012, it boasts River Island, Monsoon and Best Western among its customers. 

The deal is the biggest for Oracle since its $7.4bn purchase of Sun Microsystems in 2010 - although sales of Sun hardware, particularly servers, have fallen since that deal. It also comes nine years after Oracle acquired retail software provider Retek for $630m. 

Some commentators suggested that the deal was intended purely to propel revenue growth at Oracle that could not be generated organically after revenue growth flattened - even falling by four per cent in its fiscal third quarter

However, financial analysts were more positive, suggesting that the two companies fitted together well as the acquisition would improve Oracle's presence in retail and hospitality.

Summit Research Partners analysts Richard Williams and Srini Sundararajan wrote in a research note: "We think a deal could make sense from a number of perspectives. One aspect would be vertical expertise in parts of retail that are spending increasing amounts on IT infrastructure. Another would be to provide tighter integration between Oracle's database and software stack for hotel retailers."

The deal will close in the second half of the year and will add to Oracle's non-GAAP revenues and income straight away.

However, analysts at US investment bank Stifel wrote that while the deal "would be a modest positive" for Oracle, "we ultimately believe that Oracle would be better off using $5bn of cash to buy more pure software-as-a-service assets".

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