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| Oracle to Acquire NetSuite for $9.3 Billion | Oracle to Acquire NetSuite for $9.3 Billion |
| (about 2 hours later) | |
| When Evan M. Goldberg founded NetSuite in 1998, he did so with backing from his former boss, Lawrence J. Ellison, who started the software giant Oracle. | |
| On Thursday, their relationship came full circle as Oracle agreed to acquire NetSuite for $9.3 billion to beef up its cloud offerings. | On Thursday, their relationship came full circle as Oracle agreed to acquire NetSuite for $9.3 billion to beef up its cloud offerings. |
| Oracle will pay $109 a NetSuite share in cash, according to a news release issued by Oracle on Thursday. That represents a 19 percent premium above NetSuite’s closing price on Wednesday. | Oracle will pay $109 a NetSuite share in cash, according to a news release issued by Oracle on Thursday. That represents a 19 percent premium above NetSuite’s closing price on Wednesday. |
| The NetSuite deal is Oracle’s largest acquisition since it bought PeopleSoft for $10.3 billion in 2004, according to data from Standard & Poor’s Global Market Intelligence. That deal, a hostile takeover fought out over 18 months, extended Oracle’s customer base and product offerings. | |
| It made Oracle bigger, but it did not change its business model. About 5,000 PeopleSoft employees, close to half the company, were laid off in the following months. | |
| The NetSuite purchase, on the other hand, is at the heart of Oracle’s fight to remake itself for the modern world of cloud computing, or providing accessing to vast computational resources over the internet. This transition has shaken up the software business for the last several years, as companies like Google, Microsoft and Amazon have created markets worth billions, and older companies like IBM, Hewlett-Packard and Oracle have struggled to change the way they make and sell their products. | |
| Mr. Ellison, through personal and family holdings, owns more than 40 percent of NetSuite, which makes the deal to acquire it a phenomenal payday for a man who was already among the world’s richest. | |
| NetSuite has more than 5,000 employees and specializes in accounting and other back-office e-commerce software, particularly for smaller businesses. It has also created online software for manufacturing. That is akin to some of Oracle’s software applications, but that online software is created, sold and serviced differently. | |
| Oracle has, for most of the last decade, bought cloud companies and spent big on remaking its engineering and sales staff for the cloud world. That has paid off some: In the last fiscal year, the company had $12.2 billion in core cloud software sales, an increase of 49 percent from fiscal 2014. | |
| That is enough to make Oracle one of the largest cloud companies, but it was still just 8 percent of the Oracle’s revenue. Overall revenue shrank 3 percent last year, as demand for older products fell. | |
| NetSuite’s chief executive, Zachary Nelson, is a well-regarded leader who also worked at Oracle and is close to Mr. Ellison. NetSuite has held customer events at Mr. Ellison’s Silicon Valley estate. He is likely to occupy a senior role at Oracle. | |
| “Oracle and NetSuite cloud applications are complementary, and will coexist in the marketplace forever,” Mark Hurd, chief executive of Oracle, said in the statement. | “Oracle and NetSuite cloud applications are complementary, and will coexist in the marketplace forever,” Mark Hurd, chief executive of Oracle, said in the statement. |
| An Oracle special committee made up of independent directors led the process to sign a deal with NetSuite. The transaction is expected to close in 2016, subject to regulatory approvals and agreement by a majority of NetSuite’s shareholders, not including shares owned by executives of NetSuite or anyone affiliated with Mr. Ellison. | An Oracle special committee made up of independent directors led the process to sign a deal with NetSuite. The transaction is expected to close in 2016, subject to regulatory approvals and agreement by a majority of NetSuite’s shareholders, not including shares owned by executives of NetSuite or anyone affiliated with Mr. Ellison. |
| Shares of NetSuite surged to a level just below the deal price in early trading on Thursday. | Shares of NetSuite surged to a level just below the deal price in early trading on Thursday. |