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York City realty investments. See them at n r i A dot Net. I'm Charlie Pellett and that's a Bloomberg business flash. You're listening to taking stock with pim Fox and kapolee knews on Bloomberg Radio. The race is on an Oracle took a big step today buying net Suite in a deal valued at about nine point three billion dollars. Netsuites products include customer relationship management software that will help Oracle compete against the likes of Salesforce, dot Com and Microsoft.
Joining us now is on rog Rana. He's senior analyst of software and I t services for Bloomberg Intelligence on Rock. Welcome. Thank you. Now we know Oracle has been heading in this direction as you were just telling me. Uh. In fact, Larry Allison was a h investor in net Suite along the way, so not exactly a surprise. How important is this for Oracle? It's fairly important for Oracle to be
much more aggressive in the cloud applications space. Um, they have been behind salesforce, they have been behind work day when it comes to applications that are sold through the cloud. Now, the history is both SAP and Article has dominated this place for the last twenty plus years selling on premise applications. Now with this new way of selling applications through the cloud.
You know, the three largest companies have been sales course worked in net suite and you know a few smaller ones and the growth is all in the cloud area. So as Article is trying to move their product portfolio from on premise to the cloud, you know this kind of fits into their uh, you know, grow organically as
well as through acquisition strategy. On a rug, just to describe CRM customer relationship management, we're talking about being able to manage a salesforce and their interaction with current clients but also potential clients. Doesn't really matter whether it's in the cloud or wherever it is, just has to work. Net suite do they bring small and mid size businesses to Oracle in a way that is almost you know, one of the reasons why you want to buy that sweet,
so that a couple of things first. In the CRM space, you know, the big goodll Obviously Salesforce, dot Com, um next wee does not do that. The net Sweet is in the e r P space, which is your financial accounting, financial management and things like that, and only for the small to midside, mostly for the small to midsize customers.
As you said, UM, so far we really don't have a bohemoth like Salesforce for CRM or work Day for HR applications um in in the e r P space, most of those are on premise applications that were deployed by s a P. Now Article has a product which is a cloud based the RP system. But what I think will happen with this this place is you have the next SWEET product. You have the financial and the sales and marketing arm of of Article, which now you can go and start selling this product to the to
the large enterprises. How much does this mean for Oracle's bottom line? See again, it's it's more of a strategic move because again it's not going to add that much to the you know, earnings or to the to the top line. But really what you're going to see is, you know, you know, a few years later when most of the applications that people are using would be cloud based. Article wants to be a part fit at that point.
You don't want to be left behind, which is partially the reason why you see a lot of cloud acquisitions in the space. SAP has been acquiring a lot of entities for the past few years. Article actually has been a lot a little you know, quieter on on the acquisition front compared to these some of the other companies. Well, I'm just looking at the performance of the stock of Oracle today. Investors must like the deal because the shares
are higher by about three quarters of a percent. Shares of net Suite are higher by more than eighteen percent. Any chance that anybody else is going to come in and make a competing bid for net Suite. I mean, I'm leading you on because I want you to tell me who's the biggest shareholder of net suite. It's lady is one of the biggest area, one of the biggest shareholders.
But the thing is, I think that the valuation for this particular deal, let close to eleven plus times revenue, is one of the more expensive ones on the market. So it's not as if you know, he's he's getting a bargain over here, uh um, you know, in this deal. So I know it will be very tough for somebody else to come in and you know, either top the price or try to get it with so much of
you know, voting power that Larry has. Is there a risk of a disruptor of a whole other approach to this, this kind of uh task inside a company that you know, or a call the spends way to keep up, but someone else it's going to leap frog ahead. It's going to be tough only because you have a lot of customer relationships and your systems are already ingrained to what you do, whether it's supply chain, whether you're serial accounting, I mean you're that's the lifeline of a particular business,
so it's not just easy to uproot it. And which is partly the reason why the on premise business is still relatively stable for a SAP is because it's just not easy to rip it about. I want to thank you very much for coming and sharing all this information with us. On A. Rag Arana is a senior analyst of software and I T services for Bloomberg Intelligence, providing real time and unique research as well as context and a variety of industries as well as markets and government
factors that affect business operations are terminal. Customers can access this function at b I go on or speaking about Oracles nine point three billion dollar purchase of net Suite, shares of net Suite higher right now by more than eighteen shares of Oracle up by three quarters of represent and the shares of Salesforce dot Com up more than one percent. This is taking stock. I'm pim Fox, my co host Kathleen Hayes, and this is Bloomberg. Where does
Hillary Clinton go? And next We're going to be speaking with Irene Finnel Hanegman from Columbia University about Clinton's platform and what it means for the economy.