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Oracle sets its sights on chipmaker acquisitions

by Sarah Griffiths on 24 September 2010, 16:54

Tags: Oracle (NASDAQ:ORCL)

Quick Link: HEXUS.net/qaz7h

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When the chips are down

Oracle is planning to snap up firms that make industry-specific software plus semiconductor companies.

The firm's CEO, Larry Ellison, said:"You're going to see us buying chip companies," according to Bloomberg, with Oracle set to add to its arsenal of 65 acquisitions over the past five years.

Oracle splashed the cash on Sun Microsystems in January and it is thought buying up chip makers would accelerate its move into computer hardware.

Speaking at the company's annual meet in San Francisco, Ellison reportedly said he wanted to mimic Steve Jobs' Apple model and own more of the intellectual property behind chips.

Apple has already got its own semiconductor businesses to help work on its iPad and iPhone and while Oracle has nabbed some chip know-how from its purchase of Sun Microsystems, it still uses personal computer chips from Intel and AMD.

Doug Freedman, an analyst at Gleacher & Co told the news service, Oracle may be keen to buy up semiconductor firms with technology for servers, with AMD, NVIDIA and IBM's chip division on its potential shopping list.

"You've got to think it's focused on enterprise hardware, on the server. AMD jumps off the screen," he reportedly said.

Both AMD and Nvidia's shares jumped in early trading in response to the rumours. AMD, Nvidia and IBM reportedly didn't comment on the rumours.

Ellison also told the news service the Oracle plans on acquiring companies that make software for specific industries to differentiate from its rivals like SAP AG.

"We want to play in every important industry," he reportedly added.

The controversial appointment of HP's Mark Hurd had analysts guessing the company may pursue a hardware company buying programme and has been working on boosting the profits of its hardware business by cutting sales of its cheaper offerings.

According to Bloomberg, Oracle's hardware sales notched up a gross profit margin of 48 percent in Q1, compared with almost 73 percent for all its operations. It is believed it wants to double the sixe of its lucrative hardware business, which made $1.7bn last quarter.

Oracle is reportedly strategically pushing more pricey all-in-one computer systems to its customers, unveiling its Exalogic system this week.

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

 

Editor's comment: A quick look around the webosphere reveals a fair bit of chatter that ARM is also a possible acquisition target. It doesn't look like a tech CEO can so much as say the word chip without an ARM acquisition rumour springing up these days, and that's just fine by its shareholders.

Oracle is not shy about making big acquisitions, as the deals for Sun (which does have its own chip division), Siebel, PeopleSoft, etc show. But while buying either AMD or ARM would get Oracle a lot of chip engineering expertise, it would also launch it into markets way out of its enterprise comfort zone. It's one thing to aspire to offer complete enterprise solutions, quite another to get into consumer PCs or mobile phones.

It seems more likely that Oracle would behave like Apple did and acquire some smaller semiconductor companies that specialise in adapting existing designs for enterprise purposes, such as Smooth-Stone.

 



HEXUS Forums :: 6 Comments

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Didn't realise Oracle had so much money… Hope they leave AMD alone..
Brewster0101
Didn't realise Oracle had so much money… Hope they leave AMD alone..

Why? With Oracle's backing, AMD would have the backing of a company with a larger market cap than Intel (although a little over half the earnings)
badass
Why? With Oracle's backing, AMD would have the backing of a company with a larger market cap than Intel (although a little over half the earnings)

AMD as a company right now have to focus on two things: producing good CPU's and GPU's (and, well, putting them both together for ‘fusion’).

If AMD was part of a much larger company, especially one like Oracle where the focus is on enterprise systems rather than system builds me and you might put together, that focus and edge *could be* lost. In many cases, you just become another department, segment or subsidiary fighting for some investment and R&D money in a much larger machine.

Not saying that would happen but it's a risk. So I'd prefer them to leave AMD alone too :)
badass
Why? With Oracle's backing, AMD would have the backing of a company with a larger market cap than Intel (although a little over half the earnings)
Yeah, if you look at the raw “dollars and cents” then sure, taking over AMD makes sense for both companies. Trouble is that - as can be seen from the Sun takeover - Oracle have probably got past the size where they can manage new acquisitions effectively.

I'm sure Intel would probably welcome Oracle “helping” AMD - because it'd more or less hand Intel the desktop and laptop markets. Also I'm going to suggest that if you're running Intel chips on your desktop and in the box in your briefcase, then you're going to be favourably disposed towards that same maker for your servers. Finally can you see Oracle wanting to continue developing any of the ATi ranges? I can't!

So like “Brewster101” I'm hoping that AMD stay independent, if for no other reason than to keep the pressure on Intel.

Can't see IBM wanting to give up their fabs to Oracle (remember that Oracle are just as much as competitor to Big Blue as HP are these days), but I'm wondering what a potential Oracle takeover of ARM would do to all those ARM-derivatives, like the Snapdragon processors in many mobile phones?
crossy
Can't see IBM wanting to give up their fabs to Oracle (remember that Oracle are just as much as competitor to Big Blue as HP are these days), but I'm wondering what a potential Oracle takeover of ARM would do to all those ARM-derivatives, like the Snapdragon processors in many mobile phones?

Although Oracle and IBM are competitors, don't forget the Sun factories make the i and p series systems for IBM and they're essentially the same kit as Sun so it would make sense in that way. However with IBM's fabrication being so far advanced of AMD or Intel would IBM part with it ? will be interesting to see how it pans out….