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6/23/2014
12:23 PM
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Oracle Buys Mini Me In $5.3 Billion Micros Deal

Oracle nabs a software and hardware kingpin in hospitality and retail, but it won't do much for cloud growth.

Oracle made official its rumored acquisition of Micros Systems on Monday, announcing a whopping $5.3 billion deal for a company that's a small version of Oracle itself, with a mature software business, a sizeable hardware business, and a fledgling foothold in the cloud.

Like Oracle, Micros gets the biggest share of its revenue (about 40%) from software maintenance. Maintenance accounted for $482 million of the company's $1.2 billion in fiscal 2013 revenue. New software sales, by comparison, accounted for only 11.3%, or $143 million. And, like Oracle, Micros sells hardware, though mostly point-of-sale specialized workstations and terminals used in restaurant, hotel, and retail settings. This business accounted for 21%, or $269 million, of Micros's 2013 revenue.

[Want more on Oracle's latest financial results? Read Oracle Turns Cloud Corner.]

By comparison, Oracle netted 47% of its $38.2 billion in fiscal 2014 revenue from software maintenance, a healthier 25% from new software licenses, and 14% from its server- and engineered-systems-focused hardware business.

There's one other similarity that won't benefit Oracle much when it comes to one of its biggest growth objectives: cloud computing. Only 7%, or $86 million, of Micros's 2013 revenue was tied to hosting and software-as-a-service (with hosting outweighing SaaS business). At Oracle, SaaS, platform-as-a-service, and infrastructure-as-a-service accounted for a combined 4% of 2014 revenue.

What is Oracle getting in its largest deal since the $7.4 billion Sun Microsystems acquisition in 2009? It's mostly more maintenance revenue from a long list of well-known companies in the restaurant, hotel, and retail industries. These customer ties are not to be discounted when it comes to knocking heads with ERP and CRM competitors, including SAP, Infor, Microsoft Dynamics, and Salesforce.com.

Restaurants, hotels, cruise lines, casinos, and retailers are among Micros's biggest customers.
Restaurants, hotels, cruise lines, casinos, and retailers are among Micros's biggest customers.

Micros's long list of restaurant customers includes Buffalo Wild Wings, Cracker Barrel, Hard Rock Café, Hooters, IHOP, Ruby Tuesday's, and T.G.I. Friday's. Hotel and cruise customers include Best Western, Carnival, Celebrity, Fairmont, Four Seasons, MGM Resorts, Norwegian Cruise Lines, Ramada, Travelodge, Wynn, and Wyndham Resorts.

Oracle already has a big customer base in retail, but Micros's customer list includes Abercrombie and Fitch, Armani Exchange, Burberry Limited, Ikea, Jos. A. Banks Clothiers, Kingfisher, Starbucks, Tesco, and Zales. Other specialties for Micros include high-profile sports stadiums, theme parks, and casinos.

If there's a cloud angle in the Micros deal, it's the hope that Oracle will be able to use its multi-tenant Oracle 12c Database and growing PaaS and IaaS services to cloud-enable the heavily on-premises Micros software business. Oracle CEO Larry Ellison noted this strategy in last week's fourth-quarter earnings call with financial analysts, and it came up again in a statement from Micros president and CEO Peter Altabef.

"In combination with Oracle, we expect to help accelerate our customers' ability to innovate and differentiate their businesses by utilizing Oracle's technologies, cloud solutions, and scale," Altabef said.

Micros is a big user of Oracle database. With this deal, it's apparent that Oracle is hoping to do with Micros's business what it plans to do with its own: transform a mature, on-premises dominated software business into more of a cloud presence.

InformationWeek's new Must Reads is a compendium of our best recent coverage of the Internet of Things. Find out the way in which an aging workforce will drive progress on the Internet of Things, why the IoT isn't as scary as some folks seem to think, how connected machines will change the supply chain, and more (free registration required).

Doug Henschen is Executive Editor of InformationWeek, where he covers the intersection of enterprise applications with information management, business intelligence, big data and analytics. He previously served as editor in chief of Intelligent Enterprise, editor in chief of ... View Full Bio

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D. Henschen
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D. Henschen,
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6/23/2014 | 5:54:08 PM
Re: Larry Ellison's pinky is next to his lips.... "$1.2 billion in revenue"
$38.2 billion in revenue for Oracle vs. $1.2 billion for Micros makes it a "mini" if the "me" is Oracle.
Lorna Garey
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Lorna Garey,
User Rank: Author
6/23/2014 | 5:22:39 PM
Re: Larry Ellison's pinky is next to his lips.... "$1.2 billion in revenue"
Seems like more of the same Oracle focus on buying expertise in specific verticals. I read that Micros has more than 6,000 employees. Not so "mini" in reality.
Laurianne
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Laurianne,
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6/23/2014 | 3:26:28 PM
Micros
Micros has some big-name customers, for a company many people may not have heard of before today.
D. Henschen
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D. Henschen,
User Rank: Author
6/23/2014 | 1:09:24 PM
Larry Ellison's pinky is next to his lips.... "$1.2 billion in revenue"
Micros CEO Peter Altabef has his pinky next to his lips, too... "$5.3 billion dollars. Bwahaha!"

Micros competitor Jason Richelson, CEO of Shopkeep, comments "...independent retailers and restaurants need real, cloud-based tools to compete... Micros doesn't do cloud computing, it does hosting."

 
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