Mergers Benefit Bottom Line



Consolidation in the I.T. sector seems to paying off for two major vendors: Oracle and EMC Corp.

Oracle sees its acquisition of PeopleSoft Inc. as accelerating per-share earnings growth, forecasting a rise of 24% this year and between 22% and 28% next year. This month's PeopleSoft acquisition is fueling some of that growth by increasing its base of software subscribers, executives at the enterprise software vendor say.

The company's subscription-based pricing is becoming a larger share of Oracle's business each year. "It's now our largest business and it's our highest-margin business," CEO Larry Ellison told Wall Street analysts and investors last week. "It's a highly predictable, recurring revenue stream."

With the merger behind it, Oracle will pick and choose where to compete against SAP. It won't compete in auto-manufacturing or energy applications. "We won't go out and bang our heads against the wall," Ellison said. "But we don't think they can compete with us in banking."

Next year, Oracle sees sales topping $14.1 billion, with new license revenue of at least $4.3 billion.

Storage maker EMC also is reaping benefits from its string of software acquisitions. Software license revenue grew 43% last quarter, propelled by its purchases of Documentum, Legato, VMware, and other software companies, EMC reported last week.

EMC's revenue in 2004 rose 32% to $8.2 billion; profit rocketed 76% to $871 million.

CEO Joe Tucci sees 2005 as the year to expand the company's market share by accelerating the pace of innovation and counting more on channel partners.

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