Oracle
ORCL
is holding discussions with
Cerner Corporation
CERN
regarding a potential takeover,
per The Wall Street Journal report.
Based in North Kansas City, MO, Cerner provides healthcare information technology (HCIT) solutions worldwide. The company offers software and hardware solutions that give healthcare providers secure access to clinical, administrative and financial data in a short time. The company continues to benefit from electronic health record (EHR), electronic patient record (EPR) or electronic medical record (EMR) platforms.
There has been no official word on the matter from either company. Following the report, shares of Oracle fell 6.4%, Cerner shares increased 12.9% on Dec 17.
The potential acquisition could cost Oracle nearly $30 billion, making it the largest ever acquisition for the tech giant, added WSJ. Some of Oracle’s most notable acquisitions include NetSuite (for $9.3 billion in 2016), MICROS System ($5.3 billion in 2014) and Sun Microsystems ($7.4 billion in 2010).
Oracle Corporation Price and Consensus
Oracle Corporation price-consensus-chart
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Oracle Corporation Quote
Why Could Oracle be Eyeing Cerner?
According to a Bloomberg report,
the Cerner acquisition could boost Oracle’s cloud business in the lucrative healthcare domain. The global healthcare cloud computing market is expected to witness a CAGR of 14.1% between 2021 and 2026 and reach $52.3 billion,
according to a Mordor Intelligence report.
Citing a Bloomberg Intelligence analyst, the Bloomberg report further stated that with the Cerner buyout, Oracle could focus more on its applications business as the infrastructure business continues to perform weak.
Oracle is striving to gain a bigger share of the worldwide cloud market to boost the top line. The company’s infrastructure-as-a-service (IaaS), software-as-a-service (SaaS) and platform-as-a-service (PaaS) products are likely to gain strong traction over the next few years as enterprises rapidly migrate to the cloud environment.
For second-quarter fiscal 2022
, management noted that the company’s IaaS and SaaS business increased 22% to $2.7 billion, respectively. Oracle’s Cloud services and license support revenues (73% of total revenues) in the reported quarter increased 6% year over year (up 6% at constant currency or cc) to $7.554 billion. The upside can be attributed to continued strength in the Fusion, Autonomous Database and Oracle Cloud Infrastructure (OCI) services.
Applications revenues (contributed 41.7% to total cloud services and license support revenues) amounted to $3.149 billion, up 9% year over year (up 8% at cc).
The higher availability of Oracle cloud regions globally is expected to bolster its competitive position in the cloud computing space. In October 2021, Oracle announced that it would open 14 new cloud regions across Europe, the Middle East, Asia Pacific and Latin America to support its cloud services platform.
However, Oracle faces stiff competition from the likes of
Amazon
AMZN
Amazon Web Services (“AWS”) and
Microsoft
’s
MSFT
Azure, which lead the global cloud market.
In the last reported quarter, Amazon’s AWS revenues (15% of total company sales) rose 39% year over year to $16.1 billion. Expansion in the AWS services portfolio is helping Amazon to maintain its dominance in the cloud domain by gaining more customers.
Microsoft’s performance is benefitting from strength in the Azure cloud platform amid the accelerated digital transformation taking place globally. Microsoft reported a 50% year-over-year (up 48% at constant currency) increase in Azure and other cloud services’ revenues in first-quarter fiscal 2022. The company is also looking to boost its share in the healthcare cloud computing domain.
In April 2021, Microsoft
announced
its intent to acquire Nuance Communications for $19.7 billion (including Nuance’s net debt) in an all-cash deal. The acquisition of Nuance Communications is expected to increase Microsoft’s total addressable market or TAM in the healthcare vertical to $500 billion, noted the software giant. Nuance Communication specializes in offering innovative conversational Artificial Intelligence tools to boost business productivity.
Oracle currently carries a Zacks Rank #3 (Hold). You can see
the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
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