Where next for Oracle's Ellison?

Oracle Corp Chief Executive Officer Larry Ellison has spent $33.5 billion buying the software maker's way into markets for telecommunications, retail and financial-services programs.

To keep his promise to double sales to $50 billion by 2012, Ellison needs to find a target in another big-spending industry, says Sarah Friar, an analyst at Goldman, Sachs & Co, and the likely choice is healthcare.

"If you're chasing dollars, there's probably nothing bigger than healthcare," said Friar in San Francisco. "The software that healthcare companies use is archaic. That's a big opportunity for Oracle."

It's also not a new idea for Ellison. The 63-year-old architect of 40 takeovers since 2005 had considered the sector five years ago. Oracle's board reviewed a list of potential acquisitions that included Cerner Corp.

The healthcare software maker with programs for handling electronic medical records, accounting and billing now has a market value of $3.71 billion. While Oracle hasn't made a public bid for Cerner, it has already bought the two largest companies on the target list - PeopleSoft Inc and BEA Systems Inc. The board's April 2003 presentation was released during the federal antitrust lawsuit that tried to stop Oracle from buying PeopleSoft.

Deborah Hellinger, a spokeswoman for Redwood City, California-based Oracle, didn't respond to requests for comment.

In the United States alone, technology spending by heathcare companies will jump 16 percent to $50.2 billion by 2011, according to researcher Gartner Inc in Stamford, Connecticut. Hospitals and physicians' offices will account for almost two-thirds, based largely on a switch to electronic record keeping from paper. Insurance companies will make up the rest.

Analysts haven't published any recent reports about Oracle's plans for heathcare software. Friar first advised buying Oracle shares in April 2007, when the stock was 23 percent lower than today. She also recommended shares of Microsoft Corp ahead of the software maker's first and second-quarter earnings, correctly predicting increases in the stock.

"If Oracle made a large push into the healthcare space, it would be viewed very positively," said Daniel Niles, CEO of Neuberger Berman Technology Management in San Francisco. Neuberger Berman LLC, the parent company, added 7.96 million Oracle shares in the first quarter, bringing its holding to 36.3 million, according to data compiled by Bloomberg. "Health care is a growth industry, especially as more technology is used to tie medical data together."

Oracle was unchanged at $22.91 on Wednesday in NASDAQ Stock Market trading. The shares have advanced 1.5 percent this year.

Agencies

(China Daily 06/06/2008 page16)