Why MICROS? Why Now?

Earlier this week  Oracle announced the $5.3 billion acquisition of MICROS Systems. MICROS is the leader in providing software & systems to the hospitality industry. While a great business in its own right, Oracle has not done an acquisition this large since it acquired Sun Microsystems in 2009. Clearly, the Sun deal was very strategic for Oracle. Why then, is MICROS of the same caliber?

While Oracle executives have touted the deal as a path to continue to provide high-end Oracle solutions to a myriad of verticals that now includes the Hospitality & Retail Industries, we think there is more to the story. Yes, MICROS will give Oracle a great client base with leading national & global hospitality and retail companies as MICROS customers – amounting to over 330,000 installed sites in 180 countries are the leaders in their industry. That said, Oracle was already a key strategic partner for MICROS and was selling quite a bit of existing Oracle products & services to those hospitality and retail clients  already.

We believe the acquisition was motivated by two primary Oracle issues: 1) They need to get a better footprint in the ecommerce segment that enables them to harness cloud & social technology trends. And 2) Most importantly, Oracle’s sales are slowing and they are meeting stiff competition, both pricing & quality, from the likes of Workday, Salesforce and several others. We believe this significant multi-billion dollar acquisition is a much needed boost to help reignite the sales engine at Oracle and stimulate growth at the software behemoth. Moreover, we see this as the beginning of a potential string of large acquisitions by Oracle to better address the two trends above. We could see Oracle using its war chest of over $15 – $20 billion to effect several more key acquisitions over the next 24 months.

Why MICROS? Why Now? The software market has once again gravitated to best of breed and the cloud and SaaS business models are posing real challenges for the large incumbent players like Oracle & SAP. If we are right and Oracle continues to use M&A to change the tide, we believe the other large software behemoth’s will follow suit in short order. Stay tuned for the next round in the software M&A wave.