Oracle to Buy NetSuite for $9.3 Billion

Bengaluru: Business software maker Oracle said it would buy NetSuite for about $9.3 billion in cash, a deal designed to help Oracle gain market share in the fast-growing cloud computing business.

The deal will bring together two companies linked to high-profile technology billionaire Larry Ellison. In addition to being Oracle's executive chairman, he owns hold about 40 per cent of NetSuite's shares, according to a regulatory filing, a situation corporate governance consultants said would increase scrutiny of the deal.

"It's definitely pricey from Oracle's perspective but it's understandable and it's justifiable especially in this environment," said Morningstar analyst Rodney Nelson, who noted some companies in the sector have sold for high multiples.

Oracle and NetSuite both offer software applications that help companies automate back end and administrative operations from technology to human resources.

NetSuite's chief executive, Zach Nelson, was responsible for Oracle's global marketing from 1996 to 1998.

Oracle's cloud business, which stores enterprise software and data on remote servers, lets the company sell to clients who lack the budget for on-site hardware and technology staff.

Like rivals SAP SE, Amazon.com and Microsoft, Oracle has focused on moving its business toward the cloud-computing model as sales of traditional software licenses struggle.

The deal also could help Oracle, which is aggressively trying to build and sell more cloud-based business software, play catch up with competitors such as Workday and Salesforce.com that specialise in cloud-based offerings.

Jefferies analysts said in a note the deal provides an immediate, significant entry into the mid-market for corporate applications but that "the price paid seems steep."

Oracle also has acquired companies such as Textura and Opower to increase its competitiveness in the cloud market. Morningstar's Nelson said NetSuite would be Oracle's largest purchase since PeopleSoft more than a decade ago.

The company expects the deal to add to its adjusted earnings in the first full fiscal year after it closes.