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Why Oracle thinks Micros is worth $5.3 billion

Chris Kanaracus | June 25, 2014
Oracle's pending acquisition of retail and hospitality technology vendor Micros is its biggest since scooping up Sun Microsystems in 2010, which begs questions about why it's willing to pay so much.

Oracle's pending acquisition of retail and hospitality technology vendor Micros is its biggest since scooping up Sun Microsystems in 2010, which begs questions about why it's willing to pay so much.

Micros is going for US$4.6 billion, net of its cash, while Sun cost Oracle $7.4 billion, or $5.6 billion net excluding its cash and debt. The Sun deal got a lot of buzz and scrutiny, given that it ushered Oracle into the hardware business and involved popular open-source technology such as MySQL going to a largely proprietary vendor.

Micros may not fundamentally change Oracle as much as Sun did, but it will help it adapt to the rapidly transforming world of retail and hospitality for a price tag that some financial analysts say is actually quite reasonable. Here's a look at the underlying reasons Oracle is making such a huge investment.

It's all about the data: While Oracle gains a huge customer base and family of well-established, widely used hardware and software products, the real prize may be the ever-increasing amounts of data that flow through Micros-powered POS (point of sale) systems. That information is closely linked with individual customers, providing insights into buying patterns, likes and dislikes, the performance of products and services, and their supply chains.

"They aren't focused on selling the POS software in the long run," said analyst Ray Wang, chairman and founder of Constellation Research. "That's just the start. The data is where the long game is."

The possibilities run deep with respect to analyzing data from Micros systems, in Wang's view. "Why is table two doing better than table 15?" he said. "Why is store 235 doing better with selling extra salads and sides than store 260?"

Oracle has a bevy of data-processing technologies at the ready to help deliver the answers to those hypothetical questions.

Time for refreshments: "The restaurant and hotel businesses are definitely areas where many firms are looking now to upgrade aging systems," said independent enterprise applications analyst China Martens via email.

Some businesses want to fold in acquisitions they may have made under a unified system that ties them more closely together with suppliers as well as "all the way through to responding to customer feedback via social media," she added.

Oracle already had applications for retailers, having outbid SAP for Retek in 2005. While the Retek software has continued to be supported and updated, Oracle may seek some type of convergence path between the two families post-acquisition.

Changing the game: Data collected by Micros products can drive personalized loyalty programs and targeted pricing deals, as Oracle noted in a presentation released this week on the deal. Trends such as the "Internet of Things" are driving other new innovations in retail and hospitality, such as "secure, intelligent room keys," in-room technologies and "remote kitchen and property asset monitoring," Oracle said.

 

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