Expect Oracle's Acquisition Spree To Continue

If you think Oracle’s (ORCL) acquisition spree is nearly completed, you ought to guess again.

In a research report, Bernstien Research analyst Charles DiBona today asserts that Oracle is almost certainly going to continue spending billions on additional acquisitions. He notes that CEO Larry Ellison last summer projected that the company would hit $50 billion in annual revenue by FY 2012. But he contends that current businesses, growing at an estimated 11.4% compounded, would only bring the total to $34.4 billion by 2012.

Ergo, he thinks the company needs to make up the $15.6 billion shortfall via acquisitions. DiBona figures that, at current rates, that would mean $40 billion of additional acquisitions over the next four years. He notes that over the last two years, the company has spent $21.3 billion to buy BEA Systems, AdminServer, Captovision, Empirix, Peoplesoft, Retek, Sitel, MetaSolv, Hyperion, i-Flex, Oblix, ProfitLogic, TempoSoft, Thor Technologies, G-Log, TripleHop, TimesTen and ContextMedia. Among others.

DiBona, who has a Market Perform rating on the stock with a price target of $22.50, near the current level, contends an acquisition spree of this size is risky.

He also contends that the pro forma EPS estimates used by First Call and many Street analysts, which adds back amortization and stock-based compensation, obscures the true performance of the company “and results in an artificially depressed forward P/E multiple.” His view here is that Oracle basically is using M&A as a substitute for internal product development, “and as such the costs associated with this M&A activity should be treated as operating expenses.”

The most obvious thing missing from DiBona’s report: a list of potential targets.

Comments

[User18358]

They should acquire Sybase

[p. smith]

they should acquire that miserable MSFT.

[User 26737]

Oracle does totally nothing for the stockholder! 18 to 25 on a 52 week and really nothing before ...... no dividends ...... no movement .... no appreciation ..... buys everything that barely competes ......... dead money stock!