Bloomberg reports Oracle (ORCL +0.9%) is close to buying leading point-of-sale hardware/software vendor Micros (MCRS +17.6%) for ~$5B.
Micros has soared on the report; its market cap is currently at $5.05B. Peers NCR (NCR +3.4%), VeriFone (PAY +2.2%), and PAR Technology (PAR +4.6%) are also up. Oracle has ticked higher.
If the report holds, Oracle will be paying ~24x FY15E (ends June '15) EPS. Micros has a long list of retail/hospitality industry clients that Oracle could offer integrated CRM hardware/software solutions to.
IBM and SAP have each shown an interest in growing software sales to retailers. However, Big Blue sold its POS hardware business to Toshiba in 2012.
Target (TGT -0.4%) issues a new security update in which the company says it remains "confident" that PIN numbers of cardholders were not compromised, although encrypted pin data was removed. The assertion runs counter to what some data security bloggers have been maintaining.
The data security breach of 40M Target accounts continues to draw the ire of politicians. More Congressmen want the FTC to increase the depths of its probe on the delay of Target's disclosure and the number of lawsuits filed against the company continues to increase.
Shares of Target have been somewhat resilient following the security breach, only dropping 0.5% since the story broke.
What to watch: Most countries have adopted smart cards which contain data on microchips, instead of magnetic strips, to allow for much better encryption, but the U.S. lags behind. Banks in the U.S. have been hesitant to force the issue due to the pricey upgrades to payments systems the new technology would require for some large retailers mired with older systems. If the timetable for the adoption of smart cards in the U.S. is pushed forward due to the Target fiasco, some point-of-sale hardware firms (NCR, PAY, MCRS, DBD) could pick up extra business.
While NCR (NCR -10.5%) nosedived after releasing mixed Q3 results and reiterating its full-year guidance - 9%-11% revenue growth and EPS of $2.70-$2.80 vs. a consensus of 10.2% growth and $2.76 - fellow point-of-sale hardware vendor Micros (MCRS +4.3%) rallied after beating FQ1 estimates and reiterating FY14 (ends June '14) guidance - revenue of $1.295B-$1.32B and EPS of $2.46-$2.50 vs. a consensus of $1.31B and $2.46.
NCR's Financial Services unit (52% of revenue, makes ATM systems and other hardware) continued to struggle: sales -4% Y/Y vs. -1% in Q2 due to U.S. and European weakness. Meanwhile, excluding $80M in revenue from recently-acquired Retalix, NCR's Retail Solutions unit only saw 2% growth vs. 6% in Q2.
The Hospitality business was stronger, rising 25% Y/Y vs. 22% in Q2. Emerging Industries sales were flat after dropping 5% in Q2. On its CC (transcript), NCR admitted demand from major U.S. banks remains sluggish, but added financial services orders in China (+12% Y/Y) and India (+72% Y/Y) are healthier.
Micros' FQ1 beat was fueled by 9.5% Y/Y North American sales growth. EMEA sales rose 3.6%, and Asia-Pac sales fell 3.3%. Sales to food & beverage industry customers were a bright spot, growing 11.1% Y/Y.