Oracle Buys NetSuite for $9.3B
bloomberg.com
bloomberg.com
Hmm, I wonder if the NetSuite board will approve this:)
Man, Microsoft has its OS and Office revenue to
Google and Facebook have their advertising revenue
Oracle has its licensing revenue
Amazon has its everything store revenue.
Apple has its iPhone revenue.
The big tech incumbents all figuratively print money each quarter.
If the long reported bubble burst ever gets around to happening, it's hard not to see them as the big winners. With piles of cash on hand and cash reserves growing can anyone make the case that they don't become the lender of last resort to cash strapped startups?
Side note, I'm surprised that Oracle is still running with Safra Catz and Mark Hurd as co-CEO's. I figured that that setup along with a very strong willed founder in Ellison, would cause some spectacular implosion at some point:)
I would assume they would use their cash stockpiles to acquire/acquihire any promising startups.
I.e. Develop a business that generates large cash flows, then relentlessly plow that money into more profitable side ventures. Except in this case they didn't buy an insurance company and instead developed a product that generated those flows.
Amazon, Apple and Microsoft have managed to build some new profitable businesses over time with Amazon having done the greatest leap. The advertisement giants seem to struggle to gain traction - lots of projects but revenue streams less impressive.
On the other hand, Waze, Orkut, Nest. They spent billions on those and all they got was a lousy t-shirt.
This is the difference between mobile/tablet performance looking unprofitable vs. profitable because the conversions are attributed to them.
The Nest acquisition seems to be part of a long term robotics strategy, so probably too early to call on that one.
Orkut I'll give you--Google seems to have basically thrown in the towel on social networking.
The GP said that they are like Berkshire Hathaway - basically a conglomerate of profitable companies. This simply isn't true. Acquiring a company to incorporate their assets into yours is just M&A, nothing like BH.
Nest is a miserable failure.
I don't know a whole lot about the Nest story--seems the consensus now is that it didn't go well, but if Google retains engineers and IP that help them down the line with their robotics push, it's still probably worth something to them, though perhaps that will wind up being a lot less than they paid in 2014.
X who knows but they're supposed to be moonshots, but Fiber and Verily can hardly be called failures.
He takes low risk, profitable companies with proven track records and strong management teams. Geico, Fruit of the Loom, building products and materials etc. Its a very different mindset then what Google is doing when it invests in self driving cars.
Every company thats profitable re-invests those profits in some way. Trying to lump the way Google or Amazon uses their excess cash is different then the way Facebook does (Facebook builds moats mostly) and definitely different then the way Berkshire does.
(1) Core technology & monetization -> (2) Cash Flow -> (3) M&A to Fuel (1) -> (4) Goto 2
Looks different at that size than it does for smaller entities. And if you have a revenue stream generic enough to feed on a variety of inputs, then you have huge flexibility in what you can purchase. And you can likely afford to pay more because you've got efficiencies of scale on your side (including access to hyper-scale amounts of data).
The core of BH has ~20 employees. Warren Buffet always calls out his subsidiary CEOs for doing a great job, because BH couldn't exist in its current format if he had to manage day-to-day operations in any subsidiary.
The steps in Buffet's algorithm are the same, but the emphasis is different. Amazon builds moats and cashflow, while BH buys stable companies that already produce cashflow. BH doesn't need moats, only profit. Amazon, Google, FB need both moats and profit.
Buffet's algorithm looks more like:
- (1) Identify stable, profitable businesses that WB understands
- (2) if they're a good bargain, and it moves the needle on BH stock, buy
- (3) goto (1)As such you can invest that money in assets able to throw off 96M in cash, like mattress sales or stock dividends, even if the return on purchase cost of the stocks is 2 or 3%. If anyone was to borrow 100M to invest they would not see a nice 6-7% return, but for most of past 40 years would see a negative return.
The cost of capital for Google will be different - most of their ad revenue is upfront but is short timescale (say a week) so it's not annual like BH. At best their cost of capital is probably zero. So their range of investments is smaller compared to BH.
And let's be fair - the brand is different. Google fiber is one thing. Google Coke? Google Mattresses?
Google is almost DNA bound to swing for the fences, and one suspects their will be no investor festivals for Serge and Larry in their 80's because the returns on that strategy don't often work.
But betting against Google is also a bad strategy :-)
Berkshire is a conglomerate that looks for proven, established, cash-flow-positive businesses. See's Candy, for instance, requires no debt and is a sure bet every holiday season.
On the other hand, self-driving cars and WiFi balloons are extremely speculative and definitely aren't cash generating.
It's because Safra Catz is a master operator while Hurd is a good IR and market-facing leader. Of course, Ellison is the visionary.
I read this as Oracle realizing that cloud is real and that they need to buy as many sources of cloud data silos as possible to build up their fortress of customer data.
Without Googling it, Do you even remember what Mark Hurd's scandal was about? I don't...
I'm sure the social justice warrior types see it another way though.
But do you think oracle might be looking to jump into the Machine Learning/AI BandWagon
http://www.forbes.com/sites/anthonynitti/2015/10/05/tax-geek...
I honestly don't know the answer to your question, though.
(Of course Oracle makes great stuff. In a company as big as Oracle, there are always niches that create great things. But most offerings are dreadful. And most open source acquisitions did not fare especially well under Oracle)
VirtualBox and VMWare, for example, allow you to run Windows on a Mac, or FreeBSD on Linux, or Linux on Windows. lxc/Docker does none of this, it's simply a different technology with a different purpose.
I have no idea how big the impact of Docker is on the various VM vendors, but it isn't zero.
For OS X/Windows hosts the only thing keeping VirtualBox around is the price tag. No one is going to pay for the commercial version with the terrible performance it has.
If you're willing to part with $ you have much better options.
On OS X I think new players like Veertu will further displace VirtualBox even in the $0 category.
Look at the number of opensource projects distributing Hyper-V images, which has the exact same problem; and the OSX market is orders of magnitude smaller.
I like the Veertu concept and I think it has its advantages, but realistically, it has no chance to encroach on VB's market share.
Disclosure: I work on this team. Take a look at new features in 5.7 for example: http://www.thecompletelistoffeatures.com/
I know MySQL doesn't use Semver at all, and I know the domain probably cost 3/5 of fuck all, but still...
It's not a minor release.
MySQL predates semver. It is not alone here (see Mac OS X; PostgreSQL etc.). But you will be happy to hear that the next version will be called 8.0.
Oh right, Oracle. Like how Java 1.5 became Java 5, eh.
Is >=8 going to be Semver?
7.x. is used by Cluster.
8.0 is the next number along, and makes it easy to follow as "it just drops the 5".
Couldn't help posting it: https://news.ycombinator.com/item?id=12181637
Also, "Random password generated by default on installation"
This has been a long time coming. I can't tell you how many mysql servers I've cracked into with "root"
I am curious as to how features get prioritized, though. I would think certain things would be higher priority, such as supporting a full outer join and ensuring that cascaded deletes/updates fire triggers.
In general I would say that we like to understand the use case more than the feature :) If the workaround viability is low, the priority goes up.
We had to downgrade a project here from 5.7 back to 5.6 because of the issues that 3rd party tools were having. And we were using latest releases of the tools too!
Or perhaps 5.7 should have some sort of fallback or wrapper functions for tools that insist on doing a SET on the password column?
SELECT /*!50706 authentication_string as */ password FROM mysql.user;
It seems like every time I fire vbox up locally it's prompting me to upgrade, which is a very clunky experience given the state of other software patching.
It's good to know I'm not alone in this. Also, since I don't remember the exact version I'm currently using it feels like I'm always using an old installation and that I ended up opening the wrong version... well that's some therapist money saved right there, thanks!
Anybody got a few hundred million sitting around and wants to build another SaaS ERP/SCM solution? :)
But what a business needs is an application and not a platform. So if you have a specific business problem and a use-case in mind and can prototype a solution, you can find a company to at least hear out your pitch.
Good luck with your idea!
How about, stop obsessing over fucking SaaS and make software people can use without worrying when your bullshit company will "pivot" from CRM to cute cat gifs like the majority of SaaS startups.
NetSuite sells to SMB space. Those companies lack IT expertise and prefer cloud-based solutions. Hence they were successful.
If your anger is toward poorly designed software, then yes, it doesn't matter if it's SaaS or on-premise.
Another comment identified "SMB" as "companies in the $10m - $250m revenue range". Other definitions are based on staff count, with "<200", "<250", "<500" accepted 'standards' for Australia, European Union and USA respectively.
So, your basic premise is that a company with up to 200 staff, does not, and cannot have any staff capable of installing/maintaining a CRM tool, despite the fact that many companies have sold on-premise CRM software for many years, including NetSuite.
> Hence they were successful
I would argue that a number of major SaaS products are only successful because they already had an entrenched user-base who basically had limited options besides moving to the SaaS solution.
My point was that there are already several SaaS CRM tools for those who don't want to control their own data.
SaaS is not about making software better, its about getting continual income from the users of the software, and increasing vendor lock-in.
Unfortunately, lock-in will occur regardless of whether it's an on-prem software or SaaS. Companies don't go around changing their platforms every year or even every 3 years. So, one way or the other, the vendor will derive revenues from Annual Maintenance or Subscription. How's NetSuite unique in that regard?
With your standard ERP software, after you buy the software, it's yours. They can't take it away from you, they can only charge you for support. You might even have unlimited users/business units. Add 100 employees and it doesn't cost you a dime.
With a SaaS solution like NetSuite, they can charge you per user. You might pay $x/year per user, but if you add 100 users you're paying x*100 more per year.
You're also going to be paying the SaaS provider for every month/year you continue using the system. You might own your server and software but with a hosted system you're paying over, and over again. Which can be good if you're doing opex vs capex.
Companies generally switch ERP platforms every 10-12 years. Not only do new products come on the scene, but systems decay over time.
That's not always the case. Especially in the space that NetSuite operates in. Microsoft charges per CAL. SAP, Oracle and IBM have their corresponding pricing structure.
Any company that uses an ERP system is pretty much forced to upgrade regularly to keep in compliance. And every ERP system I've ever used or evaluated charged by the user.
When we used Great Plains, sure it was ours. But the price was based on the license count. Then after 1-3 years support would end and we'd have to upgrade. Oh, we could have decided not to upgrade. But then our owner's auditors would come along and give us bad grades for using an unsupported system. We'd be out of compliance with our lenders. And we just sell stuff, we don't have to worry about HIPAA or ISO standards or any other compliance issues that some companies deal with.
So we subscribed to the support plan, paid yearly and were entitled to all upgrades as they came out + some limited support from MS (which we never used).
Now we are on NetSuite and we pay annually, just like we did before. Except now upgrades are handled for us and I don't have to purchase a new server every 3-5 years.
You probably don't have an unlimited-seat license, because that's not how most are sold, and the market that buys ERPs (and enterprise software in general) is primarily motivated to pay for software for support, so "they can only charge you for support" isn't a meaningful limitation.
It's not that they can't, it's that they don't want to. As vendors of a (FOSS) ERP/CRM platform, we offer both a SaaS and a self-hosted installation, and most of our SMB clients prefer the former.
The thing about the continual income is that the salary of a sysadmin (which most companies don't have) costs way more than many SaaS plans, so it doesn't make sense until you're very big.
As for the lock-in, many business SaaS platforms allow you to export your data. And in our case, you also get a FOSS-licensed copy of the software :)
SaaS solves to that initial "we need process but can't afford the minimum buy in" gap. Admittedly at the cost of lining someone else's profit margin. But when your choices are between "nothing feasible" and "pay some overhead", it starts to look pretty attractive.
From their email newsletter 3 days ago:
Microsoft Dynamics 365 available later this year
Available this fall, Microsoft Dynamics 365 evolves our current CRM and ERP cloud solutions into one cloud service with new purpose-built apps to help manage specific business functions, including: Financials, Field Service, Sales, Operations, Marketing, Project Service Automation, and Customer Service. Dynamics 365 apps are designed so they can be easily and independently deployed. That means you can start small and pay only for what you need. Yet they work together seamlessly so, as your business demands, you can grow into additional capabilities with ease. For more information, visit the Official Microsoft Blog.
They had something in the works and this was about a year ago so I don't know if anything's changed since then. But I do remember the company that helped us manage our MS licensed software suggesting that their true cloud offering wouldn't be ready for quite a while.
In the end we went with NetSuite. Just like most software it's good at some things, not so much at others. But all in all I don't miss Great Plains that much, NetSuite does the job.
Wikipedia confirms - 2001 acquisition for 1B. Probably a profitable one!
[0]: http://www.plex.com/
I do not think it will acquire SaaS SMB in ERP/SCM.
This means he is aiming to make $3.75 Billion from this trade.
Holy crap.
It seems that at some point after becoming very wealthy your money can produce more money than you can actually spend.
And yea, I agree that being able to make that amount of money in a "single operation" is staggering.
Just the interest/return on investment of that amount in one year would make anyone a millionaire.
On a long enough time line many of those businesses also went on to become direct competitors. So not surprised to see that he has a stake in the business, though have 45% is pretty amazing.
I can only recall Salesforce, although I don't know the extent to which their offerings overlap.
As long as it isn't a startup where the braintrust instantly fleeing makes the product essentially worthless, it makes sound business sense.
But you seem to imply a financial reason. Say Netsuite's Oracle fee was $1M a year. If Oracle acquires them, Netsuite saves $1M a year sure, but Oracle also loses $1M year in external revenue. The result is the same.
On a related note: anybody on here want to work on some kind of innovative enterprise database startup? (I don't have any ideas, I just want to work on one because I see a lot of potential).
Yes, they have a very robust database. But what they've been selling to enterprises for at least 20 years is better thought of as ... schema.
When you buy Oracle Financials (or whatever modules / pieces / etc.) what you're buying is "how to set up and run your business." All of the non-physical parts of your business operations are now entities inside Oracle SW (and, as it happens, stored in the Oracle RDBMS, too, but that's practically speaking irrelevant).
Once you're "on" Oracle, or SAP, or whatever, every invoice you send out exists only because it's in that software. The software is your system of record, your single point of truth for your whole enterprise. You might think you are physically a human employee or a box of nuts but if you're not entered into Oracle with a row ID, you don't exist.
So, yeah, Oracle has an RDBMS. But what they really have is the "operating system" or the "schema" of a large enterprise which otherwise would have to rely upon a vast pyramid of specialist operational knowledge (bureaucrats / paper pushers / functionaries) in order to know how invoices got approved, sent, dunned, paid, reconciled, etc., or how orders got quoted, approved, picked, packed, shipped, etc.
(Not meant to sound condescending; I certainly wouldn't have known had I not spent some time seeing Oracle deployed in real life. It was certainly super-instructive for me to have spent a summer during college working for a midsize enterprise on Oracle, in a role kind of bridging ops and IT, and seeing what it really did. No SELECT statements involved.)
What are some promising open source efforts out there to create such a universal schema?
(I'm thinking along the lines of "The Cathedral and the Bazaar")
Relational databases have had [technically] open-source alternatives from the beginning, you're right. But they were also always playing catch-up to commercial databases. Oracle supported SQL long before Ingres, making them the lead product at the very beginning, and their services and support (and superior marketing power) kept them at the forefront.
Corporate or military investment is usually what drives cutting edge technology, which is adopted by necessity.
> anybody on here want to work on some kind of innovative enterprise database startup? (I don't have any ideas, I just want to work on one because I see a lot of potential)
Find out what a huge corporate product is lacking, make that, and then get them to buy you.
On your point about Military / Govt applications. This Larry biography:
"The Difference Between God and Larry Ellison: *God Doesn't Think He's Larry Ellison"
This book is an insanely amazing read. Apparently, the CIA was one of their first clients, and Oracle was named after a failed CIA project (the book hints that Larry might actually be CIA)
I'm supposed to be working here - not surfing Hacker News!