Should Oracle Start Another Buyout Binge Today?


Sometimes I worry about Oracle (NAS: ORCL) .

The company always seems healthiest with a very large acquisition freshly tucked under its belt. And that appetite is getting out of hand. Oracle has spent more than $4 billion at the buyout mall over the last year, and that's still not enough to keep the needle moving.

Well, you know what they say -- starve a fever and feed a cold. Maybe Oracle just needs another huge meal to get back on its feet again.

In the just-reported fourth quarter of 2012, Oracle boosted its total revenue by a measly 1% year over year. Software sales jumped 7% but hardware swooned by 16%. $4 billion worth of new operations would be game-changing for many companies, but it's barely enough to keep Oracle treading water.

In all fairness, two of Oracle's three largest buyouts in the past year only closed in the middle of the fourth quarter and never had a chance to do much good for this period. CEO Larry Ellison stated that these two additions, RightNow Technologies and Taleo, transformed Oracle into the second-largest software-as-a-service vendor in the world. That's presumably behind SaaS expert (NAS: CRM) , which sports a $2.4 billion sales run rate versus Oracle's segment bookings "approaching $1 billion" today.

The fourth quarter's $10.9 billion of total sales matched Wall Street's estimates, and $0.82 in non-GAAP earnings per share beat the average analyst target by 5%. Fighting currency-related headwinds, that's a 10% annual earnings jump. So I have to applaud the company's tight grip on the operational reins, even in the face of modest sales growth. Management took pains to point out that these results happened in spite of the fiscal drama going on in Europe.

So Oracle muddled its way through some tough economic times but still relies on huge acquisitions to keep the growth engines running. Management just approved another $10 billion of share buybacks, which seems opportunistic in light of a share price that crashed hard six months ago and never really recovered.

But with a buyout track record like Oracle's and the less-than-stellar value most buyback programs really bring, I'm pretty sure that Ellison would have been better off earmarking that $10 billion check for another splashy buyout bid. That's just how Oracle rolls.

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