Mon. Jan 17th, 2022

Oracle’s commitment focuses on its cloud business

Enterprise software companies are suddenly strongly focused on healthcare. If you want proof, check out how Oracle and Microsoft both backed up truckloads of cash this year to buy health tech companies.

Right now I’m putting together the top 10 M&A deals of the year, and the two most significant deals today are Oracle’s $28.3 billion deal to buy Cerner and the $19.7 deal billion from Microsoft to buy Nuance Communications in April. That works out to just under $50 billion for two health-related companies.

Other majors circle the health market. Amazon has been quieter about it, but in the past year it has also looked at healthcare, with partnerships, hires and programs abound targeting the lucrative vertical. Google’s approach was less certain, as its vertical healthcare leader David Feinberg jumped in October to Cerner, the company that Oracle bought this morning.

There is a lot of interest, because healthcare is just a huge market. In its announcement, Oracle quoted a popular figure that the US healthcare sector alone is worth $3.8 trillion a year. If you extrapolate that figure to the whole world, it’s no wonder that big companies are willing to make huge bets to get a share of it.

But beyond the obvious market potential, what does Oracle get for its money? We spoke to some industry experts to get their thoughts.

Let’s start with some numbers. In its most recent earnings report, Cerner posted revenue of $1.47 billion in the third quarter, a fairly modest 7% year-over-year growth. So the company didn’t exactly grow by leaps and bounds, making it a good takeover target. When you consider that Cerner had a run rate of $6 billion, the deal is worth just under 5x sales, which is kind of the middle ground these days.

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