Contact: Brenon Daly
One way to read Oracle’s novel announcement on Wednesday that it will start paying a dividend is that after years of handing out money to shareholders of other companies in the form of acquisitions, it will dole out some to its own investors. Word that the software giant will pay a dividend for the first time comes after a quarter in which Oracle acquired just one company, mValent. It was the lowest quarterly total for the company in recent memory, and compares with the shopping spree in the same quarter last year that saw it take home BEA Systems for $8.5bn, among other deals.
Although terms for Oracle’s most-recent acquisition weren’t released, we understand that it paid less than $10m for mValent, a change and configuration management startup. Viewed in light of the announced dividend of a nickel per share, even assuming that Oracle paid $10m for mValent, the purchase price works out to just 4% of the cash that the company is set to return to shareholders next month. (With five billion shares outstanding, Oracle’s dividend bill will be $250m per quarter, or $1bn for the full year.)
Even though time and money can only be spent once (as the saying goes), merely committing to paying a dividend doesn’t necessarily take a company out of the M&A market. Look at Microsoft, which has been a dividend-paying company since the beginning of 2003. It has inked four of its five largest deals even as it handed back billions of dollars to its own shareholders. And that corporate largess has hardly imperiled the Redmond, Washington-based behemoth. It finished last year with more than $20bn in cash and short-term investments on its balance sheet.
Oracle’s M&A, by quarter
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Source: The 451 M&A KnowledgeBase