Oracle M&A: real and rumored

Contact: Brenon Daly

Since 2005, Oracle has notched an average of about an acquisition per month each year. Generally speaking, the deals can be sorted into three main buckets: broad horizontal technology purchases, small technology tuck-ins and equally small purchases of companies selling applications for specific industries. Fittingly for a busy buyer, Oracle has one of each of those types of transactions either done or ready to get done. At least, those are the rumors.

First, let’s start with an acquisition that Oracle has announced. On Monday, the vendor said it will pay an undisclosed amount for Relsys, a 22-year-old company that makes safety and risk management software for the pharmaceutical industry. Oracle’s purchase of the Irvine, California-based company comes after it made similar buys for software vendors that serve specific industries, including telecommunications, insurance, retail, utilities and others.

Turning to the speculative transactions, we heard a month ago from several sources that Oracle was interested in picking up Virtual Iron Software. As an example of a technology acquisition, Virtual Iron would add Xen management capabilities to Oracle, which already has a Xen-based hypervisor. And on a larger scale, the market has been buzzing with talk this week about whether Oracle might be mulling a bid for Red Hat. (The open source giant, which reports earnings after today’s close, has seen its shares double since late November.)

While Oracle has reached for open source vendors in the past (Sleepycat Software and Innobase) and still lacks an OS offering in its portfolio, we have doubts that it would make a play for Red Hat. The main reason: Larry Ellison has maintained that his company does not need to have a Linux distribution of its own since it provides support for Red Hat via its Unbreakable Linux program, which was launched in late 2006.

Select platform acquisitions by Oracle

Date Target Price Market
January 2008 BEA Systems $8.5bn Middleware
May 2007 Agile Software $495m Product lifecycle management
March 2007 Hyperion Solutions $3.3bn Business intelligence
November 2006 Stellent $440m Content management
September 2005 Siebel Systems $5.85bn CRM
December 2004 PeopleSoft $10.46bn ERP

Source: The 451 M&A KnowledgeBase

Real deal for Virtual Iron?

Contact: Brenon Daly, Rachel Chalmers

Several sources, both from industry and financial circles, have indicated that server virtualization startup Virtual Iron Software is nearing a deal to sell to a strategic buyer. The name at the top of the list? Oracle, which has a Xen-based hypervisor (OVM), but lacks management tools. Virtual Iron would bring Xen management.

Another name that has surfaced is Novell. A year ago, the company handed over $205m for PlateSpin, which was its largest virtualization acquisition and one that valued eight-year-old PlateSpin at roughly 10 times its revenue. Virtual Iron would fit well with Novell’s virtualization efforts as well as with its open source leanings (Virtual Iron is based on Xen).

Sometimes viewed as a ‘down-market VMware,’ Virtual Iron sells primarily to SMEs through its channel. The Lowell, Massachusetts-based company has raised some $65m in funding since its founding in 2003. Backers include Highland Capital Partners, Matrix Partners, Goldman Sachs Group and strategic investors Intel Capital and SAP Ventures.

We understand that Virtual Iron had somewhat ‘frothy’ expectations after Citrix paid a half-billion dollars for XenSource in mid-2007. However, sources say Virtual Iron won’t get anywhere near the valuation of XenSource. In fact, most folks have doubts that the company will even sell for the amount of VC dollars that went into it.