The takeover gives the world's largest database software maker a shot at being the leader in the retail market space.
Posted Jul 6, 2005
Oracle plans to acquire ProfitLogic, a provider of software that helps retailers make more accurate sales forecasts and pricing decisions through analyzing customer demand patterns. The terms of the acquisition were undisclosed; the deal is targeted for completion by the end of July. The buy allows Oracle, which acquired Retek three months ago, to delve even deeper into the retail software vertical.
ProfitLogic has approximately 250 employees and 30 customers, including American Eagle Outfitters, Bloomingdale's, JC Penney, Nordstrom, and Toys R Us. AMR Research estimates that ProfitLogic will have between $40 million and $50 million in revenue in 2005. "ProfitLogic's software provides analysis that helps retailers put the right product in the right store for the right customer at the right time," said Duncan Angrove, general manager of Oracle's Retek global business unit, in a statement. "With ProfitLogic's Retail Profit Optimization software, Retek's end-to-end retail products, and Oracle's infrastructure software and ERP applications, we will be able to offer an integrated solution for retailers of any size and in any industry."
Oracle's takeovers this year also include its $11.1 billion acquisition of PeopleSoft and two other privately held software makers. The purchase of ProfitLogic follows Oracle's April acquisition of Retek for approximately $669 million, after a bidding war with SAP, which was followed by SAP offering a discount to lure Retek customers. Oracle and SAP have made the retail industry a prime battleground due to strong growth potential and the lack of a clear leader. "Right now, the retail industry is the holy grail for a lot of the software vendors," says Noha Tohamy, principal analyst with Forrester Research.
Oracle's strategy of buying best-of-breed players makes sense, according to Tohamy, because retailers are cautious and like focused software vendors that have experience, as opposed to suite providers. The deal adds functionality for Oracle, but the main advantage is the relationships with its 30 customers. The acquisition gives Oracle certain advantages over SAP. "Following Oracle's acquisition of Retek, SAP went back to the drawing board and tried to come up with something organic for the retail industry," Tohamy says. "That can take a long time. This expands the gap of what Oracle can offer compared to SAP. Getting 30 customers in one fell swoop is big in this market."
Additionally, Tohamy maintains that while SAP is focusing on ERP, Oracle is taking the acquisition route by acquiring vertically focused functionality that supports its database software and customer analytics product lines. As for SAP, Tohamy says that acquiring some other best-of-breed retail companies, such as DemandTec, JDA Software Group, and Khimetrics, would bode well for the German software giant. "I think acquiring a best-of-breed player is a good move for SAP. DemandTec would be a perfect fit. They have a large and loyal customer base that could potentially benefit from a company like SAP."
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