Oracle's merger and acquisition strategy gets respect

can own the mission-critical business application and run it on your technology, you have a winning combination."

Of course, Oracle isn't the only enterprise vendor that's been making splashy acquisitions lately. SAP purchased BI vendor Business Objects, IBM acquired Cognos, and Microsoft has made a US$44.6 billion bid for Yahoo.

Forrester's 2007 data showed that the four largest vendors, IBM, Microsoft, Oracle and SAP, had 35 percent of the global market for software bought by businesses, governments, and other enterprises and small- and medium-sized businesses (SMBs). By the end of 2008, that number could reach as high as 39 percent, Wang notes.

Oracle's "acquisition strategy makes a lot of sense," now and in the future, Wang says. "Oracle has been able to reach near 50 percent profit margins, and they have also retained customers and are in a very good position to battle SAP in the short term and IBM in the long run as they [add more] integrations into software components."

What Microsoft Can Learn from Oracle

Over the past four years, Oracle executives have displayed remarkable consistency in their M&A approach and rate of success: They seem to avoid costly mistakes and never stray from their product lines. And they always get their prey. When asked if he can remember an instance in which Oracle did not get its intended target, Mike Gilpin, a research director at Forrester, says, "I cannot think of a case."

"With impressive regularity...Oracle has picked up key products and customers while avoiding an 'oops' slip, venturing too far away from its core business, or paying too much," writes Randall Stross, a professor of business at San Jose State University, in a recent article. "At no point along the way has it acted in a fit of desperation."

A fit of desperation is what Stross and Michael Cusumano, a professor at MIT's Sloan School of Management who's quoted in Stross's article, point out is what Microsoft appears to be doing right now as it continues to pursue Yahoo. Stross and Cusumano agree that Microsoft should go after SAP instead, a move, they contend, that would be more in line with Oracle's M&A M.O.

"A few dozen well-paying Fortune 500 customers may actually be more valuable than tens of millions of Web e-mail 'customers' who pay nothing for the service and whose attention is not highly valued by online advertisers," writes Stross.

With a suggestion that would surely irritate Microsoft Chairman Bill Gates, Stross suggests that Microsoft execs should ask themselves "What would Larry do?" to determine the best acquisition strategy.

"You have to admire Oracle's ability to remain focused on the business that serves business," writes Stross, "and to not be distracted by the buzz of the Web crowd gathered across the street."