Oracle to Buy I-Flex in $909M Deal

Gain should bolster its vertical strategy.

Swirling rumors concerning more Oracle Corp. acquisitions were proved true last week when the software maker announced plans to buy a majority stake in Indias largest applications business, I-Flex Solutions Ltd., in a deal worth some $909 million.

Oracle, of Redwood Shores, Calif., also recently embarked on a secretive technology acquisition from Context Media Inc. Based in Providence, R.I., Context Media develops content integration software.

Bombay-based I-Flex develops software for corporate, consumer and investment banking. Under the terms of the agreement, Oracle will acquire 41 percent of the companys outstanding shares from its current owner, Citigroup Venture Capital International, for $593 million. Indian law requires that Oracle bid for 20 percent more of the outstanding shares, which it did last week, upping the ante by $316 million.

The deal is expected to close by years end.

By acquiring I-Flex, Oracle will be able to strengthen its vertical-market strategy in a broad geographic swath—I-Flex has 575 banking customers in 115 countries—and re-enforce its nascent relationship with its heretofore nemesis, IBM. The I-Flex products run on IBM software and hardware.

Oracle has made no secret of its plans to challenge major competitor SAP AG and move beyond traditional ERP (enterprise resource planning) applications by honing its vertical expertise. The company has focused on retail over the past several months, acquiring retail software developers Retek Inc. in March and ProfitLogic Inc. last month.

I-Flex and Oracle have nearly a decade-long relationship. In 1997, I-Flex began optimizing its suite of software for Oracles platform.

Oracle plans to keep the company running in its current mode in India. The management team will remain intact, but it will align product development, sales, marketing and services with Oracles approach.

With Oracle on a buying spree, some industry observers question whether the acquisitions will help.

"Oracle is adding a significant burden by doing this comprehensive [acquisition] strategy, and there are going to be some integration issues," said Joshua Greenbaum, principal at Enterprise Applications Consulting, in Berkeley, Calif. "They are buying companies that have existing synergy with Oracle."