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Oracle is 'the new IPO"

Larry Ellison's cash-rich company stands to gain as valuations for its acquisitions fall, but open source offers an alternative way to gain new customers.

The Wall Street Journal has some sobering news for start-ups looking for a big exit: Oracle is "the new IPO," and it's paying pennies on the dollar.

"If I was in their shoes, I would ride it out" and try not to sell.

That's the advice of Sonny Singh, one of Oracle's chief deal makers, but it's advice that cash-strapped start-ups are increasingly incapable of heeding. Oracle and other cash-rich companies, including Cisco Systems, Apple, Microsoft, and SAP stand to benefit.

As The Wall Street Journal points out, with fewer big companies left to buy, Oracle is focused on smaller acquisitions of companies earning less than $750 million in revenue. The strategy seems to be to buy products that will help drive database sales (68 percent of its revenues today) but also complement its growing applications business (32 percent of its revenues today).

One thing that Oracle could also use? Open source. As successful as Oracle has been, one area that it still needs to improve in is reducing its cost of customer acquisition. Open source would provide a way for Oracle to seed and discover new accounts without the bulk of an expensive sales force.

The good news? Oracle doesn't have to buy any open-source companies to achieve this. Open source, of course, is just a license change away. But I suspect that the company would have an easier time accepting open source as a strategy with acquired products, rather than open-sourcing its own.

Regardless, with cash to burn, Oracle is in the cat bird's seat in a recessionary economy. It will be interesting to see how its strategy plays out.

Follow me on Twitter at mjasay.