Oracle to acquire healthcare tech giant Cerner for $ 28.3 billion

Confirming recent reports, Oracle Corp. today announcement that it has entered into a deal to acquire healthcare technology provider Cerner Corp. for approximately $ 28.3 billion.

Oracle’s $ 28.3 billion offer is about $ 95 per share. Cerner’s stock is up nearly 1% in trading today, while Oracle’s is down more than 4%.

Kansas City-based Cerner provides electronic health record software, or EHR, that healthcare organizations such as hospitals use to manage patient medical data. The company is a major player in the EHR market, with sales of $ 5.5 billion last year. Cerner also offers a range of specialized applications in addition to its EHR software that are used by hospitals to manage care delivery, perform business administration tasks, and analyze operational data to find ways to increase efficiency. efficiency.

Oracle has big plans for the acquisition. The database maker said it will integrate its Voice Digital Assistant product with Cerner’s software to help healthcare professionals access patient data faster.

In developing, Oracle Executive Chairman and CTO Larry Ellison said the company aims to “provide our overworked healthcare professionals with a new generation of easier-to-use digital tools that enable ” access information through a hands-free voice interface to secure cloud applications.

Oracle believes there is an opportunity to help healthcare organizations run more efficiently and thereby improve patient care. “This new generation of medical information systems promises to reduce the administrative workload on our healthcare professionals, improve patient privacy and outcomes, and lower overall healthcare costs,” said Ellison.

As part of Cerner’s software improvement plan, Oracle will move systems from software maker EHR to its public cloud platform. “This can be done very quickly because Cerner’s largest company and largest clinical system is already running on the Oracle database,” said Mike Sicilia, executive vice president of Vertical Industries at Oracle.

The plan, the companies said today, is for Cerner to use Oracle’s infrastructure and cloud resources to accelerate the pace of product development initiatives. Oracle highlighted its artificial intelligence capabilities as another asset that can help Cerner customers operate more efficiently.

On the business side, Oracle plans to make Cerner a “huge driver of additional revenue growth” for years to come. In his most recent quarterly results report, Cerner reported a 7% year-over-year increase in revenue, which helped boost sales to $ 1.36 billion. Oracle intends to accelerate the growth rate of the EHR software vendor by offering its products in more countries.

“This is exactly the growth strategy we adopted when we bought NetSuite, except that Cerner’s revenue opportunity is even greater,” said Safra Catz, CEO of Oracle. NetSuite Inc. is a maker of commercial applications that Oracle acquired in 2016 for $ 9.3 billion. The deal was the second largest acquisition in the company’s history until that point.

“Oracle’s acquisition of Cerner may be a way to gain a solid foothold in the emerging healthcare cloud opportunity,” commented Paddy Padmanabhan, Founder and CEO of Damo Consulting, a growth strategy company and digital transformation that works with healthcare organizations as well as technology. companies. “Cerner is a leading provider of EHRs and healthcare is in the early stages of moving to the cloud. “

Oracle hopes to complete the acquisition next year. The company’s proposed acquisition of Cerner is the second major healthcare purchase made by a leading technology company this year. Previously, Microsoft Corp. $ 19.7 billion deal to acquire Nuance Communications Inc., whose medical note dictation software is used by a significant percentage doctors in the United States

The acquisitions continue a broader trend of leading enterprise technology providers to focus more on vertical industries.

Last year, Inc. introduced a range of vertical specific solutions called Industry Clouds. Industry Clouds combine functionality from the company’s existing products with niche capabilities for specific industries. Most recently, in September, Snowflake Inc. introduced a vertical specific solution designed for companies in the financial sector.

Vertical industries have also become a priority among major public cloud operators. Amazon Web Services Inc. this year introduced Amazon FinSpace, a data processing service for the financial industry. Google LLC’s cloud activity in July debuted Healthcare Data Engine, a solution that facilitates the processing of medical data by healthcare establishments.

Oracle expects the Cerner’s acquisition to have an immediate impact on its adjusted earnings in the first full fiscal year after closing. The $ 28.3 billion offered by Oracle is a significant premium over the roughly $ 23 billion that Cerner has value last week, before reports on the acquisition were first released. The high premium underscores the key role Cerner sees in Oracle’s growth plans.

“Cerner has been a leader in helping digitize healthcare and now is the time to deliver on the true promise of this work with healthcare delivery tools that get information to the right caregivers at the right time,” said the President and CEO of Cerner, David Feinberg. “Joining Oracle as a dedicated industry business unit provides an unprecedented opportunity to accelerate our work of modernizing electronic health records, improving the caregiver experience, and creating more connected patient care. , high quality and efficient. ”

Photo: Open Grid Scheduler / Grid Engine / Flickr

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