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Oracle (ORCL) to Acquire Cerner for $28B in Cash, Shares Fall

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Oracle (ORCL - Free Report) is looking to takeover Cerner Corporation in an all-cash transaction amounting to $28.3 billion or $95 per share. The acquisition, biggest ever for Oracle, is expected to bolster the company’s position in the lucrative healthcare domain.

Headquartered in North Kansas City, MO, Cerner provides healthcare information technology (HCIT) solutions for hospitals, globally. The company offers software and hardware solutions that give healthcare providers secure access to clinical, administrative and financial data in a short time that helps medical professionals boost patient health outcomes.

Cerner continues to benefit from electronic health record (EHR), electronic patient record (EPR) or electronic medical record (EMR) platforms.

Following the news of an all-cash Cerner deal,  shares of Oracle fell 5.2% and closed at $91.64 on Dec 20.


How Cerner Fits into Oracle’s Strategy 

With the Cerner acquisition, Oracle is eyeing the revenue opportunity in the healthcare vertical. The company cited that the sector was worth $3.8 trillion in the United States alone in 2020.

The global healthcare cloud computing market is expected to witness a CAGR of 14.1% between 2021 and 2026 and reach $52.3 billion, according to a Mordor Intelligence report.

Oracle is looking to integrate its cloud offerings like Autonomous Database, Voice Digital Assistant user interface and low-code development tools with Cerner’s systems. The company will then migrate the systems to Oracle’s Gen2 Cloud, which will make the systems available all the time, thereby reducing downtime considerably.

Oracle noted that as the Cerner systems run on the Oracle database, it will allow access to patient data to only authorized personnel, thereby improving data safety.

Oracle is planning to use its “hands-free” voice assistant as the main user interface for Cerner’s clinical systems. This will save considerable time for the medical staff as opposed to typing.

Following the buyout, Oracle is looking to expand Cerner’s global footprint, which will eventually boost the top line.

Subject to regulatory, customary and other conditions, the Cerner acquisition is expected to close in 2022.

Cerner acquisition will be accretive to Oracle’s non-GAAP earnings for the full first year after and then “contribute substantially more” to the bottom line from the second fiscal year onward, noted the tech giant.

In the last reported quarter, Cerner reported adjusted earnings of 86 cents per share, which surpassed the Zacks Consensus Estimate by 4.9%. The bottom line increased 19.4% from the prior-year quarter’s levels. The company reported revenues of $1.47 billion, which beat the Zacks Consensus Estimate by 1.2% and jumped 7.3% from the year-ago quarter’s levels.

The revenue potential in the healthcare vertical has attracted tech giants into the space. In April 2021, Microsoft (MSFT - Free Report) announced its intent to acquire Nuance Communications for $19.7 billion (including Nuance’s net debt) in an all-cash deal.

The acquisition of Nuance Communications is expected to increase Microsoft’s total addressable market or TAM in the healthcare vertical to $500 billion, noted the software giant. Nuance Communication specializes in offering innovative conversational Artificial Intelligence tools to boost business productivity.

Oracle currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

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