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What does the Hurd mentality bring to Oracle?

Wielding the executioner's axe for Ellison

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Service with a grin

The other thing that Hurd has experience with is buying up a services behemoth — remember the $13.9bn HP paid for EDS? — and slashing costs and getting rid of people to the point where you can hear the gnashing of teeth and weeping.

If Oracle wants to be truly complete, then it needs to add the fourth leg to its chair: it has a database and middleware leg, it has systems (meaning servers, storage, operating systems, file systems, virtualization, and management tools), it has application software (with different suites with broad integration and precise features for specific industries, and now it needs to be a services player, too.

So everyone looking at the possibilities of a Hurd mentality at Oracle is trying to think of what services company Oracle might buy. Services is a people-intensive business, as IBM's payroll shows, and it is hard (but not impossible) to turn a profit here — hard at least compared to the relatively easy money that Oracle is used to getting from its database, middleware, and application-software businesses. And as Oracle has said repeatedly since acquiring Sun, it believes it can extract $2bn in operating profit from Sun by focusing on what the company does in hardware and systems software, and only doing what is necessary (in terms of research and development) to speed up application performance.

If Oracle wanted to snap up a quick, easy, and cheap services business, there's always Unisys — although Oracle had better act fast, with Unisys righting itself these days. With EDS gone to HP and Perot Systems eaten by Dell, that leaves Accenture as a services candidate for Oracle. But not really, since Accenture has 177,000 employees and a very high market cap of $27.2bn against $23.2bn in revenues. That's way too rich for Oracle's blood, and Ellison would have to cash out all his Oracle stock to even match that number.

Among other candidates, Cognizant Technology Solutions, the IT services arm spun out of Dun & Bradstreet that has a market cap of $18.8bn as we go to press, seems a bit pricey for Oracle to acquire. It has 88,700 employees, which means plenty of heads to roll costs to cut, but with only $3.3bn in sales and $535m in net income for 2009, Cognizant is too expensive to buy and cannot yield to the Hurd execution axe to create profits while also boosting revenues hugely, as EDS did for HP during the economic downturn. CapGemini, which is eating other services companies left and right these days, is also a possibility. A lot depends on how much Hurd and Ellison like French food, wine, and hospitality.

Computer Sciences Corp, with 95,000 employees and a market cap of only $6.6bn, looks like a perfect target and one rich in government work — particularly when you realize that it took in $16.1bn in its fiscal 2010 ended in April, but managed only $834m in net income. Ding ding ding — we have a winner!

Hurd is probably sharpening up that axe right now and will be ready to wield it as soon as lawyers finish fighting over whether or not he can take the co-president job at Oracle. ®

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