Establishing a beachhead in the banking market, Oracle Corp. said Monday that it has agreed to buy Treasury Services Corp. for $120 million in cash.
Treasury Services, a developer of risk management and profitability measurement systems, is the first in a series of components that Oracle is expected to string together for a concentrated marketing effort in the financial services field.
Redwood Shores, Calif.-based Oracle, second only to Microsoft among independent software companies, already provides many banks with large- scale data base systems. But the $5.7 billion company is just getting around to focusing on banking-specific software.
Making a $120 million investment clearly indicates "they are focused on becoming a major software solutions provider for large financial institutions," said Neil Herman, equity analyst at Salomon Brothers.
Steve Perkins, senior vice president and head of Oracle's worldwide financial services unit, declined to identify other bank technology providers the company is talking with.
But he said Oracle's moves in the financial services market "will pick up rapidly in pace" in the next few weeks.
"We've spent the last 14 months looking at the financial services industry, looking at the areas of functionality, looking at the players in the market," Mr. Perkins said.
The move into financial services comes at a crucial time in Oracle's history. The company in June announced with much fanfare Oracle 8, the latest version of its relational data base software.
At the unveiling at Radio City Music Hall in New York, Oracle chairman and chief executive officer Lawrence J. Ellison said he expects faster, larger data bases to help usher in "nothing less than a new era of computing"-one based on stripped-down desktop terminals called network computers.
In that vision, network computers would rely on remote data bases for much of their processing and storage, in contrast to conventional personal computer hardware relying on disk drives.
Treasury Services' flagship product, the Treasury Services Evaluation and Reporting (TSER) system, is to be integrated with Oracle 8.
Having worked together for several years, Oracle and Treasury Services executives expect the acquisition to go smoothly. Specifics of the integration plans should be available next month.
Oracle has set up a financial services headquarters in New York, with branches in London, Paris, Amsterdam, and Zurich.
Treasury Services will continue to operate from its Santa Monica, Calif., base, and the company's senior management will remain intact, Oracle officials said.
Treasury Services' president and chief executive officer, John Dorman, becomes an Oracle vice president and general manager of financial services applications. He reports to Mr. Perkins.
With about 160 employees and $32 million in annual revenue, Treasury Services provides software that helps banks balance their quest for profits with the risk posed by their actions.
Salomon Brothers' Mr. Herman said Oracle was likely drawn to Treasury Services' customer base. The deal "overnight gives Oracle 80 major financial institutions worldwide. That's important," he said.
Mr. Dorman, who along with other senior executives own most of Treasury Services (Alltel Corp. and General Atlantic Partners own minority stakes), said the acquisition gives his company access to sales and consulting resources it needs to continue to grow.
"We concluded that the scale of the challenges that the industry is facing has evolved to a level of complexity that really requires a major worldwide technology provider," Mr. Dorman said.
