Cerner Shares Soar on Report Oracle Is in Takeover Talks

(Bloomberg) -- Cerner Corp. shares had their best day in almost a decade following a report that Oracle Corp. is in talks to buy the medical-records company for about $30 billion, part of the software maker’s push into health care.

A deal could be reached soon, the Wall Street Journal reported Thursday, citing unidentified people familiar with the situation. If the transaction goes through, it would mark Oracle’s biggest acquisition yet. Representatives of Oracle and Cerner didn’t respond to repeated requests for comment on the report.

The report follows a former Silicon Valley executive taking charge of Cerner. David Feinberg, previously vice president of Google Health, joined the company as chief executive officer on Oct. 1. Cerner, which competes with Epic Systems Corp. and Allscripts Healthcare Solutions, among others, generated $5.51 billion in revenue during 2020, and sales are projected to rise by 5% to $5.8 billion this year. 

Shares of Cerner, which had a market value of $23.4 billion at the close in New York on Thursday, jumped 13% to a record $89.77 at Friday’s close, the biggest single-day increase since October 2012. Oracle, meanwhile, dropped 6.4% to $96.62, the largest one-day fall since March.

Cerner’s choice of Feinberg as CEO highlighted the company’s move toward “a strategy based on big data, population health management and consumerism -- and away from the legacy health records business,” Donald Hooker, an analyst at KeyBanc Capital Markets, said when Feinberg was named to the post in August.

That effort could make Cerner an attractive target for Oracle, the second-biggest software maker by revenue, which is known for database products. While Oracle has struggled to gain ground in the cloud-computing business, trailing far behind market leaders such as Amazon.com Inc. and Microsoft Corp., a deal for Cerner would give Oracle a huge foothold in the health industry. The sector alone is expected to spend $15.8 billion on cloud infrastructure and software by 2023, according to market researcher IDC.

“A potential acquisition of Cerner would pivot Oracle more toward applications, which we believe is the right long-term strategy amid an ailing infrastructure business,” Bloomberg Intelligence analyst Anurag Rana wrote in a research note. Applications make up 41% of Oracle’s cloud services and license support segment, he said.

Two years ago, Cerner announced a deal with Amazon’s cloud division to develop programs trying to predict medical diagnoses or recommend courses of treatment for patients. Beyond moving its data and computing to Amazon’s cloud services, Cerner said it would use the tech company’s artificial intelligence and machine-learning prowess to improve patient care. Cerner, based in North Kansas City, Missouri, has about 23,000 employees.

Oracle has racked up 13 deals topping $1 billion in the past two decades, according to data compiled by Bloomberg. At its current market value, Cerner is roughly three times the size of Oracle’s biggest previous acquisition -- its 2016 purchase of NetSuite Inc. in a deal valued at $8.7 billion. In 2005, Oracle completed an $8.4 billion takeover of Peoplesoft Inc., the data show.

The Austin, Texas-based software maker on Dec. 9 reported revenue and profit that topped analysts’ estimates, sending shares up 16% the next day, the biggest single-day gain since March 2020.

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