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Zoe Thomas: This is your Tech News Briefing for Tuesday, December 21st. I’m Zoe Thomas for The Wall Street Journal. Oracle says it’s buying the electronic medical records company Cerner for about $28 billion. It’s the biggest acquisition ever for Oracle, and it gives this software giant a major presence in healthcare data, one of the top drivers of growth for cloud computing. On today’s show, our reporter Aaron Tilley, who covers enterprise tech and cloud computing will be here to talk about Oracle’s cloud dreams and how it hopes this deal will help it achieve them. That’s after these headlines.
The Justice Department says a Russian national with close ties to the Kremlin was extradited from Switzerland to the U.S. over the weekend. Prosecutors say Vladislav Klyushin participated in a scheme to hack and steal corporate earnings information from companies, including Tesla and Roku, earning himself tens of millions of dollars in illegal profit. A lawyer for Klyushin couldn’t immediately be reached for comment. The Russian government contested his extradition and the charges. Four other Russian nationals have been charged in the case and remain at large.
The world’s richest person, Elon Musk, says he’ll face more than $11 billion in taxes for this year. Much has been made of the Tesla CEO’s taxes over the years, with calls for him to pay more. A lot of his wealth though is tied up in company stock. Musk started selling some of his Tesla shares in November. That’s what’s helped cause this massive tax bill. But Tesla shares have fallen by nearly a quarter since Musk began selling shares. The WSJ has calculated that that decline has saved Musk hundreds of millions of dollars in taxes.
And the Chinese artificial intelligence giant, SenseTime says it still plans to go public in Hong Kong this year. Last week, SenseTime delayed its planned IPO after being placed on a blacklist by the U.S. Treasury Department for cooperating with the Chinese military. That move prevents Americans from investing in it. SenseTime has said the blacklisting reflects a fundamental misunderstanding of its business. Our Markets Editor, Quentin Webb, has more.
Quentin Webb: If you are SenseTime, I mean their points of view is that they say what they do is commercial and civilian, they’re not making products for military use and they contest this designation. So in their view, it’s political. If you’re in the U.S. position, you’re trying to kind of check the rise of China and the Chinese military and you’re also trying to stop human rights abuses in far Western China. And so SenseTime and other companies are seen as agents of that issue. Now, we should say that some other companies have successfully contested previous designations as being in league with the Chinese military. So most notably Xiaomi, which is a big smartphone maker, was put on the same Treasury Department blacklist and successfully appealed that designation. So it hasn’t always been the case that those labels have been water tight.
Zoe Thomas: SenseTime still aims to raise the equivalent of up to $767 million through the listing. It shares are set to start trading on December 30th.
All right, coming up, Oracle made up less than half a percent of the cloud market in 2020. How much more will a $28 billion acquisition get it? We’ll discuss after the break. Oracle is the kind of company that has its fingers in all sorts of different areas. It sells database software, security software, software for people who make software. And the way it’s gotten into a lot of these businesses is through acquisition, buying up companies who already do the business Oracle wants to move into. Now, it’s doing it again, acquiring the electronic medical records company Cerner for about $28 billion to go deeper into cloud computing. Joining us to discuss how this latest deal could position Oracle to expand its role in the cloud business is our reporter Aaron Tilley. Hi, Aaron. Thanks for being here.
Aaron Tilley: Thank for having me.
Zoe Thomas: So can you start by telling us a little bit about this deal? I mean, apart from the top line number, what are the details we should know, and how is it being received?
Aaron Tilley: Yeah. So Oracle buying Cerner was a effort for Oracle to really target this area of healthcare data and how it’s going to change and evolve over the years. And so I think people should be looking at this as Oracle looking for ways to buy its way into this extremely lucrative field that will probably grow extraordinarily fast in the cloud in the coming years, which will give them a foothold in this area of the cloud, which is where they’re really struggling to grow.
Zoe Thomas: So let’s talk about the company Oracle as purchasing Cerner. What exactly do they do?
Aaron Tilley: So Cerner is the second largest player in this field called electronic medical records software. This Wisconsin-based epic systems corporation is the largest. Cerner comes in at around 25% market share. And it is a old sort of legacy business where doctors are inputting patient records and any visit times, prescriptions, anything related to a patient’s healthcare records into this computer system. And primarily, this has been a sort of legacy computer system.
So in the sort of corporate IT world, this is like hospitals with servers in their IT closet backroom running this software. So in the lingo of corporate IT, this is considered on-prem. And what’s happening now is that there’s this move to take it out of these on-prem corporate data center something, a data sitting in to a hospital into the cloud, which is where the whole world is moving. It is these clouds run by these very small amount of players, Microsoft, Amazon, Google, and Oracle is trying to grow here and they own this data center that then is rented out by like a hospital and you get all these efficiencies and all this better technology and better hypothetically better security through moving it to the clouds.
Zoe Thomas: You know, right now I’m picturing a hospital and you open a closet door and there’s like a bunch of servers stacked up with information. Why would Oracle want to buy a company like that?
Aaron Tilley: Because Cerner’s trying to go towards the future of the cloud. And two years ago in 2019, they partnered with the cloud pioneer leader, which is Amazon with their Amazon Web Services cloud unit that has nearly 50% market share in this market. And they went with Amazon to try to figure out how are we going to fit into the world, the cloud. And so they’ve been slowly trying to figure out their way there. It’s just, they haven’t gotten very far and by Oracle buying Cerner, they can sort of take away that business from Amazon most likely.
Zoe Thomas: And so what’s the big picture for Oracle then, it gets to take the business from Amazon, but where does this position it going forward?
Aaron Tilley: Well, Oracle for the last few years has been really desperately trying to catch up to the cloud giants. For years it’s chairman, co-founder, Larry Ellison, a very brash sort of classic Silicon Valley executive has really derived cloud and called it names as a fad that will fade into obscurity in the coming years. He’s come to realize that is not true. Oracle if it wants to be relevant and continue to be relevant in the technology field and industry at wide, it has to move into the cloud. So it’s been making all lot of effort to buy its way into the cloud or find new avenues. And by buying Cerner, it potentially has an opportunity to get a very important and strategic part of the cloud, which is just the whole healthcare space. So this gives them a good foothold into that.
Zoe Thomas: Okay. So I can see why this is good for Oracle. I can see maybe why Cerner would be interested in this deal, but if I’m just an ordinary person with medical records, why should I care about this purchase?
Aaron Tilley: Well, I think it points to how healthcare could really transform over the coming years because a lot of healthcare is so stuck in sort of archaic systems and it’s really manual, like, manually inputting in a lot of very paper-based kind of industry. By finding new ways to move into the cloud there’s a lot of AI that can be applied to healthcare. I think has the potential for healthcare data to be really used in different ways. The data that doctors and healthcare and in your insurance and hospitals collect about all of us, they’re going to find ways to make use of that.
Zoe Thomas: How do investors feel about this deal?
Aaron Tilley: Investors were on the Oracle side, not too happy about it. Oracle stock has been driven a lot by stock repurchases and by spending all this money on this all cash deal of nearly $30 billion, this stock repurchases are probably going to slow down. So they weren’t too happy about that. It’s not going to be as lucrative stock to own for investors. For Cerner investors, they had reacted much more positively, but still not at the trading at the market rate that it was acquired for. So there’s still, I think, some skepticism around the deal, if it how soon it can close regulatory matters. So not that positive.
Zoe Thomas: You know, I remember last year, Oracle wanted to buy TikTok for quite a large sum of money that never went through. I mean, was money just lying or around for Oracle waiting to be spent? Do these deals connect in any way?
Aaron Tilley: Yeah, I think they connect in a way that it’s Oracle looking for ways to essentially buy its way into the cloud. Finding large customers where they can prove they’re a viable player in the cloud, that they can be important player and competing against Amazon and Microsoft who are the leaders. So this gives them a really interesting opportunity to get really a major player in health, which will become significant in the cloud pretty soon. TikTok was a way for them to be a significant player potentially in social media, in delivering these viral videos that TikTok serves up. So it essentially trying to buy their way into the cloud.
Zoe Thomas: All right. That’s our reporter, Aaron Tilley. Thanks so much for joining us.
Aaron Tilley: Thank you.
Zoe Thomas: And that’s it for today’s Tech News Briefing. If you want more text stories, check out our website, wsj.com. And if you like our show, please rate and review it. You can do that wherever you get your podcasts. I’m Zoe Thomas for The Wall Street Journal. Thanks for listening.
