Update: Oracle to buy retail software vendor ProfitLogic

Application analyses pricing, inventory, promotions, and other factors

Oracle has reached a deal to acquire privately held ProfitLogic, a Cambridge, Massachusetts, developer of software for the retail industry. Financial terms of the deal were not disclosed.

The acquisition comes on the heels of Oracle's April purchase of retail ERP (enterprise resource planning) software maker Retek for around $670 million. ProfitLogic focuses on improving retailers' profit margins: Its software analyzes factors such as inventory, pricing and promotions to help retailers optimize their financial strategies. The company's customers include Sears, Roebuck & Co., Bloomingdale's, J. C. Penney Co., and Burlington Coat Factory.

Adding ProfitLogic to a portfolio that also includes Retek's applications and Oracle's database and infrastructure software will help Oracle build its retail software line, the company said. Executives have previously identified the retail industry as a key growth opportunity for Oracle.

"This combination readily fits into Oracle's overall strategy in retail," said Tom Madigan, Oracle's vice president of retail distribution and consumer products, on a conference call following Oracle's announcement.

ProfitLogic is a smart purchase for Oracle, according to analyst Alexi Sarnevitz, AMR Research's retail industry research director. He considers ProfitLogic's analytics software among the most sophisticated in the industry.

"Our overall perspective is that this is very positive for everybody involved," Sarnevitz said. "ProfitLogic brings a whole new set of industry and technical capabilities to Oracle to build on what Retek has. We see the capabilities here as very complementary."

Before buying Retek, Oracle had a limited presence in the retail industry. Now, in a matter of months, it has positioned itself as a major vendor in the sector, where its archrival SAP also competes. Oracle very publicly snatched Retek away from SAP, which initially agreed to buy the company for a lower price than Oracle paid, following a bidding war.

Oracle will have 1,900 retail software customers once ProfitLogic's 30 customers are integrated into Oracle's sphere of influence, said Duncan Angove, general manager of Oracle's Retek business unit.

"This is part of the broader global battle between Oracle and SAP. What you're seeing here is a series of skirmishes," Sarnevitz said. "If you're at war with somebody, fighting for domination of the global ERP space, you don't want them to have a core vertical you don't compete in."

ProfitLogic has 250 employees spread around the world, said Scott Friend, co-founder and president of the company. The company has raised US$38 million in venture capital and has been growing profitably since its last round of funding in January 2002, he said.

Oracle should be able to keep all of ProfitLogic's management and most of its employees in their current roles, Angove said.

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