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Cerner Shares Surge On Reports Of $30 Billion Oracle Takeover Bid

The Wall Street Journal reported that Oracle is eyeing electronic medical records company Cerner Corp. in a deal that could be worth as much as $30 billion.

Cerner Corp.  (CERN) - Get Cerner Corporation Report shares surged Friday after the Wall Street Journal reported that Oracle  (ORCL) - Get Oracle Corporation Report is preparing to buy the electronic medical records company in a deal worth as much as $30 billion.

A takeover of Cerner, the biggest designer of software used by doctors and hospitals to mange and store medical records, would not only be one of the biggest M&A deals of the year, it would also be the biggest in Oracle's corporate history -- more than 3 times the size of its $10 billion purchase of PeopleSoft in 2005 -- and a bold statement from CEO Safra Catz, who assumed sole control of the cloud and software group in 2019.

Cerner, which posted third quarter revenues of $1.468 billion in October, has a 25% share of the medical records market, according to SVB Leerrink.

"We view the potential deal as a positive for CERN as it will allow the company to undergo its transition from an EHR to a healthcare platform within the cover of a far larger organization, and with the benefit of a premium takeout valuation," said Leerink analysts Stephanie Davis. "We are cautious on potential pushback from Oracle shareholders creating risk to a deal announcement, as the deal would mark a transition away from the company’s core organic growth acceleration story while the check size implies likely dilution to holders." 

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Cerner shares closed 13% higher on the session Friday at $89.77 each, while Oracle fell 6.4% to end the week at $90.62 each. 

Oracle shares traded at an all-time high last week, giving the cloud and software group a market value of around $290 billion, following better-than-expected second quarter earnings and a robust near-term outlook.

Oracle, which earns the bulk of its revenues from its cloud services and license support unit, beat Street earnings forecasts by a dime with an adjusted second quarter bottom line of $1.12 per share.

Cloud division revenues topped $7.5 billion as companies continue to spend on hybrid work solutions in a post-pandemic world, while overall revenues grew by 6% to $10.4 billon. 

Bookings grew at an even faster pace, rising 11% from last year's levels, giving Oracle the confidence to forecast current quarter revenues in the region of $10.7 billion to $10.9 billion, based on growth forecasts, with profits of between $1.19 and $1.23 per share.