The sell-off in the enterprise software sector, combined with the complexity related to the acquisition of Cerner, provided an opportunity for us to re-establish a position in Oracle (ORCL, Financial). Oracle is one of the world’s largest and most profitable software companies—generating more than $42 billion in revenue and 40% operating margins. We have always admired the stability of Oracle’s business and the strength of its customer relationships. Now, the company’s organic growth is beginning to accelerate. Specifically, total revenue grew 7% in fiscal year 2022 and 10% in the fourth fiscal quarter. In addition, management believes that Cerner’s growth and margins can be higher under Oracle’s ownership than it could on a standalone basis. Finally, we commend Oracle’s repurchase of roughly half its share base over the past decade, which has nearly doubled each remaining share’s interest in the business. Trading for only 12x calendar 2023 earnings ex-cash, we believe Oracle’s risk/reward is attractive.
From Bill Nygren (Trades, Portfolio)'s Oakmark Fund second-quarter 2022 commentary.
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