In its largest acquisition since 2004 and biggest cloud deal ever, Oracle Corp. today agreed to buy software-as-a-service giant NetSuite Inc. for $9.3 billion. The sum breaks down to $109 per share, a respectable 19 percent premium over the company’s Wednesday closing price.

The deal isn’t much of a surprise, though it was long in coming. A large portion of the cash from the transaction is slated to end up in the hands of Oracle boss Larry Ellison, who reportedly owns 40 percent of the cloud provider’s shares together with his family.

The executive also has close ties with NetSuite CEO Zach Nelson that trace back all the way to the 1990s. Nelson joined Oracle in 1998 as its head of marketing and spent two years on the management team before heading off to lead Network Associates Inc., now known as McAfee. The two executives’ time-tested working relationship may help smooth the task of integrating their organizations.

Oracle has been increasingly focused on cloud technology, an industry that has investors particularly excited. But Peter Burris, head of research at SiliconANGLE Media, says that Oracle is still playing catch-up.

“Investors are pretty jazzed about Amazon Web Services (AWS),” Burris said. By contrast, Oracle remains a bit player in cloud computing. “I don’t think it’s serendipitous that Oracle purchased NetSuite on the same day that AWS reported its growth numbers.”

In fact, the deal may indicate that Oracle’s core database business is facing fiercer competition from cloud database services offered by Amazon.com Inc. and Microsoft Corp. and by open-source databases. “It may be an indication that the database business is under greater pressure that conventional wisdom thinks and they are trying to add application revenue faster than organic growth would deliver,” said George Gilbert, an analyst with Wikibon Research, owned by the same company as SiliconANGLE.

Big boost

Burris added that the NetSuite purchase makes sense for Oracle, and acquisitions is still a key strategy for the Santa Clara-based company. “Oracle still has a sizable M&A team running around,” Burris said. “Institutionally, it remains a key feature of their strategic patterns.”

Oracle will absorb NetSuite into its cloud business to level the playing field against Microsoft, Salesforce.com Inc. and other better-established providers. The deal is poised to give the database maker a particularly big boost in mid-market, a space where its software-as-a-service offerings have struggled to gain significant traction.

NetSuite boasts a dominant position in the segment thanks to its popular resource management and business automation offerings. The portfolio generated total revenues of $741 million during NetSuite’s last fiscal year while Oracle made $1.5 billion off its own cloud business during fiscal 2015.

But even with the new revenue streams that the acquisition is poised to create, the database maker still has a long way go to before it can catch up with its top competitors. Microsoft’s cloud division recently achieved a $10 billion run-rate and Salesforce.com is only a few years behind if CEO Marc Benioff is to be believed.

Still, the purchase of NetSuite should put Oracle in a much better competitive position on the long run assuming everything goes according to plan. The deal is expected to be completed later this year pending regulatory and shareholder approval.

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