Oracle to Buy Banking Software Firm

Software powerhouse Oracle Corp. turned to a small Santa Monica company Monday for help in cracking the vast financial services industry, agreeing to acquire Treasury Services Corp. for about $120 million in cash.

Oracle executives said the deal is designed to help the Redwood Shores-based company wrest business away from IBM, Unisys and other companies that have traditionally supplied the bulk of the software used by banks and other financial institutions.

“The cornerstone of that plan is the blending of Treasury Services’ software with Oracle’s core products,” said Steve Perkins, Oracle’s senior vice president in charge of worldwide financial services.

Executives at privately held Treasury Services said a small number of the company’s 160 employees could be laid off as a result of the acquisition but that the company will continue to be based in Santa Monica.

Oracle is the dominant supplier of database management software used by companies to keep track of everything from sales to payroll. But analysts said Oracle has lagged rivals in grabbing market share in the financial services industry.

Treasury Services makes software that allows banks to analyze key facets of their business in great detail. Banks use the software to track the risks of their investments, for example--even to measure which accounts are profitable and which are not.

“We enable banks to understand their profitability down to the individual transaction,” said John Dorman, chief executive of Treasury Services. He will become vice president of financial services applications at Oracle following the acquisition.

Such software is of growing importance in the banking industry, in which institutions increasingly structure fees and services to influence customer behavior and maximize profits. Treasury Services’ software is used by a number of leading institutions, including Chase Manhattan Bank and Wells Fargo.

Treasury Services was founded 14 years ago by Dorman, formerly treasurer of Union Bank in Los Angeles.

Initially conceived as a consultancy, the company shifted its focus to software about five years ago, Dorman said.

The company’s annual sales are about $40 million and have been growing by about 50% a year in recent years, he said.

Oracle and Treasury Services had been working together for about a year developing software products for the financial services industry, executives at both companies said.

The acquisition is the latest move by Oracle to expand its management software products in certain industries. The company recently said it was buying British Petroleum’s software used by energy companies to monitor and organize their sales and distribution operations.

Oracle shares rose $1.25 to close at $56.13 on Nasdaq.

Times wire services contributed to this report.