The rumor mill was working overtime last week after a TD Cowen research note claimed that Oracle will need to offload Oracle Health – formerly known as Cerner – to fund its AI datacenter commitments.
It’s a tale of the times. A research note isn’t an official announcement, but the EHR market could be heading towards its biggest shakeup since Oracle first acquired Cerner in 2022.
- The speculation revolves around Oracle’s massive $300B datacenter contract with OpenAI, which will apparently take $156B of capital expenditures to fulfill.
- Add in contracts with Meta and Nvidia, and Oracle’s commitments swell to over $500B.
That’s a ton of CapEx. TD Cowen says Oracle will have to make some deep cuts to round up enough funds. That includes:
- Selling Cerner to the highest bidder
- Axing up to 30k jobs, about 15% of the current workforce
- Exploring “bring your own chip” arrangements to lighten the load on Oracle’s books
Oracle’s back is against the wall. It’s already raised $58B in the last two months, and U.S. banks have started pulling back their lending.
- Foreign banks are still supporting Oracle’s datacenter projects, but they’ve also raised their premiums to levels typically reserved for non-investment grade companies.
- On top of that, Oracle is going to have a hard time recouping the $28B it just paid for Cerner. Since the acquisition, Cerner’s had a brutal VA implementation, a tough rollout with the DoD, and Epic’s been eating its lunch.
Who has deep enough pockets for Cerner? It’s a short list.
- Microsoft is a prime suspect. It’s already heavily invested in healthcare through Nuance and Azure, so an EHR could potentially create a compelling end-to-end cloud lineup for its existing customers.
- Google and Amazon also probably wouldn’t mind having Cerner’s customer base as an anchor for their cloud ambitions. They both have full war chests and established healthcare ventures like Verily and One Medical, but they also share a track-record of expensive lessons in the industry.
The Takeaway
Recent struggles aside, Cerner is one of healthcare’s true industry titans. It shaped decades of innovation and thousands of careers. Now it might end up as a line item to fund GPU clusters.
