Company shifts further away from Silicon Valley to get closer to the healthcare industry.
Oracle’s plans to move its headquarters even further from Silicon Valley surprised people at its Austin, Texas, home this week as the software giant said it is making the leap to get closer to the healthcare industry.
Chairman Larry Ellison announced Tuesday that Oracle’s move to Nashville, Tenn., was also intended to offer its employees a better lifestyle.
Austin city leaders said they hadn’t been told about the plans.
“City Hall was as surprised as everyone else with the Oracle announcement,” Austin Mayor Kirk Watson said. “We look forward to learning more from the media reports.”
During the pandemic, Oracle and other Silicon Valley companies and investors decamped to sunnier American cities, some of them criticizing San Francisco’s government and relatively high cost of living.
While San Francisco has recently re-emerged in the spotlight as a center for AI, Oracle’s wandering eye shows how the rethinking of workplaces continues to ripple through industries, rearranging America’s corporate map.
Oracle, which was founded in Santa Clara, Calif., in 1977, later had its headquarters in Redwood City. The software giant, at the time of its move to Texas, said that relocation was to allow a more flexible approach to its workforce.
The company had neither asked for nor received economic incentives from Austin to relocate, said city officials. Nashville pledged $175 million in incentives and the state of Tennessee $65 million to help build the Oracle campus in 2021.
A spokesman for Nashville Mayor Freddie O’Connell said Thursday that there were no additional incentives from the city ahead of Oracle’s headquarters announcement. In a statement, O’Connell noted that the area’s healthcare industry employs more than 300,000 people and adds $68 billion to the Nashville region’s economy.
The Nashville area is home to hospital chains HCA Healthcare and Community Health Systems. HCA is one of the largest U.S. hospital owners and among the region’s largest employers, according to the Nashville Area Chamber of Commerce.
The hospital owners are part of more than a dozen publicly traded healthcare companies based in the Nashville area, including behavioral healthcare provider Acadia Healthcare and surgical center operator Surgery Partners.
The city’s private sector has for decades pursued growth in the healthcare industry, said Apryl Childs-Potter, president of the Nashville Health Care Council, an industry group.
Oracle made a big bet on the healthcare industry through the acquisition of electronic medical records company Cerner, announced in 2021. The nearly $30 billion deal gave Oracle a presence in an industry that is one of the top drivers of growth for cloud computing.
During Oracle’s last earnings announcement in March, Ellison said the company expected years of high growth from the healthcare business. Oracle uses its cloud and AI to streamline how Cerner’s clients do everything from transcribing doctors’ dictation to generating notes and updating health records.
Cerner is a small part of Oracle’s overall business. It contributed roughly $5 billion in revenue last year, but it has weighed on the company’s overall revenue growth.
Still, Ellison this week described healthcare as the “industry we’re most concerned about.”
Oracle’s shares have risen 21% over the last 12 months as the tech-heavy Nasdaq Composite Index rose 31%. On Thursday, Oracle shares eased 0.4%.
Oracle’s leaders “believe far more than the street does in the value that is going to be created in the healthcare sector,” said Mark Moerdler, an analyst with Bernstein.
While tax rates can sometimes be a reason companies or individuals move, the mailing address of a company’s headquarters doesn’t necessarily determine where it pays the bulk of its taxes.
Companies divide their U.S. earnings among the states where they do business in a way that reflects sales, employment, physical facilities and other factors. A company moving its headquarters to Texas from California, for example, wouldn’t necessarily stop paying California’s corporate income tax.