) is aggressively building its position in the cloud-computing
arena through strategic acquisitions. After acquiring cloud-based
service providers RightNow Technologies in January and Taleo Corp
in April this year, Oracle recently announced the acquisition of
) for approximately $871.0 million.
Virginia-based Eloqua develops cloud-based automated marketing
solutions. Eloqua software helps businesses monitor marketing and
sales initiatives. Its tools are also used by marketing
departments to analyze online behavior and buying preferences in
order to find prospective customers.
According to Reuters, Eloqua has a strong customer base, which
Automatic Data Processing Inc.
), AON Plc, Dow Jones, Polycom Inc. and National Instruments
Corp. The company also has an online sales partnership with
), one of the major competitors of Oracle in the automated
marketing software market. Eloqua earned revenue of $23.8 million
in the recently concluded third quarter of 2012.
In August 2012, Eloqua completed its initial public offering
("IPO") that generated net proceeds of approximately $87.7
million. Oracle's offer price of $23.50 per share is double that
of Eloqua's IPO price of $11.50 per share and represents a 31%
premium to its December 19 closing price of $17.92. Following the
announcement, Eloqua share price surged 32.0% to close at $23.66
on December 20, 2012.
According to data from Bloomberg, Oracle's offer price equates
to more than 9 times Eloqua's trailing 12 months sales, a premium
compared to 6.3 times for RightNow and 7.1 times for Taleo. As
Oracle is comparatively a late entrant in the cloud-computing
market, we believe that the company is paying a premium to boost
its product portfolio in order to catch up with Salesforce and
According to market research firm Gartner, marketing is one of
the four fastest growing areas of enterprise sales applications
on the SaaS (software-as-a-service) platform. Gartner projects a
robust increase in marketing spending due to improving e-commerce
sales, higher adoption of social networks, rapid usage of mobile
devices and improving marketing effectiveness.
We believe that higher spending on marketing bodes well for
Oracle, as strong demand for Eloqua's revenue performance
management application will boost its top-line. Oracle intends to
integrate Eloqua into its Oracle Marketing Cloud and it will be
an important addition to Oracle's customer experience
We expect Oracle to continue pursuing strategic acquisitions
of technology start-ups that can be easily synchronized with its
product lines. These acquisitions will help Oracle to expand its
customer base over the long term. The strategic acquisitions will
also help Oracle to reduce competition by eliminating rival
products going forward.
However, we believe that competition remains stiff for Oracle,
which will limit its growth abilities going forward. Oracle's
hardware business continues to decline, putting massive pressure
on the software side to perform consistently in order drive to
growth. In such a scenario, cut-throat competition and sluggish
IT spending will hurt profitability going forward.
We remain Neutral on a long-term basis. Currently, Oracle has
a Zacks #3 Rank (Hold).
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