Oracle Corp (
ORCL
)
is on an acquisition spree in order to expand its social media
offerings. The database application vendor recently announced that
it has agreed to buy social marketing software developer Involver
Inc. for an undisclosed sum. The transaction is expected to close
by the end of the third quarter of 2012.
San Francisco, California based Involver develops marketing
applications that can be deployed exclusively on
Facebook (
FB
)
. The startup has a significant clientele that includes
Best Buy Co. (
BBY
)
, Toys "R" Us Inc. and
Viacom Inc.'s (
VIA
)
MTV Networks.
Social media marketing tool providers have become prime
acquisition targets lately. This is due to the growing influence of
social media such as Facebook and Twitter on customers' lives.
Marketers on a regular basis are using social media platforms to
market their brands and also interacting with existing and
prospective customers.
According to Forrester Research, advertiser spending on social
media is expected to increase at a compounded annual growth rate
(CAGR) of 26.0% for the period of 2011-2016. At the same time, the
market for social media management tools is expected to double to
$970 million in 2016 from $389.0 million in 2012.
This staggering growth potential is attracting the likes of
Oracle,
Salesforce.com Inc. (
CRM
)
,
Google Inc. (
GOOG
)
,
Microsoft Corp. (
MSFT
)
and
SAP AG (
SAP
)
. To gain an upper hand, these large vendors have been picking up
companies, which they expect would not only expand their product
portfolios but also provide a competitive edge.
In June this year, Salesforce announced the acquisition of Buddy
Media Inc. for $689.0 million. At the same time Google acquired
Meebo. In late June Microsoft announced the acquisition of Yammer
Inc. for $1.2 billion in cash. However, Oracle has been the most
aggressive of the bunch in recent times. The Involver deal is
Oracle's third social marketing buyout over the last three
months.
In May this year, Oracle acquired Vitrue for approximately
$300.0 million. Vitrue offers solutions, which marketers use to
collect and collate social interaction data from Facebook, Youtube,
Twitter, Google+ and many other social networking platforms. In
June, Oracle announced the acquisition of Collective Intellect, a
social media monitoring firm.
We expect Oracle to continue to pursue strategic acquisitions of
small technology startups that are more likely to be easy to
integrate along its product lines, thereby helping it to expand
customer base over the long term. The strategic acquisitions are
also expected to provide Oracle a significant competitive edge over
its peers going forward.
However, Oracle faces significant integration risks due to the
rapid pace of acquisitions within a short span of time, in our
view.
We remain Neutral on a long term basis (6-12 months). Currently,
Oracle has a Zacks #3 Rank, which implies a Hold rating on a
short-term basis.
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