recently announced acquisition of Responsys Inc. is expected to
bolster its position in the cloud-based enterprise marketing
software sector. The current acquisition complements Oracle's
early 2013 acquisition of Eloqua.
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Oracle is paying approximately $1.5 billion ($27.00 per share)
for Responsys and the transaction is expected to complete by the
end of first-half 2014. This represents a 38.3% premium to
Responsys closing price of $19.52 on Dec 19, much higher than
what Oracle paid for RightNow (2011) and Taleo (2012).
San Bruno, California-based Responsys helps customers to create
and manage marketing campaigns through e-mail, mobile and social
marketing. The company earned revenues of $163.0 million in 2012
and is estimated to earn revenues of approximately $200.0 million
We believe that the premium is justified as the acquisition will
improve Oracle's market position. It will help Oracle to better
address the needs of Chief Marketing Officers (CMOs), as spending
on cloud-based marketing software is expected to be much higher
than overall IT spending.
Responsys has a strong clientele of approximately 450, which
includes the likes of
, Nordstrom, Lego, Southwest Airlines and United Healthcare. This
will boost Oracle's customer base. Moreover, the acquisition will
improve Oracle's competitive position against the likes of
Over the last 12 months, both Salesforce and Adobe have been on
an acquisition spree to boost their competitive positions. Over
this period, Salesforce bought ExactTarget, Buddy Media and
Radian 6, while Adobe made a string of acquisitions (including
Neolane) that improved its marketing software product offerings.
We believe that Oracle, being a late entrant to the cloud
computing field, will continue to pursue strategic acquisitions
to improve its market share and top-line growth. The company
reported better-than-expected second-quarter 2014 results, with
cloud bookings increasing 35.0%.
Engineered systems bookings also jumped 35.0% in the quarter. We
believe that the speedy adoption of engineered systems and cloud
suites will drive incremental top-line growth, going ahead.
Moreover, Oracle's strategy of providing end-to-end solutions
will further attract new customers in the long run.
Currently, Oracle has a Zacks Rank #2 (Buy).