Oracle to Acquire RightNow - Analyst Blog
25 Ottobre 2011 - 6:00PM
Zacks
Oracle Corp. (ORCL) recently announced its
decision to acquire customer relationship management software
provider, RightNow Technologies Inc (RNOW). This
marks the company’s third acquisition in the past month and the
largest after the acquisition of Sun Microsystems in January 2010.
The acquisition is expected to close by early 2012.
Oracle will have to pay $1.43 billion in cash, or $43 per share,
which is approximately 20.0% of RightNow’s closing price of $35.96,
as of October 21, 2011. According to Bloomberg, the acquisition
values RightNow at 68 times EBITDA, the highest multiple for
similar deals over the past five years. On a price/sales basis, the
acquisition is valued at approximately 7.7 times of RightNow’s 2010
sales of $185.5 million.
RightNow's primary product helps companies manage customers'
questions and complaints. RightNow’s suite of applications includes
multi-channel service, sales, marketing, customer feedback
management, voice automation and analytics.
RightNow is a premier Software-as-a-Service (SaaS) provider with
more than 2000 customers. SaaS is a software delivery method that
enables data access from any device with an Internet connection and
web browser. In this web-based model, software vendors host and
maintain servers, databases and codes that constitute an
application. This is a significant departure from the on-premise
software delivery model.
SaaS has gained immense importance in recent times due to the
increasing adoption of cloud computing. According to market
research firm Gartner, sales of online software, which touched $10
billion in 2010, is expected to more than double to $21.3 billion
in 2015, much faster than traditional software. Customer
Relationship Management (CRM) continues to be the largest market
for SaaS, with revenues estimated to reach $3.8 billion in 2011, up
from $3.2 billion in 2010.
We believe the acquisition reflects Oracle’s continued focus on
improving its cloud computing infrastructure. Recently, Oracle
launched its public cloud, which delivers software online via cloud
computing. The addition of RightNow is expected to boost Oracle’s
CRM initiatives and counter stiff competition from
Salesforce.Com (CRM). Oracle will likely integrate
RightNow's software into its own portfolio of online offerings,
which include programs for managing sales and marketing and human
resources.
Our Take
Oracle remains very active on the acquisition front and
generally targets companies that can be integrated within its
existing or new product lines. From time to time, the company also
acquires organizations with competing technologies with the
intention of eliminating rival products.
In the last ten years, Oracle has spent more than $40.0 billion
to buy 80 companies, including big names such as PeopleSoft Inc.
and Sun Microsystems. In July 2011, Oracle acquired privately-held
InQuira, a developer of service knowledge management software. Most
recently, the company acquired Endeca Technologies, a leading
provider of unstructured data management, web commerce and business
intelligence solutions for $1.0 billion.
We believe that acquisitions in the field of data management and
cloud computing will be beneficial for Oracle over the long term.
We believe that Oracle’s strong product pipeline, rapid adoption of
Exadata and Exalogic, and solid growth in the software business
will drive incremental top-line growth 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 also note that Oracle is a late entrant in the field of
cloud computing compared to some of its more illustrious peers such
as Salesforce.com and Microsoft Corp. (MSFT) and
hence may be expected to face tough competition.
Moreover, stiff competition from International Business
Machines Corp. (IBM), SAP AG (SAP),
Hewlett-Packard Co. (HPQ), Dell
Inc. (DELL) and Cisco Inc. (CSCO) in most
of the markets is expected to hurt its profitability going
forward.
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.
SALESFORCE.COM (CRM): Free Stock Analysis Report
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ORACLE CORP (ORCL): Free Stock Analysis Report
RIGHTNOW TECH (RNOW): Free Stock Analysis Report
SAP AG ADR (SAP): Free Stock Analysis Report
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