Last week, after Oracle announced it was buying a company called Responsys for $US27.00 per share in cash, investors turned around and drove up the price of Responsys to $US27.40.
And the stock today is still trading today above $US27 (at about $US27.24).
What’s going on? Rumour has it that SAP, or some other tech firm, could swoop in and make a competing offer. SAP was also bidding on the company before it chose Oracle, the Wall Street Journal’s Shira Ovide reported.
Some say that the deal, valued at about $US1.5 billion is a relative bargain for Oracle. It means Responsys is selling at about eight-times revenue from the prior 12 months, Ovide reports, or 5.6-times its anticipated 2014 revenue, says Wall Street analyst Pat Walravens from JMP Securities, who closely follows Oracle and the enterprise software industry.
That compares to the 11 times recurring revenue which Oracle paid for Eloqua, according to Goldman Sachs estimates.
Walravens even went so far as to increase his target price for Responsys to $US33, after the $US27/share deal was announced. He wrote in a research note:
We are raising our price target because we would not be surprised to see a competing bid from another vendor like SAP … IBM or Microsoft. SAP, in particular, has apparently been in recent partnership discussions with Responsys, has previously paid higher multiples for other SaaS solutions (8.1x for SuccessFactors, 7.1x for Ariba and reportedly a similar multiple for privately held Hybris) and would have little to lose, in our view, by putting in a higher bid, thereby either forcing a competitor to pay more for an asset or acquiring a business that would be a very nice fit for its SaaS and retail businesses.
Reponsys has a cloud service that helps companies with marketing campaigns like sending offers via email, Web ads or mobile ads.
Oracle wants Responsys to help it do battle with its old frenemy, Salesforce.com. Salesforce.com founder, Marc Benioff, who studied at Oracle CEO Larry Ellison’s knee, wants to dominate what looks to be the next big trend in enterprise IT.
Companies spend nearly $US4 trillion a year on technology, mostly through their IT departments. But Benioff believes that by 2017, the chief marketing officer will buy more tech than the chief information officer. So he’s building out his marketing tech offerings to grab that business, something he calls “Marketing Cloud.”
Oracle wants the CMO’s business, too, and, ideally, to prevent Salesforce.com from winning it. Responsys will be combined with another huge Oracle acquisition, Eloqua, for something that Oracle also calls “Marketing Cloud.”
That’s not too subtle is it?
SAP’s interest in Responsys could indicate that SAP is getting ready to make this a three-way war for the Marketing Cloud.
And that’s why, days after the announced acquisition, Responsys investors are hopeful that they’ll get more than $US27 a share.
We’re not holding our breath that SAP or another player will really will swoop in and disrupt Oracle’s deal. There are several other players in this market SAP could grab if it wanted to, like Marketo.