Oracle to Buy Responsys for $1.5 Billion for Sales Tools
Oracle Corp. (ORCL), the world’s largest database maker, agreed to buy Responsys Inc. (MKTG) for about $1.5 billion, upping the ante in a wave of technology company acquisitions of marketing software makers.
Oracle will pay $27 a share in cash for Responsys, according to a statement today, a 38 percent premium over its closing price yesterday. The transaction is expected to close in the first half of next year.
The Redwood City, California-based company is adding to its array of marketing software as it tries to boost growth and square off against Salesforce.com Inc. and Adobe Systems Inc. in courting spending by chief marketing officers, who sit outside traditional information-technology departments. Responsys, based in San Bruno, California, makes software that lets businesses including Nordstrom Inc. and Southwest Airlines Co. tailor e-mail campaigns to consumers and track how the ads perform.
“Investors want Oracle to put more fuel in the growth engine,” said Daniel Ives, an analyst at FBR Capital Markets & Co., who has the equivalent of a buy rating on the shares. “Marketing automation is one of the hyper-growth areas within cloud” computing software that is delivered over the Web, he said. In contrast, traditional IT budgets are only growing 1 percent to 2 percent annually, said Ives.
Chief Executive Officer Larry Ellison has spent about $50 billion to buy about 100 companies over the past decade, seeking to keep 36-year-old Oracle relevant to customers. He is using those acquisitions to gain a foothold in cloud computing and shift away from traditional software stored on personal computers and servers.
Responsys surged 40 percent to $27.40 at the close in New York, capping a more than fourfold gain this year. Oracle shares fell less than 1 percent to $36.37.
Oracle, also the second-largest maker of business applications, rose to a 13-year high yesterday after forecasting quarterly sales and profit earlier this week that may top some analysts’ estimates.
While its sales and profit growth have slowed in recent years, Oracle’s latest earnings gave investors confidence that the company is weathering the transition to cloud software. Revenue for the quarter ended in November climbed 2 percent to $9.28 billion, while profit excluding some items was 69 cents a share. Analysts had estimated $9.18 billion in sales and earnings of 67 cents, according to data compiled by Bloomberg.
Responsys will become part of Oracle’s Customer Experience Cloud so CMOs can find the tools they need in one place, Oracle co-president Mark Hurd said in the statement.
The deal complements marketing software from companies including Eloqua Inc. and Endeca Technologies Inc. that Oracle has bought. Oracle’s cloud-computing bookings, or new business signed, increased 35 percent in the fiscal second quarter that ended in November. Hurd said in an interview before the Responsys deal was announced that cloud companies would bring in recurring revenue equal to client-server software licenses within two to three years.
“This one has a potential to be a very nice acquisition for Oracle because there is not a lot of overlap with what Responsys does on the marketing side,” said Matthew Hedberg, an analyst at RBC Capital Markets in Minneapolis. “It makes a lot of sense, and it certainly accelerates their strategic transition to more cloud-based revenue.”
Oracle’s competitors are chasing CMO spending too. Salesforce CEO Marc Benioff spent $2.4 billion to buy ExactTarget Inc., a Responsys competitor, in July. Salesforce also bought Web marketing companies including Buddy Media Inc. and Radian 6 Technologies Inc. Salesforce’s Buddy team now reports to former ExactTarget CEO Scott Dorsey.
Adobe, the top maker of graphic design tools, has also purchased a string of companies to build a marketing software franchise that now represents 30 percent of its revenue.
In a note to clients today, FBR’s Ives said Oracle’s latest deal makes it more probable that e-mail and social-media marketing software maker Marketo Inc. (MKTO) would be bought by a company such as No. 1 applications market SAP AG or Netsuite Inc., which Ellison invests in.
Mary Jo Rose, a spokeswoman for Marketo, declined to comment on Ives’s note.
Marketo CEO Phil Fernandez said in an e-mail that Oracle’s agreement to buy Responsys “is another clear validation of the rise of the marketer.”