Oracle Corp., the second largest software maker in the world, agreed to purchase RightNow Technologies Inc. for $1.43 billion on Oct. 24.
With this purchase, Oracle Corp. is adding software to its relatively new cloud that will help serve customers through call centers, internet and social networks.
“Oracle is getting serious about its own cloud,” said Richard Williams, an analyst at Cross Research in Livingston, New Jersey in an article with Businessweek.com. “This is the first infrastructure buy, and it means they’re putting the plumbing for the cloud together.”
Williams is referring to the Oracle Public Cloud, which delivers software through cloud computing. Cloud computing refers to anything that involves delivering hosted services on the internet.
“I think cloud software is definitely what software companies need to be looking into for the future,” said junior journalism major Ethan Scholl. “I’ve heard Google is putting a lot of effort into cloud software, and if Google is doing it, it’s probably a pretty good idea for others to do so.”
According to data provided by Bloomberg, Oracle is paying seven times RightNow’s revenue in the deal.
“A lot of the acquisitions in the software-as-a-service space tend to be pricey because everybody sees that the market is moving towards the cloud, and everyone wants to make sure they have a well-placed strategy,” said Kirk Materne, an analyst at Evercore Partners Inc. in New York in an article in the San Francisco Chronicle. “A lot of these cloud-based deals tend to be in anywhere from five to 10 times revenue.”
This is Oracle Corp.’s largest acquisition since last year, when it purchased Sun Microsystems Inc. Oracle has made nine acquisitions in the past year.
“Oracle is paying a premium to lock them up,” Williams said in article with the San Francisco Chronicle. “It’s not unexpected that this would be an expensive acquisition because [software as a service] companies are trading at very high multiples.”
In this acquisition, according to Bloomberg data, RightNow is valued at 68 times earnings before taxes, depreciation, interest and amortization. This is the highest multiple of similar acquisitions in the past five years.
Investors in RightNow Technologies will now receive $43 a share, which is 20 percent more than they would have received before the purchase on Oct. 21, according to a statement by Oracle Corp.
On Oct. 24, Oracle gained 2.3 percent, moving to $32.87 a share.
Through the similar additions of more than 70 companies, Oracle boosted its sales to $35.6 billion in the fiscal year ended in May.
“I don’t know too much about the software technology business, but it definitely seems like a smart move to make considering the sale boost that Oracle Corp. saw,” said junior education major Zach Schmid.