Oracle Acquires Taleo For $1.9 Billion

Oracle announced plans to acquire Taleo Corporation, the SaaS provider of human resources software that helps organizations recruit, retain and manage employees, on Thursday. Oracle acquired Taleo for $1.9 billion, roughly six times its 2011 earnings figure of $309 million. Oracle’s acquisition of Taleo consolidates it recent interest in cloud-based software by building upon its October 2011 acquisition of RightNow technologies, the customer relationship management vendor. Oracle’s acquisition of Taleo enables it to keep pace with rival SAP in the SaaS space for human resources software given SAP’s December 2011 acquisition of SuccessFactors for $3.4 billion.

Key details of the acquisition are as follows:

• Taleo has over 5000 customers ranging from small to mid-size businesses to large enterprises.
• The acquisition of Taleo at $1.9 billion amounts to $46/share.
• Shares of Taleo (TLEO) jumped in price from a pre-acquisition announcement price of $38.94 on February 8 to $45.64 at the close of trading on February 9.
• Shares of Taleo closed at $45.65 on Friday, February 10.
• Several analysts downgraded Taleo stock on Thursday and Friday.

Michael B. Nemeroff of Morgan Keegan downgraded the stock from Outperform to Market Perform because the acquisition price of $46/share represents a “fair price” close to its market value. Rick Sherlund of Nomura Securities downgraded Taleo shares from Buy to Neutral and Mark Marcon of Robert W. Baird downgraded the stock from Outperform to Neutral. BMO Capital, Citigroup and JPMorgan similarly downgraded the stock.

Oracle boasts annual revenues of $8 billion and over $30 billion in cash. In recent months, much of Oracle’s publicity has centered on its Big Data appliance, which it made available in January 2012. Oracle has historically been skeptical about cloud-based software but appears to be changing course in light of its acquisitions of Rightnow and Taleo.