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Oracle Corporation Here We Go Again; Announces Eloqua Acquisition

On Thursday, December 20, before the markets opened, Oracle announced that it is acquiring SaaS vendor Eloqua (ELOQ $17.92) for $23.50 per share or roughly $871 million net of Eloqua’s cash. The deal represents a 31% premium to Eloqua’s previous
closing price, a 104% premium to the company’s August IPO, and it values the business at 7.6 times 2013 revenue—above the overall SaaS group median, which trades at 4.0 times 2013 revenue. The acquired property grew subscription revenue by 32% in its most recent quarter, and the Street was expecting 22% total revenue growth in calendar 2013. The deal is expected to close in the first half of calendar 2013

The Eloqua Platform provides on‐demand revenue performance management (RPM) designed to improve revenue predictability by automating, monitoring, and measuring sales and marketing initiatives. Eloqua competes in the lead management component of
the marketing space against private companies Marketo, HubSpot, and Pardot (recently acquired by ExactTarget [ET 19.16]). All of these organizations are focused on the “top of the funnel” taking leads and helping turn them into customers. E‐mail is an integral part of lead nurturing and creation, as are other functions, such as landing pages and blogging

As of November 2012, the company had more than 1,200 customers, including Adobe (ADBE $38.09), American Express (AXP $56.79; Outperform), Dell (DELL $10.49), McGraw‐Hill (MHP $54.57), VMware (VMW $96.82; Market Perform), and Siemens AG (SI $109.68). Founded in 2000, Eloqua has roughly 400 employees mostly split between its headquarters in Vienna, Virginia, and an office in Toronto, Ontario.

In Eloqua’s first full quarter as a public company (ended September 30, 2012), subscription revenue grew 31.6% year‐over‐year to $21.6 million; total revenue was up 29.6% to $23.8 million. We estimate roughly 10% of the company’s revenue is outside the United States and Canada. The company’s non‐GAAP operating margin was roughly breakeven.

For full year 2013, the Street is expecting total revenue of $114.3 million (growth of 21.7%) and a non‐GAAP loss per share of $0.05.

Our Thoughts
This marks the third major SaaS vendor that Oracle has taken out over the last 12 months (RightNow and Taleo previously). While its portfolio of cloud assets is now building, it remains largely an on‐premise provider—last quarter, for example, Oracle’s reported cloud revenue (non‐GAAP) was $230 million, representing less than 10% of the company’s total license revenue of $2.4 billion. With the Eloqua acquisition, Oracle’s cloud revenue has now slightly exceeded a $1 billion annual run‐rate—a large number but less than 3% of Oracle’s total revenue

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