Companies in the software-as-a-service business were higher on speculation that Oracle‘s acquisition of RightNow announced Monday means more M&A in the industry.
Oracle (ORCL) said it would pay $43 per share, which amounts to an enterprise-value-to-evenue multiple of 5.5x compared to a 4.5x average multiple for a basket of SaaS companies, according to FBR Capital Markets. FBR says Oracle’s diversified software and hardware portfolio
“positions the company well to weather the uncertain economic climate. We believe Oracle’s engineered systems (Exadata and Exalogic) strategy, coupled with Fusion Applications, should allow the company to take market share from its rivals, namely IBM, Hewlett-Packard, and SAP. We reiterate our Outperform rating and $38 price target.”
Names with significant SaaS revenue include Ariba (ARBA), Callidus Software (CALD), inContact (SAAS), LivePerson(LPSN), salesforce.com (CRM) and Ultimate Software (ULTI). Stocks with contact center/customer service revenue include inContact, Interactive Intelligence (ININ), LivePerson, Pegasystems (PEGA) and salesforce.com.
RightNow reported earnings a day early. Management raised its EPS guidance higher than the consensus, and “still looks conservative,” writes Nathan Schneiderman at Roth Capital Partners. RightNow posted revenue of nearly $58 million (a $1 million beat) and EPS of $0.19 (a 4 cent beat), suggesting healthy company momentum and positive sector demand.
The earnings performance was due to what Schneiderman called “surprisingly low” operating expenses, which can happen when a takeover is in the offing.
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