Investopedia: Another Day, Another Deal For Oracle

If growth through acquisition is supposed to be bad (as some academic types suggest), Oracle (Nasdaq:ORCL) CEO Larry Ellison very clearly doesn't care. Less than half a year after the $1.5 billion acquisition of RightNow, Oracle is at it again with the acquisition of cloud-based HR specialist Taleo (Nasdaq:TLEO). 

The Deal   
Taleo certainly cut to the chase in its PR announcement (titled "Oracle Buys Taleo"). The companies have reached an agreement on a deal that will see Oracle buy Taleo for $1.9 billion in cash. That values Taleo at $46 per share, or about an 18% premium to the prior day's close.

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Investopedia: SAP Pays Up And Accelerates Its SaaS Development

One way or another, growth costs money. Large software companies, like Microsoft (Nasdaq: MSFT), Oracle (Nasdaq: ORCL) and International Business Machine (NYSE: IBM), spend piles of money on internal software development, but the reality is that the big boys still often have to bring out their wallets to compliment or compensate their own efforts. To that end, SAP AG (NYSE: SAP) is paying quite a lot for human resource software-as-a-service (SaaS) leader, SuccessFactors (NYSE: SFSF), but it would seem the alternative was even less appealing. (To know more about technology industry, read: A Primer On Investing In The Tech Industry. )


The Deal 
SAP announced over the weekend that it was acquiring SuccessFactors in an all-cash deal worth about $3.4 billion. SAP will pay SuccessFactors shareholders $40 a share, a 52% premium to the Dec. 2, 2011, close and near to the all-time high for the stock. SAP will initially pay for this deal with cash on hand and a loan.


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Investopedia: Oracle Expands Its Cloud Business ... RightNow

Oracle (Nasdaq:ORCL) has always been a notably acquisitive company, so it was really only a matter of time before they announced another meaningful deal. Likewise, the company is actively trying to build it out its cloud computing and software as a service (SaaS) business, and stay ahead of the likes of SAP (NYSE:SAP) and Salesforce.com (NYSE:CRM), so a deal in the SaaS space was likewise just a matter of time.


Those two timelines met on Monday morning, as Oracle announced that it had reached an agreement to acquire customer service specialist RightNow (Nasdaq:RNOW) in an all-cash deal.

The Deal
Oracle will be paying $43 per share in cash for RightNow. That works out to about a 20% premium to RightNow's prior closing price, and a total net price tag of about $1.5 billion - not exactly a huge deal for a company with $16 billion in net cash on the balance sheet, and over $5 billion of free cash flow in the last quarter. (Free cash flow is a great gauge of corporate health, but it's not immune to accounting trickery. For more, see Free Cash Flow: Free, But Not Always Easy.)


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Investopedia: Red Hat Plays A Familiar Tune

When analyzing the quarterly reports from virtualization and middleware provider Red Hat (NYSE:RHT), it is tempting to just refer back to older reports. For better and worse, not much has been changing for this software growth story. For those who liked Red Hat before, there are still ample reasons for optimism that this company has a defensible niche in a growth market (and/or could be an attractive buyout target). For those who didn't like Red Hat before, it's still a company with questionable operating leverage and rampant well-heeled competition.

Second Quarter Results - Like The Past, Only More So  
There was not much in the way of new trends or themes to come out of Red Hat's latest quarter. Revenue was up 28% from last year (and 6% from the first quarter), with subscription revenue up about 28% and billings up about 30%. Growth continues to be fueled by strong demand for products like RHEL and Jboss, and the company continues to do well in signing up large customers (30-million-dollar-plus deals this quarter) and keeping the ones they have.

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http://stocks.investopedia.com/stock-analysis/2011/Red-Hat-Plays-A-Familiar-Tune-RHT-VMW-CRM-ORCL-CSCO-IBM-GOOG0922.aspx

Investopedia: CA - Quality Is There, Growth Is Not

Looking only at cash flow, CA Technologies (NYSE:CA) should be a slam-dunk for value investors. The company produces a lot of cash flow, has a strong position in its core markets, and provides software that is critical enough to its customers' operations that switch-overs to competitors' products are not undertaken lightly.

But then there is the growth problem. CA Technologies just is not growing that much, has not grown much in a long time, and serves a market (mainframes) that seems to be in inexorable decline. Given the relative scarcity of technology value investors, then, CA is a stock may well be much too cheap and yet could languish anyway.

A Fiscal Fourth Quarter that Was Not Strong 

Sometimes companies report earnings that look bad at first and get better with further exploration. In other cases, the opposite is true. It looks like CA Technologies belongs in that second category.

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Investopedia: Signings A Small Thorn In IBM's Paw

Old-tech hasn't been getting much love lately, but this earnings cycle may help bring investors back to many of these old-school tech names. For although weak signings in the service business may send some investors to the sidelines, IBM (NYSE:IBM) reported an otherwise solid quarter and Big Blue remains a respectable less-risk play on technology. 


A Mostly Solid First Quarter
IBM reported top-line growth of 8%, adjusted down to 5% on a constant currency basis. Growth was led by the Systems and Technology business (hardware, mostly), which posted 19% growth with strong mainframe and UNIX business. Software grew 6% this time around, while the services business rose by a like amount.

IBM also delivered solid operating leverage for the first quarter, though readers should realize that there are a lot of adjustments and moving parts here and the numbers will vary from investor to investor depending upon what charges they choose to add back. Nevertheless, gross margin ticked up almost a full point, while operating margin expanded nicely as adjusted operating profits grew more than 20%.


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Investopedia: Salesforce.com - High Octane Growth With A Price To Match

Nothing frustrates a value analyst more than a breakaway growth stock that keeps posting excellent results and a seemingly bullet-proof valuation. Salesforce.com (NYSE:CRM) offers growth investors a choice not unknown to those who enjoy a good adult beverage or two - quality does not come cheap. So the question for investors is whether they are comfortable paying single-malt prices for a story that does not have that kind of age just yet. 

A Hot End to a Great Year
The sea change that is cloud computing is not stopping, and neither is CRM's growth. Revenue rose about 29% this quarter with 9% sequential growth - beating the average estimate, though not exceeding the highest estimates out there. The company also announced that billings grew 36%, while the year-end customer count was 27% higher and the company's deferred revenue was 33% higher.

CRM's profitability performance is more mixed. Gross profit rose 27% for the quarter, but the company significantly ramped up expenses across the operating spectrum. Even investors who buy the notion that stock compensation expense is not a "real" expense (the main difference between the company's GAAP and non-GAAP operating income figures) have to contend with the reality that operating income fell on a year-over-year basis. Granted, spending on R&D and sales may very well help further the company's competitive edge, and the company's trailing cash flow is not problematic, but this is what passes for a black mark on CRM's performance these days. 



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