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In a brief but crystal clear announcement Monday morning, old school software giant Oracle (NASDAQ: ORCL) announced that it would acquire customer service software pioneer RightNow Technologies (NASDAQ: RNOW) for $43.00 per share or roughly $1.5 billion. Oracle’s generous valuation of 6.6 times RNOW’s projected 2011 revenue provides the latest evidence of old school, client software companies’ interest in cloud computing.

Founded by CEO Greg Gianforte in 1997, and based in Bozeman, Mont., RightNow Technologies sells a suite of software products that help companies improve customer service, while reducing support costs. From its heritage in website customer support, RNOW expanded into several adjacent segments, including marketing automation, call center management, online chat, and, most recently, social computing for customer service. With an average order size of about $100,000 per customer per contract, RightNow provides hosted, or what is more commonly referred to as cloud-based services for its customers. Thus, there is no need to purchase the software outright.

Over the years, RightNow has developed a solid presence in online customer service, a critical component of customer relationship management, and can now boast the leading market position in this segment. The company serves a broad array of roughly 2,000 customers.

In November of 2010, RNOW closed a $170 million convertible debt offering, and, more recently completed the acquisition of Q-Go.com, a Dutch-based company, for which it paid $34 million. Q-Go.com offers natural language search technology that helps large banks, travel services and telecommunications companies improve the quality of customer service on their websites.

Ironically, Right Now began fourteen years ago as a client server software company, selling on premises perpetual license software. Several years ago the company began a painful and courageous transition to adapt its core technology to harness the many benefits of cloud computing. Over the last two years, RNOW managed to grow steadily and predictably, with a top-line growth rate of roughly 20 percent, across a broad number of industries.

Oracle’s generous valuation of 6.6 times RNOW’s projected 2011 revenue, and roughly 5.4 times projected 2012 revenue, indicates the length to which client server software companies may go to improve their prospects in the public cloud. The valuation appears to be on par with other publicly traded cloud-based software companies, such as Salesforce.com (NYSE: CRM) , athenahealth (NASDAQ: ATHN), SuccessFactors (NASDAQ: SFSF), and others.

We do not doubt that there may have been other interested bidders for RNOW, such as Salesforce.com and/or SAP—both of which seek to extend their presence in cloud computing. However, our sense is that Oracle’s generous offer leaves little chance for an alternative bidder to emerge successfully.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Source: Old School Software Company Oracle Seeks Cloud Entry