In part one of our two part Cloud Computing Takeover Targets series we discussed cloud computing in general and the $3.4 billion SAP acquisition over the weekend of SuccessFactors (SFSF). Our underlying thesis is that with the earlier Oracle (ORCL) acquisition of RightNow Technologies (RNOW) in October and now the SAP transaction that there will be pressure on all the large software/computing companies to take heed and make their move to grab one or more of the existing players in the field or risk being “left at the station”. The final five of our ten takeover candidates are as follows:
NetSuite, Inc. (N)
NetSuite is a $3.2 billion market cap company with an average daily trading volume of 444,000 shares. The company was founded in 1999 and is headquartered in San Mateo, California. NetSuite is a leading vendor of cloud computing business management software suites. NetSuite is the prized property in its playing field and would be a great acquisition. Keep in mind with 2012 EPS estimated at $0.21 per share and revenues of $294 million this would come with some steep dilution. Also remember that the majority of the stock is held by insiders and with Larry Ellison as the largest shareholder it would seem logical that NetSuite is eventually going into the Oracle fold.
Salesforce.com is a $17 billion market cap company that trades an average daily volume of 3.1 million shares. The company was founded in 1999 and is based in San Francisco. The name Salesforce.com is synonymous with cloud computing. If one of the large cap tech companies (perhaps IBM?) wanted to make a dramatic move to advance their cloud presence then Salesforce.com might be the answer. At $17 billion this company has the largest market cap of the cloud companies in our universe which certainly limits the number of potential suitors. Likewise, with estimates of $1.63 EPS and $2.9 billion in revenue next year this one brings a lot of dilution to the table.
SPS Commerce, Inc. (SPSC)
SPS Commerce is a $282 million market cap company with an average daily trading volume of just 57,000 shares. The company was founded in 1987 and is based in Minneapolis, Minnesota. SPS Commerce is another 100% SaaS pure play. The company is profitable with EPS estimated at $0.25 this year and $0.46 next year and revenue at $57 million this year and $70 million next year. This company should also be an easily digestible “bolt on” transaction for any number of potential acquirers.
Taleo Corp. (TLEO)
Taleo is a $1.6 billion market cap company with an average daily trading volume of 533,000 shares. The company was founded in 1999 and is headquartered in Dublin, California. This company operates in the same SaaS HR space as SuccessFactors. The company is estimated to earn $1.03 this year and $1.13 next year with revenues this year of $324 million and $379 million next year. Any company buying Taleo would instantly have a solid position in the SaaS HR field.
Ultimate Software Group, Inc. (ULTI)
Ultimate Software is a $1.76 billion market cap company with an average daily trading volume of 253,000 shares. This company was founded in 1990 and is based in Weston, Florida. Like Taleo, Kenexa and Cornerstone this company competes in the same SaaS HR space as SuccessFactors. Ultimate is estimated to earn $0.66 this year on $268 million in revenue and $1.03 next year on $329 million in revenue