One day after Salesforce.com (CRM) announced that it had acquired social media marketing company Buddy Media for an estimated $669 million, Oracle (ORCL) and CEO Larry Ellison announced that Oracle has acquired Collective Intellect, a social marketing company based in Boulder, Colorado. Right after the 2012 fiscal year ended, Oracle and Mr. Ellison made sure that Oracle was not one upped by Salesforce.com. Mr. Ellison wants Salesforce.com to know that what ever it can do, Oracle can do it better.
Oracle has been aggressive in acquiring companies in the social networking and marketing realm that can also bolster Oracle Cloud services and its strategy to enhance Software-as-a-Service (SAAS). Two weeks ago, Oracle acquired Vitrue for $339 million a social marketing company and by adding Collective Intellect to its stable of products, Oracle has bought its way into the world of social networking and marketing. Oracle really wants the technology that Vitrue and Collective Intellect possess and how these social marketing companies can churn through big data problems in finding information for product branding. These two smaller start-ups have unique technology that can be enhanced and integrated into current Oracle operations. I think it is a masterful move because the acquisition bolsters two areas that Oracle has targeted for future growth, Oracle Cloud and SaaS.
Mr. Ellison believes that when acquiring a company it is similar to buying research and development of a proven product. Oracle likes to acquire aspiring companies for their technology and innovative concepts and since October 2011, Oracle has acquired four cloud based companies in RightNow, Taleo, Vitrue and Collective Intellect.
Acquisitions in the crowded field of SaaS
Oracle, SAP AG, Salesforce.com and Microsoft (MSFT) have been in a brutal competition over the last two years with regards to gaining market share in the SaaS world and cloud services are very important to the strategy of SaaS. Oracle and Microsoft have plenty of cash in the bank to make it difficult on SAP AG but Salesforce.com has been more successful in the research and development of SaaS.
Overall, one has to wonder what is really left to be acquired in the near future. Microsoft has made push as of late in SaaS and has secured many International contracts with regards to SaaS in all aspects of Microsoft's product line. But Microsoft has not yet entered the social marketing arena. Microsoft is currently set to release Windows 8 and also announced the emergence of Xbox SmartGlass technology which ultimately uses the Xbox for brains and smartphones and tablets as the remote control. Ultimately, when Microsoft sees the need to incorporate social marketing and branding to promote SaaS, it has more than enough money to start a bidding war for a company it wants.
SAP AG has been dumping money in cloud services while acquiring cloud-based HR company, SuccessFactor as well as acquiring Ariba which is a supplier relationship management cloud based company. In total, SAP AG has spent more than $7.5 billion on these two acquisitions. And to make matters worse for SAP AG, is that CEO Marc Benioff of Salesforce.com does not care for SAP AG, in the same way Mr. Ellison does not care for SAP AG. In the end SAP AG has not yet seen the positive returns it believed SuccessFactor would bring the company and it appears in disarray much like Hewlett-Packard's (HPQ) acquisition of Autonomy for $11 billion in 2010, which Oracle believed Hewlett Packard acquired at to high of a price.
As for Salesforce.com, Buddy Media is the second social marketing company it has bought in the last year. The acquisition bolsters the purchase of Radian6 by Salesforce.com in 2011 for $350 million. In less than a year, Salesforce.com has spent over $1 billion on two companies that is to help Salesforce.com to compete with Oracle in a social branding marketing strategy for SaaS. Salesforce.com recently had a very good earnings report in May 2012 and CEO Marc Benioff was quite vocal in his calling out of SAP AG and Oracle on which businesses switched over to Salesforce.com.
Mr. Ellison believes the strategy of accelerating cloud-based services is correct. On June 6, 2012 CEO Larry Ellison and President Mark Hurd will deliver a key note address with regards to Oracle Cloud and Cloud Platinum Services. With both Mr. Ellison and Mr. Hurd on the stage together, the unveiling of new cloud-based services could be explosive in language and Oracle will use this opportunity to set-up what the fiscal outlook of 2013 might have in store for clients and investors.
I have been a believer that Mr. Ellison would make another acquisition announcement, and when Oracle snatched up two companies in less than two weeks, I was not disappointed. I also feel that an investor should buy Oracle before the announcement of the new Oracle Cloud and Cloud Platinum services by Mr. Ellison and Mr. Hurd. But more importantly, I think an investor should have a position in the stock before June 21, 2012 when 2012 fiscal year end earnings will be reported. After Oracle posted solid third quarter earnings that were 10% higher than analysts expected, I believe Oracle's numbers will be solid and Mr. Ellison will be out in front beating his drum and bashing the competition.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.