Oracle (ORCL) Inks Deal Worth $1.2 Billion to Acquire Aconex
Oracle Corp. ORCL signed a deal to scoop up Aconex Ltd for A$1.56 billion ($1.19 billion) in cash in an effort to expand into the rapidly-growing cloud market. The company expects the deal to be wrapped up in the first half of 2018. The completion of the buyout offer is subject to fulfilment of customary closing conditions.
Aconex is an Australia-based company which makes cloud-based software to build construction projects to collaborate and share documents. The company has more than 70,000 customers and its cloud-based software has been used in 70 countries on 16,000 projects.
If completed, the deal will provide an end-to-end cloud-based project management solution that would enable customers to successfully plan, build, and operate construction projects.
According to the press release of Oracle, the deal is worth A$7.80 per share, representing a 47% premium over Aconex’s Friday closing price of A$5.29 per share. Moreover, Aconex shares went up 44%, yesterday, following the news.
In addition to Aconex, Oracle has also acquired companies such as Texture, Opower and Primavera to increase competitiveness in the cloud market.
Mike Sicilia, SVP and GM, Construction and Engineering Global Business Unit of Oracle said, “With the addition of Aconex, we significantly advance our vision of offering the most comprehensive cloud-based project management solution for this $14 trillion industry."
Shares Decline
Shares of Oracle were down 3.7% yesterday, attributed mainly to soft cloud outlook. Notably, the company’s stock has gained 27.6% year to date, underperforming the rally of 40% of the industry it belongs to. We believe that a slowdown in the cloud momentum can further drag down the stock price in fiscal 2018.
Hence, Oracle has been resorting to acquisitions in order to step up its shift to the cloud. In doing so it acquired NetSuite Inc. in a deal valued at approximately $9.3 billion, or $109 per share last year.
Bottom Line
Oracle is benefiting from significant momentum in its Software-as-a-Service (SaaS) and Platform-as-a-Service (PaaS) offerings. This has also helped in improving the company's competitive position against salesforce.com and Workday WDAY. We believe that the company’s growing cloud market share will continue to drive top-line growth. This is further evident from the expanding customer base.
Going forward, the next-generation autonomous database launched by Oracle, which is supported by machine learning, is a key catalyst. Management believes that the new database will improve Oracle’s competitive position in the cloud against Amazon Web Services (“AWS”).
However, higher investments on Infrastructure as a Service (IaaS) will affect gross margin expansion in the near term. Further, a strong U.S. dollar remains a headwind.
Currently, Oracle carries a Zacks Rank #3 (Hold).
Some better-ranked technology stocks worth considering are NVIDIA Corporation NVDA and Intel Corporation INTC , both sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
NVIDIA and Intel have a long-term EPS growth rate of 10.3% and 8.4%, respectively.
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