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Oracle gobbles RightNow's tech support cloud

Suddenly finds $1.5bn for cloudy buy-out

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Oracle co-founder and CEO Larry Ellison might have poured cold water on the idea of clouds a few years back – actually, it was more of a stream of warm lager-like liquid – but he is now firmly behind owning and operating public clouds that run applications.

Earlier this month, Oracle announced its own public cloud and this morning the company said it was shelling out $1.5bn to buy RightNow Technologies, a provider of tech support and salesforce automation tools based in Bozeman, Montana, to add to the Oracle Public Cloud.

RightNow was founded in 1997 by Greg Gianforte in that Montana college town after he was going stir crazy in the wake of being a multi-millionaire - he and his partners sold off a company for $10m to McAfee (now part of Intel) a few years earlier.

RightNow was founded as a Web-based front-end for a customer service knowledge base that could be sold to companies to offer better tech support to their customers. By 2002, the company had moved out of Gianforte's spare bedroom to have 230 employees and $30m in annual sales. Two years later, the company was going public on the Nasdaq exchange, just a few months behind Salesforce.com, which it sometimes competes against.

In 2010, RightNow had grown to more than 1,000 employees and had built up a customer base of over 2,000 companies. It has posted steady revenue increases in the past five years, booking $185.5m in sales in 2010 and bringing $28.4m to the bottom line after losing money in three of the past five years.

The wonder, when you look at the numbers, is why Oracle or someone else didn't buy RightNow two years ago when the company had clearly starting making money despite the Great Recession. Back in February 2009, RightNow's shares were trading around $7 a pop, less than a sixth of the $43 per share price Oracle is peddling today. I guess this is what happens when you haven't quite caught cloud religion yet.

After going public, RightNow did some acquisitions of its own to socialize its RightNow CX suite, snapping up HiveLive, a maker of enterprise-grade social networking software, for $6m in September 2009. And in January this year, the company snapped up Q-go for $34m to add natural language search to the RightNow CX customer support and CRM tools it sells. So Oracle now has these goodies as well.

"Oracle is moving aggressively to offer customers a full range of cloud solutions including sales force automation, human resources, talent management, social networking, databases, and Java as part of the Oracle Public Cloud," said Thomas Kurian, executive vice president of development at Oracle in a statement. "RightNow's leading customer service cloud is a very important addition to Oracle's Public Cloud."

At the moment, the Oracle Public Cloud will be able to run Oracle's database and middleware as well as its new Fusion suite of applications, which were launched two weeks ago at the OpenWorld extravaganza.

That $43 per share offer represents a 19.6 per cent premium over RightNow's $35.96 closing price on 21 October. The company has just over 36 million shares, so that cash price works out to $1.55bn. RightNow was getting set to report its financials tomorrow, but in the quarter ended in June the company had $121.8m in cash and $134.1m in investments as well as $175m in long-term debt.

If you have a SaaS suite running on a cloud somewhere and you have a few hundred to a few thousand customers, you might want to gussy up with Twitter and Facebook extensions and strut up and down the street near 500 Oracle Parkway, Redwood Shores, CA 94065. ®

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