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Oracle inhales Taleo for $1.9bn

Blows it onto the Fusion app cloud

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Only two months ago, Taleo, the seller of online talent management software, was saying that it intended to remain independent despite the cloud software feeding frenzy. But today, Larry Ellison, CEO and co-founder of Oracle, made Taleo CEO Mike Gregoire an offer he couldn't refuse: $1.9bn.

That price, net of cash and debts, represents a 38 per cent premium over the market capitalization that Taleo had at the market close yesterday.

The online jobs board from which Taleo sprung was founded in 1996 by Martin Ouellet in Quebec City and was originally called Viasite. The company moved to San Francisco in 1999 and changed its name to Recruitsoft. In 2004, as the company was growing and finding its niche peddling human resources management and talent management applications, it moved to Dublin, California, and changed its name to Taleo. The company went public in September 2005 and has done eight acquisitions since then to build out its online software portfolio. The company now has 5,000 customers and some 200 million people registered in its systems that have been hired or at least looked at by its customers as they seek to fill jobs.

Taleo's online apps, known collectively as Talent Intelligence, are available in 31 different languages and sold in 187 countries. A few of these apps serve as the engine behind a number of jobs boards while others are used by companies to hire and manage their people.

What Talent Intelligence was, of course, is stiff competition for Oracle's own PeopleSoft and now its cloud-enabled Fusion Suite, which launched last October at OpenWorld and which was anchored by nine human capital management modules that were no doubt going up against Taleo's products. If you can't beat 'em, buy 'em.

"Human capital management has become a strategic initiative for organizations," said Thomas Kurian, executive vice president of development at Oracle in a statement announcing the acquisition. "Taleo's industry leading talent management cloud is an important addition to the Oracle Public Cloud."

In a presentation (PDF) that Oracle released, the company said that Taleo's cloudy worker management applications currently manage 15 per cent of all hiring in the United States and crank through 16 billion transactions per year. Nearly half of the top 30 job search and career sites in the world are powered by Taleo's back-end systems. It is not clear what infrastructure Taleo chose for its back-end systems or where it runs them, but they will no doubt be slurped into Oracle's data centers at some point.

What is clear is that Oracle wants to park Taleo apps next to RightNow cloudy tech support services (which Big Larry acquired back in October) and mash them up with its Fusion Apps to make a cloud play to customers who don't want on-premises applications. Oracle spent $1.5bn to buy RightNow Technologies, which had 2,000 customers and $185.5m in sales in 2010, with $28.4m in profits.

If you have a small but profitable cloudy app stack, Larry is paying some pretty good premiums if you want to be rebranded Fusion.

Taleo is used by Oracle rivals Dell and Hewlett-Packard as well as a number of big names across the big industries.

Taleo has not yet reported its financial results for its fourth quarter of 2011. The company had just under $95m in sales in 2006, with a loss of $5.8m, and had $237.3m in revenues in 2010 with a net gain of $420,000. Over the five years, Taleo booked an aggregate of $827.2m in sales, most of it for its applications but some from consulting services, and has lost a combined $9.7m. In the nine months of 2011 ended in September, Taleo had $224.1m in revenues, up a tidy 31.8 per cent, but it swung to a net loss of $13.6m compared to a gain of just over $1m in the prior three-quarter period in 2010. Basically, Taleo has a good product but it can't seem to get the black ink down to the bottom line.

Can you say Sun Microsystems?

The Taleo acquisition is subject to approval from Taleo shareholders and from the usual government regulators. Oracle says it expects the acquisition to close in the middle of this year sometime. Unless, of course, someone has a big wad of cash and they want to get into a bidding war with Larry Ellison. SAP is in the process of trying to pay $3.4bn for Taleo competitor SuccessFactors, so there's one company that already has a full plate and won't be doing such a counter-bid. ®

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