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Oracle buying software maker Taleo for $1.9 billion

By Benjamin Pimentel, MarketWatch –

SAN FRANCISCO — Oracle Corp. said Thursday it’s going to buy Taleo Corp. for $1.9 billion, highlighting the software behemoth’s aggressive bid to build up its cloud computing capabilities.

Shares of Taleo, which provides on-demand human resources software applications, soared 17.2 percent to close at $45.64. Oracle’s shares rose a fraction to close at $28.89.

Oracle said it’s acquiring Taleo for $46 a share, an 18 percent premium over the Dublin, Calif.-based company’s closing price on Wednesday.

The transaction, which has been approved by Taleo’s board, is expected to close by the middle of this year.

Thomas Kurian, an Oracle executive vice president, said Taleo’s “talent management cloud is an important addition to the Oracle Public Cloud.”

Oracle has increasingly focused on the growing trend of cloud computing in which businesses tap computing power through a network instead of in-house data centers.

In the emerging model, which also includes on-demand computing, business customers typically pay a fee based on the number of users, allowing companies to save on the costs of running their own data centers.

“It seems like a good move for Oracle — although one that had been widely anticipated,” JMP Securities analyst Pat Walravens said in an email. “Oracle needed to get more aggressive about its cloud offerings — which it is now doing with the RightNow and Taleo acquisitions.”

Walravens said the move is also “positive” for other companies offering human resources management applications.

Interest in Taleo heightened in December after Oracle rival SAP announced that it was acquiring SuccessFactors, another company offering workforce-management applications.

Citigroup analyst Walter Pritchard said that buying Taleo was a positive step for Oracle which, he argued, had been “losing ground” to such players as Workday Inc. and SuccessFactors.

Walravens also cited Workday, a Pleasanton, Calif.-based human resources management business applications, which is seen as gaining ground in that market.

“I think the phenomenal growth at Workday is part of the reason that Oracle is finally getting more aggressive about the cloud,” Walravens said.

In an interesting twist, Workday was co-founded and is currently led by David Duffield, who also started and led PeopleSoft, the human resources software firm.

Oracle acquired PeopleSoft after a nasty and controversial hostile takeover battle that lasted from mid-2003 to late 2004.

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