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Oracle Corp.’s (ORCL - Analyst Report) recently announced acquisition of Responsys Inc. is expected to bolster its position in the cloud-based enterprise marketing software sector. The current acquisition complements Oracle’s early 2013 acquisition of Eloqua.

Oracle is paying approximately $1.5 billion ($27.00 per share) for Responsys and the transaction is expected to complete by the end of first-half 2014. This represents a 38.3% premium to Responsys closing price of $19.52 on Dec 19, much higher than what Oracle paid for RightNow (2011) and Taleo (2012).

San Bruno, California-based Responsys helps customers to create and manage marketing campaigns through e-mail, mobile and social marketing. The company earned revenues of $163.0 million in 2012 and is estimated to earn revenues of approximately $200.0 million in 2013.

We believe that the premium is justified as the acquisition will improve Oracle’s market position. It will help Oracle to better address the needs of Chief Marketing Officers (CMOs), as spending on cloud-based marketing software is expected to be much higher than overall IT spending.

Responsys has a strong clientele of approximately 450, which includes the likes of LinkedIn (LNKD - Analyst Report), Nordstrom, Lego, Southwest Airlines and United Healthcare. This will boost Oracle’s customer base. Moreover, the acquisition will improve Oracle’s competitive position against the likes of (CRM - Analyst Report) and Adobe (ADBE - Analyst Report).

Over the last 12 months, both Salesforce and Adobe have been on an acquisition spree to boost their competitive positions. Over this period, Salesforce bought ExactTarget, Buddy Media and Radian 6, while Adobe made a string of acquisitions (including Neolane) that improved its marketing software product offerings.

We believe that Oracle, being a late entrant to the cloud computing field, will continue to pursue strategic acquisitions to improve its market share and top-line growth. The company reported better-than-expected second-quarter 2014 results, with cloud bookings increasing 35.0%.

Engineered systems bookings also jumped 35.0% in the quarter. We believe that the speedy adoption of engineered systems and cloud suites will drive incremental top-line growth, going ahead. Moreover, Oracle’s strategy of providing end-to-end solutions will further attract new customers in the long run.

Currently, Oracle has a Zacks Rank #2 (Buy).

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