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Analyst Blog

Reportedly, cloud-based marketing provider Vocus Inc. is putting itself up for sale. Per Reuters Vocus, which has a market cap of over $285.3 million is said to be working with Stifel Financial Corp. (SF - Snapshot Report), an investment banking company, to find suitable buyers.

Moreover, few private-equity firms and Vocus’ industry peers have expressed their interest in the company. Companies like ConstantContact and Web.com Group, Inc. (WWWW - Snapshot Report) have expressed their intent and are willing to offer $17.0 per share for the company. Chicago-based private equity firm, GTCR has also shown an interest to buy this cloud-based company.

Vocus is facing ever-increasing competition from the likes of Marketo, Inc. (MKTO - Snapshot Report) in the software-as-a-service (SaaS) market. User preference seems to have shifted toward SaaS-based Digital Marketing suite from standalone PR solutions. This practice is limiting Vocus’ growth prospects and profitability.

Vocus reported adjusted loss per share of 4 cents in the fourth-quarter of 2013, which came below management’s guidance of earnings 3 to 4 cents and earnings of 1 cent per share reported in the year-ago quarter.

Moreover, the company has incurred operating losses over the past few years. Operating loss in the fourth-quarter of 2013 was $0.9 million compared to an income of $0.6 million in the year-ago quarter. We anticipate disappointing operating results from Vocus until sales pick up.

Nonetheless, Vocus has a debt-free balance sheet and had $34.7 million in cash and short-term investments as of Dec 31, 2013. Additionally, Vocus’ transformation from a purely PR-centric business to a cloud-based marketing solutions provider is proving to be beneficial, especially with respect to total active subscribers.

Vocus remains a potential acquisition target for the marketing suite it provides and its steady customer base. Currently, Vocus carry a Zacks Rank #3 (Hold). Stifel and Web.com carry a Zacks Rank #2 (Buy).

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