One of the more interesting data points to emerge from 2012 is that “the cloud” dominated merger activity during the year.
Some of the biggest deals involved cloud applications that could be sold to enterprises, specifically Oracle Corporation (NASDAQ:ORCL)‘s purchase of Taleo and International Business Machines Corp. (NYSE:IBM)‘s purchase of Kenexa.
Obviously there remains a big appetite for cloud applications. So who might be the next to go?
Workday only went public a few months ago, and has gained just 7% from its first trade, and is presently trading at near $51/share, a market cap of $8.5 billion.
Workday produces what it calls “human capital management” software, so it’s competitive with both Taleo and Kenexa. Institutions own just 13% so it is highly vulnerable to an unfriendly bid. It has reported sales going back a year, demonstrating impressive quarter-to-quarter growth, but the current stock price is still 50 times those revenues. (As to profits, you really don’t want to see them in such a fast-growing company, but margins are approaching break-even.)
Workday’s architecture stack is based on transaction processing, not data analysis, so it’s very fast. The key value store is kept in mySQL, an open source database now owned by Oracle, and Inno/DB – both are under the General Public License. The company’s technology goal is to speed up handling even further by putting all client data on chips, rather than on disk.
Who might be a buyer? SAP AG (ADR) (NYSE:SAP) might be a buyer. The Workday architecture uses approaches SAP itself was considering just a few years ago.
Tibco Software Inc. (NASDAQ:TIBX)
Tibco predates cloud in the industry, so its latest software is an evolution from older, enterprise approaches. That’s actually a good thing, because it makes the company a better fit with existing enterprise players that want to give their customers a glide path into cloud.
The company’s market cap is $3.67 billion, and it actually has earnings. Holders of the stock are paying less than four times the annual revenues for the company, based on last year’s number of $1.02 billion in sales. Since 2009, those sales have doubled, while profit margins have been on a steady uptick.
Tibco is in the data analysis space, middleware that enables the creation of applications in a variety of areas. Its most recent acquisition, in 2010, was LoyaltyLabs, which works in the marketing space. But since it’s a platform, it’s applicable across industry groups.
Who might be a buyer? Dell Inc. (NASDAQ:DELL) might be the best fit here, but that’s not going to happen given that all the company’s efforts are currently focused on going private. I’d look more toward SAP again, or perhaps Oracle.
EBIX Inc (NASDAQ:EBIX)
Ebix is a company I’ve owned a piece of for some months, and its performance as an investment has not mirrored its success as a company, especially since a Nov. 5 Bloomberg article that said the SEC is investigating its accounting practices.
Ebix provides provides software for insurers, allowing them to create online marketplaces for their products. It has been pushing heavily into health insurance, making a number of acquisitions in that space during 2012.
Copperfield Research has been on the warpath against Ebix, claiming its accounting controls are inadequate and questioning the company’s denial of any SEC action against them.
