Why Kenexa Shares Popped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of HR software specialist Kenexa (NYSE: KNXA  ) popped today by as much as 42% after IBM (NYSE: IBM  ) agreed to acquire the company for $1.3 billion.

So what: Big Blue is scooping up the company, adding to its large stable of software application acquisitions made over the years. Kenexa has been putting up strong growth, with revenue jumping 24% to $88.2 million last quarter, although it remains unprofitable. The company has roughly 9,000 customers.

Now what: The move mirrors one Oracle (Nasdaq: ORCL  ) made earlier this year when it scooped up HR software player Taleo, which in turn was a response to SAP's (NYSE: SAP  ) gobbling up of SuccessFactors a few months before that. Larger enterprise-software players continue to consolidate with smaller companies as they build up an array of complementary offerings. IBM exec Steve Mills says the deal will be accretive to earnings within three years of its closing, which is expected in the fourth quarter.

Interested in more info on Kenexa? Add it to your Watchlist.

Fool contributor Evan Niu holds no position in any company mentioned. Check out his holdings and a short bio. Motley Fool newsletter services have recommended creating a synthetic long position in IBM.
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