Why Eloqua Shares Skyrocketed

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 software-as-a-service cloud-computing company Eloqua (NASDAQ: ELOQ  )  soared as much as 33% after it agreed to be acquired by Oracle (NASDAQ: ORCL  ) for $811 million, or $23.50 per share.

So what: According to Oracle, today's purchase of Eloqua will allow it to expand its cloud-computing capabilities and move into an area of growth that's rapidly expanding: the automation of administrative tasks. Eloqua recently released a new series of SaaS products over the summer, and shares have doubled since they debuted on the Nasdaq just five months ago.

Now what: It will be a few quarters before we find out if this deal is a positive for Oracle, but Eloqua shareholders have to be jumping up and down with excitement considering their company wasn't expected to turn an annual profit until at least 2014. To put this in another light, Oracle paid about 6,750 times 12-month trailing EBITDA for a company that merely rolled out a few new cloud-computing products. I congratulate Eloqua shareholders, but I don't see any immediate benefit to Oracle from today's deal.

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