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With or Without Eloqua, Oracle's on Track

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When Oracle (NYSE: ORCL  ) announced its intention to purchase Eloqua (UNKNOWN: ELOQ.DL  ) on Dec. 20 for $871 million, it was great news for Eloqua shareholders. The 33% jump in share price would have appeased most investors. The proposed deal did little for Oracle shareholders, at least in the near term.

News of a pending investigation relating to the terms of the acquisition raises questions as to whether or not Oracle will be able to consummate the deal. If it can, great; but if not, is there really anything Oracle shareholders or potential investors should be concerned about?

Problems with the deal
At first glance, finding fault with Oracle's proposal that valued Eloqua at $23.50 a share, a stock that closed at $17.92 the day before, might seem a bit odd. But, that's exactly what attorneys at shareholder rights firm Robbins Umeda contest.

According to the litigators, Eloqua had price targets as high as $27 from analysts at JPMorgan, and $26 a share at Needham. Also mentioned in the complaint was Eloqua's recent 52-week high of $24.83 it hit as recently as Nov. 1, shortly after it reported solid earnings the week before. Of course, Eloqua's stock had since been battered, dropping to its $17.92 a share price prior to Oracle stepping in, but that's neither here nor there as far as Robbins Umeda is concerned.

Does it matter?
Oracle's continued expansion of its cloud computing, software, and services business lines remains impressive. CEO Larry Ellison and team's concerted efforts to provide solutions in these burgeoning markets, along with expanding offerings in the sometimes ambiguous world of big data, is why Oracle shareholders have enjoyed a 33% jump in value in 2012. Eloqua, with its cloud-based marketing automation and revenue performance tools, would be a nice addition to Oracle's suite of solutions.

At a cost of $817 million net of Eloqua's cash, the deal would hardly make a dent in Oracle's $33.7 billion cash position. But it would be another step in Oracle's plans for competing with Microsoft (NASDAQ: MSFT  ) and IBM (NYSE: IBM  ) , both industry leaders with a head start in cloud-related services. Both IBM and Microsoft are also strong in software, licensing, and enterprise solutions, all services that offer multiple growth and revenue opportunities; something Oracle is intent on growing as well.

And Oracle's efforts are working, too. As impressive as last week's fiscal 2013 Q2 financial results were -- earnings up 24% to $0.53 a share, and total revenue up 3% to over $9 billion -- it was the performance in the software licenses and cloud computing units that really impressed.

The 17% improvement in cloud and licensing subscriptions helped drive Oracle's solid margins and its stellar $13.5 billion in annual cash flow.

With its continued emphasis on end-to-end cloud computing solutions, Oracle is, according to president Mark Hurd, "Already approaching a one billion dollar run rate, [and] our Cloud business will become much bigger over time." Eloqua would appear to be a nice addition to Oracle's offering heading into fiscal Q3 2013.

Oracle is already making tremendous strides in key growth areas, with or without Eloqua. even with Oracle's growing net profit and operating margins; strong returns on equity and assets, and its sound balance sheet; it still trades at just over 11 times future earnings.

Eloqua needs Oracle a lot more than Oracle needs Eloqua.

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