What: Shares of NetSuite (NYSE:N), a provider of cloud-based enterprise resource planning and e-commerce software, are on the move today. The company's stock is up more than 11% as of 3:55 p.m. EDT, due to rumors that are swirling about the company potentially catching a takeover bid.
So what: The rumor mill is buzzing that NetSuite could be an acquisition target, with the most likely suitor being the tech giant Oracle (NYSE:ORCL). As of this writing this appears to be just a rumor, as neither company has released any statement on the matter.
It's not hard to see why some believe Oracle would be interested in making a bid. NetSuite's revenue has grown by at least 30% for the last 15 quarters in a row, and the company continues to sign up new customers at a rapid pace. NetSuite has stated that it is stealing a significant amount of market share from SAP, a longtime rival of Oracle.
In addition, Oracle has been pushing hard over the last few years to become a leading provider of cloud services. Adding NetSuite to its empire would likely help it achieve its goal of becoming the first to reach $10 billion in cloud revenue.
What's adding fuel to this rumor is the fact that Oracle just sold $14 billion worth of bonds at the end of June, a peculiar move for a company that already held more than $55 billion in cash on its balance sheet. In addition, Oracle's co-founder and chairman Larry Ellison currently owns about 43% of NetSuite, so the two companies are already closely linked.
Now what: While it's always fun to see a stock jump substantially in a single day, investors in NetSuite should remember that this is still just a rumor. Until either company releases a statement that confirms or denies the claim, we don't have a lot of information to go on.
If you were either bullish or bearish on NetSuite's stock prior to today's pop, I see no reason to change your stance today.
Brian Feroldi has the following options: long January 2018 $33 calls on Oracle and short January 2018 $33 puts on Oracle. Like this article? Follow him on Twitter where he goes by the handle @Longtermmindset or connect with him on LinkedIn to see more articles like this.
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