What happened

You don't see this every day on Wall Street. This morning, "machine learning" star Cloudera (NYSE:CLDR) announced it is merging with data management company Hortonworks (NASDAQ:HDP) in "an all-stock merger of equals." In fact, the merger is being structured a bit more like an acquisition of Hortonworks by Cloudera, though, and 9 times out of 10, such deals cause the acquirer's stock to go down while the acquiree's stock goes up.

That's not happening today. Instead, both stocks are rising -- Cloudera up 9.9% as of 12:15 p.m. EDT and Hortonworks up 10.1%.

Schematic shows a cloud connecting to several PCs.

Cloud computing just forged a big new connection. Image source: Getty Images.

So what

Analyst reaction to the event might be one reason investors are looking on this news as a positive for both companies. At last report, at least two different analysts had upgraded Cloudera stock on the news, four more had raised their price targets on the stock, and a couple more -- who already liked Cloudera -- were reiterating their positive ratings. (By the way, there's a reason Wall Street is focusing on only one party to this merger. Assuming it goes through, all Hortonworks shares will disappear, being replaced by Cloudera shares at a 1.3-to-1 ratio.)

Now what

Also helping sentiment, one imagines, are the companies' projections that a couple of years from now, this merger will help transform both companies from cash-burning operations with negative operating cash flow into robust cash profit producers. Management predicts that a combined Cloudera/Hortonworks could generate positive operating cash flow of $150 million two years hence, and at least one analyst is predicting actual free cash flow north of $200 million.

From negative cash flow to $150 million or more in less than two years flat? No wonder investors are excited.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.