After being left for dead following what many believed was a disastrous September quarter, not only did the database giant respond recently with stronger bookings and re-accelerated growth, but Oracle's management just stunned the Street with a $1.5 billion all-cash deal for B2C (business to customer) cloud-marketing specialist Responsys (MKTG).
With the recent rise of nimbler rivals like Salesforce.com (CRM - Get Report) and Workday (WDAY - Get Report), Oracle has taken more than its share of criticism for its cloud position. Some might say "its lack of cloud position." Nevertheless, immediately after this deal some analysts have complained that Oracle has "reached" or overspent on the deal.
While it's true that the 38% premium from Responsys last closing seems a bit steep. However, with well over $30 billion in cash on the balance sheet this deal is not going to break Oracle. In fact, this deal is not even close to the 53% premium Salesforce.com paid for ExactTarget in its $2.5 billion all-cash deal. No one questioned whether Salesforce would get the value for which it believed it was paying. The assumption was that it would.
To that end, I believe Oracle deserves similar consideration. For the past six months, Oracle has been the Street's punching bag because it was seen as immobile. This is even though management had taken -- what I believe -- were prudent and necessary strides to grow into areas like SaaS (software-as-a-service) and Big Data too. Some of which served to fight off SAP (SAP - Get Report) and IBM (IBM - Get Report). It was never considered enough.
But even then, Oracle has been hard at work transforming what it calls Oracle Marketing Cloud. This was what spurred the acquisition for Eloqua, a B2B (business to business) web marketing specialist that it picked off last year. Management understands that digital marketing is the next battleground within the cloud. This is precisely what Salesforce.com understood when it dropped a king's ransom for ExacTarget, which specializes in B2C.
Plus, with research firms like Forrester predicting that the market for digital marketing will grow to over $43 billion in the next two years, it's foolish to question why Oracle would not invest in that direction. Now, with Responsys' muscle in areas like email and cross-channel marketing solutions, Oracle is now in a much better position to fight back and to become a threat of its own.
I don't believe anyone has ever mistaken Oracle for a growth company -- at least not in the last decade. But while the needs of the enterprise continues to evolve (with concepts like Big Data, cloud and now digital cloud) Oracle has never been shy about building its capabilities -- whether through internal research and development or through acquisitions.
I won't deny that Salesforce.com has landed several jabs sending Oracle back a few steps. But with the strengths of both Responsys and Eloqua under its belt, Oracle has to now be taken seriously. Not only has Oracle become a stronger player in customer relationship management (CRM) software, but management has now positioned Oracle to become the go-to vendor for cloud-based marketing CRM as well.
It goes without saying, however, that as much as I like this deal, it will only matter to the extent that Oracle can execute. For now, I have to believe that Oracle shareholders can look forward to meaningful gains in 2014. With the stock trading around $38 per share, I believe fair market value can reach $45 at some point this year, given the better-than-expected bookings and strong cash flow growth.
At the time of publication, the author held no position in any of the stocks mentioned.
This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.