Oracle Corp.’s on Monday announced it is going ahead with the acquisition of utilities cloud-services provider Opower Inc. A deal in the tune of $532 million. This news took even the top management of Opower Inc. by surprise. The deal on Oracles’s part is a reflection the software giant’s continued expansion in the cloud, where it is focused on applications and platforms often targeted to specific industries. And given that it comes within a week of buying Textura Corp., a company providing cloud services for the construction industry, for $663 million, it tells much about where Oracle is heading.
Oracle’s effort to assemble a portfolio of vertical industry cloud services that are focused on the application and platform level distinguishes it somewhat from the approaches taken by other cloud providers that place greater emphasis on infrastructure services. Oracle’s announcement comes as corporates show a greater willingness to move applications, even highly sensitive ones, to the cloud.
The deal makes sense for both the parties. Although Oracle with nearly $40 billion in yearly revenue and Opower with just around $150 million in revenue, represents only a tiny slice of Oracle’s software business. But it is Opower’s customer care offerings – particularly its strong customer segmentation tools that will give Oracle new product advantage. As one expert put it this will help Oracle to diversify something for which it has been looking for in the past.
As for Opower this acquisition will help it shake away the image of it being an efficiency company. It wants to be known as an enterprise software-as-a-service provider for utilities, and its relationship with Oracle helps shape that narrative. Another major factor for Opower was the falling share prices and cut backs. The company has been witnessing Slow sales cycles and un profitability, forcing it to shed its thermostat business and expand beyond efficiency. Earlier this month, Opower had to cut 7.5 percent of its workforce in order to scale back R&D spending ($100 million and counting), tighten its sales and marketing teams, and focus on customer care solutions. All this to make its operations profitable and help the sink the share prices which have been falling from the IPO price of $23 as early as April 2014 to $10.30 at which Oracle is going ahead with the buy out.
The acquisition is likely to be complete by the middle of this year, pending regulatory approval.