Oracle is set to acquire Opower for $532 million, which translates to approximately $10.30 per share. News of the acquisition increased Opower’s stock to $10.31 per share in premarket trading on Monday. However, Oracle’s stock seems to be holding steady at $39.86 per share.
According to Market Watch, Oracle General Manager Rodger Smith said the acquisition will “make Oracle the largest provider of cloud services to utilities.”
In the late 1970s, Larry Ellison, Bob Miner, and Ed Oates recognized the need for a commercialized relational database management system. As no other company had actually developed the technology, Ellison, Miner, and Moates founded their own company and committed to commercializing an RDBMS.
— Evan Kirstel (@evankirstel) May 2, 2016
The company was later named Oracle, which was also the name of a 1977 CIA project. The men also introduced the Oracle database.
As discussed on the company website, “Oracle’s first commercially available database software defied prevailing conventional wisdom that technology would never scale to large amounts of data or extensive numbers of users.”
Over the next 30 years, “the vision, drive, and optimism of Oracle’s founders led to a revolution in enterprise computing.”
With powerful competitors, including Google, IBM, and Microsoft, Oracle has struggled to make a name for themselves in the vast cloud market. However, as reported by TechCrunch, Oracle has ample resources to “buy its way into the cloud.” Oracle’s acquisition of Opower is only the latest step in their quest to remain significant in today’s market.
— Tecscoop (@tecscoop) May 2, 2016
Opower currently serves more than 60 million households with more than 100 utility companies worldwide. Although the company has seen great success in the industry, their stock performance has been disappointing since going public in April 2014.
When Opower went public, each share was valued at $23. However, by March 2016, the value dropped to $6.25 per share. Although it made a slight recovery following the announcement that Oracle would acquire Opower, the stock has not exceeded $8 per share.
Oracle’s acquisition of Opower is expected to benefit both interests. Oracle General Manager Rodger Smith said the acquisition will allow the technology company and utility company to “work together to meet their evolving customer, operational, and compliance needs.”
Dan Yates, who is the current Opower CEO, said the acquisition will allow the companies to “provide the industry with the most modern, complete cloud applications for the entire utility value chain, from meter to grid to end-customers.”
Oracle’s acquisition is also expected to increase the technology company’s stock value.
In 2012, Oracle’s stock reached a low of $25 per share. Although it gradually increased to more than $45 per share in 2015, the value fell to less than $34 per share in January 2016. It recovered to nearly $42 per share in March but dipped back below $40 per share by the end of April.
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— Smart Homes (@SmartHomes_US) May 2, 2016
In recent years, Oracle has focused on the sale of licensed hardware and software. However, in the last fiscal year, the technology company has increased their cloud software revenue by 42 percent.
The pending Opower acquisition is expected to increase Oracle’s position in the cloud computing market and secure their standing as the largest provider of cloud computing software in the utility market.
Oracle’s acquisition of Opower was already approved by the utility company’s board of directors. However, it is still awaiting stockholder approval and approval by the regulatory commission. The $532 million cash deal is expected to conclude before the end of the year.
According to its website, the tech company strives to “innovate and lead the industry.” Oracle’s acquisition of Opower is expected to help the company achieve that goal.