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Updated: Oracle to Buy HR Software Firm Taleo for $1.9 Billion

The deal signals more momentum for the cloud computing model, where customers rent applications over the Internet instead of paying for a software license and installing the programs on internal machines.

February 9, 2012
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Adding to the consolidation frenzy in the HR software world, Oracle Corp. on Feb. 9 said it planned to acquire talent management software specialist Taleo Corp. in a deal valued at roughly $1.9 billion.

The announced acquisition follows on the heels of Oracle rival SAP saying it would buy SuccessFactors Inc., another major talent management software vendor.

The Taleo-Oracle deal also signals more momentum for the cloud computing model, where customers rent applications over the Internet instead of paying for a software license and installing the programs on internal machines.

For years, Dublin, California-based Taleo has embraced the cloud approach, which offers the advantages of quicker implementations and fewer technology headaches. Oracle recently has made a push into the cloud, in part with the release of its Fusion applications. Fusion HR tools can be installed on-premises or delivered via the Web.

The deal raises questions about the fate of at least some Fusion tools because of product overlap. Fusion Performance Management, for example, is comparable to Taleo's employee performance management product.

As with the pending SAP-SuccessFactors acquisition, the Oracle-Taleo deal represents the union of one of the biggest core human resources vendors—Oracle—with a talent management specialist. Core HR refers to tools such as tracking basic employee information, such as name and supervisor. Talent management software refers to applications for more strategic activities, such as employee performance management, recruiting and compensation matters.

In recent years, companies have been snapping up talent management products as they seek to optimize the value they get out of their employees.

Oracle said it was buying Taleo for $46 per share of Taleo stock. That marks an 18 percent premium over Taleo's closing share price Feb. 8. Oracle said that the $1.9 billion figure takes into account Taleo's cash and debt. As of midday on Feb. 9, following news of the acquisition, Taleo was trading above its 52-week high at about $45.60.

Taleo's board of directors already approved the transaction, which is expected to close midyear. The deal is subject to Taleo stockholder approval, certain regulatory approvals and other closing conditions.

The acquisition could raise concerns about the viability of the remaining talent management software vendors. Talent management players such as Taleo and SuccessFactors have themselves been gobbling up rivals in recent years to try to offer customers a more comprehensive set of HR software products.

Ed Frauenheim is Workforce Management's senior editor. To comment, email editors@workforce.com.

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