The deal will allow Oracle to expand its line of cloud computing products and better compete with rivals including SAP AG, which in December said it would buy cloud HR software maker SuccessFactors Inc. for $3.4 billion, according to this morning's Reuters report on the deal.
Taleo shares jumped 17 percent Thursday on the news.
The Wall Street Journal report this morning said "the deal suggests the industry's recent buying streak for Web-based software, commonly referred to as cloud computing, isn't over; however, the mild 18 percent premium over Wednesday's close raises questions about what tech giants are willing to pay for cloud-based software."
Taleo later posted a press release on the transaction, which said: "Together, Oracle and Taleo expect to create a comprehensive cloud offering for organizations to manage their Human Resource operations and employee careers."
Paul Hamerman, an analyst from Forrester Research, had this to say about the deal and what it means for the industry:
By acquiring Taleo, Oracle puts itself back in the game for SaaS recruiting and talent management. Taleo is a market leader in recruitment automation, and has a competitive portfolio of products across performance, compensation, and learning management. The $1.9 million deal price is more than 6 times Taleo’s 2011 annual revenues of $309 million, a high premium but substantially less than the $3.4 billion and 11 times revenues that SAP recently paid for SuccessFactors.
In a phone interview, Hamerman said that the deal also signals Oracle's commitment to the SaaS model, even though Larry Ellison, Oracle's CEO, has been "outspoken in his anti-SaaS stance in recent years."
"I think Oracle realized that they weren't keeping up," Hamerman said.
He also said in his blog post that while Oracle has long held a "we can build it better" position on talent management, learning and recruitment applications, that it struggled to compete with "'best-of-the-breed' talent management vendors like SuccessFactors, Taleo, Kenexa, Cornerstone and SumTotal Systems."
His blog post continued: "Oracle has been reticent to offer these (or any other) applications via SaaS, preferring a licensed/on-premise business model that provides early revenue recognition versus the deferred revenue model of Saas."
With its purchase of Taleo, he said, that thinking has likely changed.
Spokeswomen for both Oracle and Taleo did not immediately return calls requesting further comment.
For further analysis on the acquisition, click here.