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7:28 am SAP Subsidiary to Acquire Concur

You have to love some of the rivalries in the software industry.  Only hours after Oracle (ORCL 41.55) shook things up with its first quarter report and news that Larry Ellison is stepping aside as CEO, SAP (SAP 77.35) stepped up to announce that its subsidiary, SAP America, entered into an agreement to acquire Concur Technologies (CNQR 107.80) for an enterprise value of approximately $8.3 billion.

Bloomberg reported on September 2 that Concur was exploring a sale, approaching the likes of SAP and Oracle to gauge their interest.  Oracle reportedly decided not to pursue a transaction.

This is a cash deal that will be funded from a credit facility agreement of up to EUR7 billion.  It translates to $129 per share for CNQR shareholders, which is a 20% premium to the closing price on September 17 and a 28% premium to the price CNQR was trading at before the Bloomberg report.

Concur is an industry leader in the multi-billion dollar market for travel and expense management software, thereby providing SAP a pathway to expand into the $1.2 trillion corporate travel spectrum and to grow its cloud business.  Another appealing attribute of the deal for SAP is that only 30% of Concur's 23,000+ customers currently run SAP.

Concur's board has unanimously approved the transaction, which is expected to close in the fourth quarter of 2014 or the first quarter of 2015.

7:05 am RedHat shares fall 3% following downside Q3 revenue gudiance

Redhat (RHT $58.80 -1.86) shares are trading lower by 3% pre-market after the company reported second quarter earnings of $0.41 which was higher than expected, while revenues grew 19.1% YoY which is higher than expected.  

The company reported billings of $439.8 million (which is expressed as total revenue less deferred revenue).  

The company reported subscription revenue of $389 mln, which is up 19%% YoY.   For the second quarter, GAAP operating margin was 14.4% and non-GAAP operating margin was 24.4%. Operating cash flow was $108 million for the second quarter, as compared to $119 million in the year ago quarter. At quarter end, the company's total deferred revenue balance was $1.25 billion, an increase of 18% on a year-over-year basis. 

The main reason for the decline may be the company's guidance.  For the third quarter the company sees revenues  of $449-452 million which is below expectations with adjusted EPS of $0.40 which is line with estimates.

The company sees fiscal year 2015 revenues of $1.77-1.85 billion (low end raised from $1.76 bln) which is line with estimates and EPS of $1.53-1.55 (from $1.52-1.54 prior) which is line with estimates.

RHT shares have traded roughly in line with the S&P 500 so far this year.  If today's downward momentum continues look for support near the 58.00-58.25 vicinity.

7:01 am Oracle Reports First Quarter Results; Larry Ellison Steps Aside as CEO

Oracle (ORCL 40.49, -0.65) delivered its fiscal first quarter results after the close on Thursday along with the news that Larry Ellison will be stepping aside from his role as CEO. Neither piece of news provided a blast of confidence for shareholders.

First quarter results overall were pretty pedestrian as they simply didn't show strong growth during the period.  Non-GAAP revenues increased 2.6% to $8.6 billion while non-GAAP diluted EPS rose 5.1% to $0.62, which was below analysts' expectations.

Total Software plus Cloud revenue jumped 6% to $6.6 billion, but Hardware Systems revenue declined 8% to $1.2 billion.

There was some robust growth in Software-as-Service and Platform-as-a Service cloud revenue, which surged 32% to $337 million.  Infrastructure-as-a-Service revenue was up 26% to $138 million.  That is encouraging activity.  Still, at just 5.5% of total sales, it is a small portion of total sales.

New software licenses were a disappointment.  They declined 2% in constant currency to $1.37 billion.  New software licenses are a feeder for the company's license update and product support business, which comprised 55% of sales in the first quarter.

On its conference call, Oracle said it is expecting total revenue growth of 2% to 6% in the second quarter.  Software revenue is expected to grow 5% to 8% while hardware revenue is anticipated to fall in a range of 2% growth to an 8% decline.  Non-GAAP EPS is expected to be between $0.68 and $0.72, which is below analyst's current expectations.

The results themselves, though, have been overshadowed by the management change.  Mr. Ellison, however, isn't leaving the company.  He will hold the positions of Executive Chairman and CTO.

In an interesting twist, Safra Catz was named CEO and Mark Hurd was also named CEO.  That is, they aren't being dubbed co-CEOs.  Manufacturing, legal, and finance functions will report to Safra Catz while all sales, service, and vertical industry global business units will continue to report to Mark Hurd.  All software and hardware engineering functions will be reporting to Larry Ellison.

Oracle investors, therefore, have a lot to consider today about the changing nature of the company's leadership and business.  One thing they can cling to is the understanding that Oracle is in a very strong financial position with over $51 billion in cash and marketable securities and healthy levels of free cash flow.

On that note, Oracle's board approved an additional $13 billion for share repurchases.

Shares of ORCL are indicated to open 1.6% lower.

6:08 am All Aboard for Alibaba IPO

The wait is over, yet the hype probably isn't. Today Alibaba Group (BABA), which is listed at the NYSE, makes its debut as a publicly-traded company after pricing its IPO last night at $68 per share. That is at the high end of its estimated range of $66 to $68, which was raised from an initial range of $60 to $66.

Just over 320.1 million shares will be sold to the public, which will raise $21.77 billion, making Alibaba the largest U.S. IPO ever. It could take the mantel of largest IPO ever if underwriters exercise their right to purchase an additional 48,015,900 ADS shares. 

For some perspective, Alibaba's market cap of $168 billion is higher than the $150 billion market cap sported by Amazon.com (AMZN 325.00) and just shy of Bank of America's (BAC) $179 billion market cap.

Fortunes are going to be monetized on Friday. Founder Jack Ma stands to rake in close to $870 million before taxes with his sale of roughly 12.8 million shares. Not bad for a former English teacher who founded the company with just $60,000.

Yahoo (YHOO 42.09) is going to sell just shy of 122 million shares, grossing about $8.3 billion, or close to 20% of its current market cap, in the process.

The world knows then how Alibaba will open. The intriguing aspect is how it will close.

Bloomberg reports that 18% of the company's shares are not subject to lockup. An effort to monetize those holdings could be a restrictive factor. By all accounts, though, there has been overwhelming demand for BABA shares given the company's industry-leading position in serving the e-commerce interests of China's growing middle class. 

It would be a real surprise if BABA didn't close north of its IPO price. Briefing.com's IPO Specialist notes there have been ten Chinese IPOs in the U.S. so far in 2014. The average first day pop for those IPOs was 11% and the current average gain for those stocks versus their IPO price is 37%, showing that investor demand for these Chinese issues has been quite strong. 

Stocks like Baidu (BIDU 228.45), Dangdang (DANG 12.78), and JD.com (JD 29.55) promise to be actively-traded in and around Alibaba's record-setting wake.

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