Bloomberg News

Jive Sale Prospects Enhanced With Suitors Such as IBM: Real M&A

May 29, 2013

Jive CEO Tony Zingale

Jive CEO Tony Zingale previously ran Mercury Interactive Corp., which he sold to Hewlett-Packard in 2006. Photographer: David Paul Morris/Bloomberg

Jive Software Inc. (JIVE:US), which is growing three times faster than its peers, may become a takeover target for International Business Machines Corp. or Oracle Corp. (ORCL:US) after luring the attention of SAP AG. (SAP)

Jive rallied 5.6 percent, the most in three months, on May 24 after Bloomberg News reported that SAP recently considered buying the $1.1 billion company before deciding there was too much product overlap. The Palo Alto, California-based developer of software that helps employees collaborate may now lure other suitors, including IBM and Oracle, because of its prospects for increasing revenue, Credit Suisse Group AG said.

Jive is forecast to boost sales by 119 percent during the next three years, according to analysts’ estimates compiled by Bloomberg. Microsoft Corp. (MSFT:US) already bought a business similar to Jive last year, paying $1.2 billion for Yammer Inc., and Jive’s chief executive officer sold his last software venture to Hewlett-Packard Co. (HPQ:US) for about $4.5 billion.

With SAP, “even if the talks were abandoned, it shows that there’s interest,” Steve Ashley, a Milwaukee-based analyst with Robert W. Baird & Co., said in a telephone interview. “They are the leader in the social collaboration space for businesses, and they have the strongest offering and most differentiated offering in that new, emerging market.”

Amanda Pires, a spokeswoman at Jive, said the company doesn’t comment on speculation, when asked whether it’s been approached by suitors.

SAP Talks

SAP, the world’s largest maker of business-management software, held discussions within recent weeks to acquire Jive, according to people familiar with the matter, who asked not to be named because the talks were private. The Walldorf, Germany-based company, which is one of Jive’s biggest customers (JIVE:US), decided Jive’s products overlapped too much with its own and wouldn’t add enough market share, one of the people said.

Jive shares jumped (JIVE:US) as much as 8.8 percent on May 24 following the report that SAP considered an acquisition. The stock slipped 1.1 percent yesterday to $16.48, still 4.4 percent higher than its May 23 closing price.

Today, Jive added 2 percent to $16.81, which would be the highest closing level in 11 weeks, at 12:09 p.m. New York time. The gain was the second-biggest advance among software stocks in the Russell 3000 Index.

The company provides businesses with social-networking software -- similar to Facebook Inc.’s platform for consumers -- that helps employees interact more efficiently than traditional e-mail services.

‘Really Great’

“Jive is really one of the very few players that’s independent with a really great product platform that can fit neatly into any larger company,” Michael Nemeroff, an analyst with Credit Suisse in New York, said in a phone interview. “The two natural suitors that come to mind are IBM (IBM:US) and Oracle.”

Kirk Adams, founder and director of equity analysis at Denver-based Wedge Partners Corp., also sees IBM and Oracle as potential suitors for Jive.

Salesforce.com Inc. (CRM:US), which like IBM and Oracle offers a product similar to Jive, could also benefit from an acquisition of the company, Nemeroff said.

“Salesforce doesn’t have nearly all the features that Jive currently offers,” he said.

Representatives at Armonk, New York-based IBM; Redwood City, California-based Oracle; and Salesforce.com of San Francisco declined to comment on whether Jive appeals to them.

Growth Forecasts

Jive, which has never generated an annual profit (JIVE:US), had $114 million of revenue (JIVE:US) last year. On average, analysts forecast Jive will more than double sales by the end of 2015, beating the median projected growth rate of only 38 percent among similar-sized application software makers, data (JIVE:US) compiled by Bloomberg show.

Jive is operating in a fast-growing segment of the software industry. Forrester Research Inc. estimated in 2011 that the market for social enterprise software will grow about 60 percent annually through 2016, when it will total $6.4 billion.

“Jive has been considered one of the best high-end solutions in the market, and their product line is something that’s hard to replicate,” Brent Thill, a San Francisco-based analyst with UBS AG, said in a phone interview. “It’s still in rapid growth the next couple of years.”

Short sellers have reduced bets that the company’s shares will decline, cutting the proportion of bearish wagers on the stock to 3.3 percent of shares outstanding from a peak of more than 10 percent last year, according to data (JIVE:US) compiled by Markit.

Limited Benefit

As major software providers build their own social enterprise products, both the need for and benefit from an acquisition of Jive diminishes, according to Brett Fodero, a New York-based analyst at Lazard Capital Markets LLC.

“You saw that with SAP passing on a deal,” Fodero said in a phone interview. “While Jive has what we would consider a leadership position from a technology standpoint and they’ve been doing some good things to differentiate themselves, as of late there is a lot of overlap. All of the major enterprise players have some type of competing product.”

While others are trying to compete with Jive, it’s still the leader, and its management (JIVE:US) team has a history of finding acquirers, said Adams of Wedge Partners.

Jive CEO Tony Zingale previously ran Mercury Interactive Corp., which he sold to Hewlett-Packard in 2006. Some current executives at Jive worked for Zingale at Mercury. Zingale was also CEO of Clarify Inc., which Nortel Networks Corp. agreed to buy for about $2.1 billion in 1999.

“It’s a very well-seasoned management team that’s had plenty of M&A experience,” Adams said in a phone interview. “A lot of firms are putting the pieces together to build a social-enterprise offering, and while the pieces are there, what Jive has done is put together a more comprehensive solution at this point. The bigger firms can probably improve their offerings with Jive.”

To contact the reporter on this story: Tara Lachapelle in New York at tlachapelle@bloomberg.net

To contact the editor responsible for this story: Sarah Rabil at srabil@bloomberg.net


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Companies Mentioned

  • JIVE
    (Jive Software Inc)
    • $6.08 USD
    • 0.00
    • 0.0%
  • ORCL
    (Oracle Corp)
    • $46.23 USD
    • 0.22
    • 0.48%
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