Technology companies pay big to seed their own computing clouds

Today, technology is spurring a high-stakes scramble to buy some of the early leaders in the cloud-computing movement.
By MICHAEL LIEDTKE Modified: June 4, 2013 at 9:45 pm •  Published: June 5, 2013
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But that sentiment has changed in the past six years as the popularity of powerful smartphones and tablet computers has driven the demand for services that can be reached from any Internet-connected device.

The phenomenon has helped propel cloud computing, and driven lucrative deals in the space. In the past two years alone, long-established technology companies such as IBM, Oracle Corp. and SAP AG have each spent several billions of dollars acquiring cloud-computing vendors.

Questions are already being raised about whether the buyers are paying too much.

Investors seemed particularly troubled by Salesforce's decision to buy ExactTarget for $33.75 — 53 percent above ExactTarget's market value before the deal was announced. Wall Street's misgivings about the deal caused Salesforce's stock to plunge $3.24, or 7.9 percent, to close Tuesday at $37.80. It was the steepest one-day decline in the stock in 13 months.

ExactTarget's setbacks came during a period of rapid growth. The company's annual revenue climbed from $72 million in 2008 to $292 million last year while its payroll has ballooned from under 400 employees in 2008 to nearly 1,700 now.

Salesforce expects ExactTarget to trim its adjusted earnings during its current fiscal year ending in January 2014 by 16 cents per share. The deal is expected to close by the end of next month.