With Oracle’s $1.9 Billion Deal to Buy Taleo, Is Cornerstone Next?

Photograph by Cornerstone OnDemand

Cornerstone OnDemand CEO Adam Miller founded the company in 1999.

And then there was one.

Last week, Oracle announced a $1.9 billion deal to buy Taleo, which offers software-as-a-service to companies that no longer want to run all of their own programs for managing the workforce. That follows SAP’s $3.4 billion acquisition in December of SuccessFactors, which provides similar services.

Those deals leave Cornerstone OnDemand as the last big indie in this “talent management” market.

So are they the next takeover target?

“I’m not expecting Cornerstone to get bought,” said Pat Walravens, an analyst at JMP Securities. “It’s too expensive.”

Walravens thinks Cornerstone will perform well as an independent company, and that its growth rates are “tremendous.”

The company is expected to grow revenues 70 percent in 2011 to $75 million (it reports fourth quarter results on Feb. 22). So far, some 700 companies have signed up to pay a monthly fee to have Cornerstone run software for various HR-related jobs, such as bringing on new employees, helping them develop their careers, and tying up loose ends when they leave.

Being the last independent talent management provider could goose Cornerstone’s sales. While loyal SAP shops will gladly use SuccessFactors and Oracle shops will gravitate to Taleo, Cornerstone is positioned to grab those that don’t want to buy into these giants’ soup-to-nuts offerings.

“Cornerstone’s competitors are being snapped up by really big companies,” Walravens said. “That’s typically great for the little guy that’s left standing.”

Cornerstone itself hasn’t made any acquisitions, allowing it to focus on creating new products, rather than on melding disparate ones into a single offering. Cornerstone CEO Adam Miller puts the recent deals this way: “While they are integrating, we’ll be innovating.”

Still, investment  bankers will be pitching Cornerstone. Now that SAP and Oracle have bought into the talent management business, the natural candidates for buying the company would be Microsoft, Salesforce, IBM, Ceridian and Automatic Data Processing (which already partners with Cornerstone to  resell its services).


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