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Adobe's Omniture Bid: Steep, Aggressive

Adobe buys Omniture

Adobe's $1.8 billion bid for Web analytics company Omniture is likely to be rich enough to stave off any interest from companies such as Microsoft, even though the shares are trading above the offer price.

Although companies like Microsoft have shown interest in Omniture (NASDAQ: OMTR‎) and the online advertising space, paying higher than the 24 percent premium that Adobe (NASDAQ: ADBE) has offered might be hard to justify, analysts said.

Companies use Omniture's software to analyze how consumers use Web sites and how they can target their ads better. It is the biggest provider of such services, competing with Google and other smaller players.

The move from Adobe has stoked investor anticipation of further deals in the Internet space.

Shares of Omniture rose as much as 41 percent to $23.31 since the deal was announced on Tuesday -- edging past Adobe's offer of $21.50 a share, a clear indication that investors want more.

They were trading at $21.90 Thursday on NASDAQ.

"The only question is, is another bidder coming in?" Signal Hill Group analyst Todd Greenwald said. "I don't have enough conviction that another bidder will appear."

Adobe's offer values Omniture at about 40 times its 2009 earnings. Compared with that, the Omniture stock was trading at 33 times forward earnings before the Adobe offer.

Adobe's bid was a premium valuation to the rest of the Internet sector as well, Kaufman Bros. analyst Aaron Kessler said.

The bid was 20 times EBITDA, while the rest of the sector is trading at 15 times EBITDA, Kessler said.

"I generally thought it would be a software company that would acquire them ultimately," Kessler said, adding that the price is fair for Omniture shareholders.

Even though chances of a higher bid are remote, some analysts said they wouldn't be surprised if they saw another offer given Omniture's unique technology.

"Could Microsoft step in? Sure. Could Oracle step in? Sure," Greenwald said.

Potential bidders could be Microsoft, Oracle (NASDAQ: ORCL), IBM, Cisco, SAP or Salesforce.com, analysts said.

But at least one analyst said the company was at an early stage of a growth cycle and could have waited for an improvement in revenue, profit and share price before selling out.

"We believe it's premature in Omniture's lifecycle to sell the company, ill-timed from an equity market standpoint to do an all-cash deal when the equity markets are still depressed," Canaccord Adams Richard Baldry said.

"We think the company could have waited 6-12 months out."

It's a good deal in the near term, said Signal Hill's Greenwald. "In the long run, could shares of Omniture have gone higher than $21.50? I think so."

Omniture's customers include Microsoft, Oracle, Hewlett-Packard, Toyota Motor Corp., Salesforce.com, ING, Manpower and Wal-Mart Stores.

Microsoft (NASDAQ: MSFT) has been making strong moves in the online advertising space -- it acquired aQuantive for $6 billion in 2007 -- and might be looking to prop up its Bing search engine as it looks to sell more online ads.

"In order to match Google's search offerings, Microsoft needs a robust Web analytics tool offering that Omniture can deliver," Collins Stewart analyst Sandeep Aggarwal said in a note to clients. IT consulting firms would also show interest, he added.

Omniture's technology could be very helpful to Microsoft's effort on its search platform with its recent Bing launch and Microsoft folded its own analytics effort last year, JMP Securities analyst Patrick Walravens said in a note titled "Will Microsoft Let Omniture Get Away?"

"But for another bidder to come in, they really would have to ignore valuation [and] say 'we need Omniture for strategic purposes,'" Greenwald said.

Investors scan "Internet landscape"

Since Adobe's offer, shares of several Internet companies have risen with investors expecting consolidation in the sector.

On Wednesday, a day after Adobe's bid, shares of online advertising company ValueClick (NASDAQ: VCLK‎) rose 10 percent. Shares of Internet market research firm comScore rose 14 percent.

"Investors are looking around the Internet landscape, especially for the type of e-commerce online advertising that ValueClick specializes in," Craig-Hallum analyst Eric Martinuzzi said.

"As people digest the news of Omniture being acquired by Adobe, they are looking for other potential take out targets in internet and online advertising."

Earlier this week, Intuit (NASDAQ: INTU‎) said it was buying Mint.com. In July, Amazon.com (NASDAQ: AMZN) said it would pay about $928 million for booming online shoe retailer Zappos.com and Bankrate.com-owner Bankrate agreed to a $571 million buyout by private equity firm Apax Partners.

"I'm sure there will be further deals. I'm sure this is not the last deal we're going to see," Signal Hill's Greenwald said.