Stocks of several cloud-computing companies rose on Monday, after German software giant SAP offered to buy Web-based software maker SuccessFactors at a high premium on Friday.
Shares of SuccessFactor's closest rival Taleo jumped by a fifth to a life-high of $39.92 in early morning trade on Nasdaq.
BMO Capital raised its rating on Taleo to outperform from market perform on Monday.
The cloud software sector is being consolidated faster than we were expecting, and most investors will likely conclude that Taleo is the most obvious acquisition candidate and that Oracle is the most obvious buyer, it said in a research note.
The SuccessFactors acquisition will help SAP catch up with rival Oracle Corp, which recently said it would buy online customer service company RightNow Technologies Inc.
These acquisitions are expected to spur interest in the cloud technology market, which includes companies that provide sales force automation, human resources and databases.
Companies that make software to help corporations hire, train and retain employees and sell their wares online, have especially been investor favorites even during the downturn.
The near-$3 billion human resources management market is expected to grow exponentially this year as the job market changes and a younger population with very different needs enter employment.
Shares of other software-as-a-service companies, such as Cornerstone OnDemand Inc, Kenexa Corp, Ultimate Software Group Inc also rose sharply in reaction to the news.
E-commerce firm Ariba Inc and travel and expense management software maker Concur Technologies Inc (CNQR.O) were also up in early trade.
(Reporting by Sayantani Ghosh in Bangalore; Editing by Joyjeet Das)