The Rhipe Ltd (ASX: RHP) share price is up 2% after the cloud channel company announced it was buying a Kiwi IT services provider.
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The Rhipe Ltd (ASX: RHP) share price has risen today, up 2% to $1.74 at the time of writing. The cloud channel company announced it has entered an agreement to acquire Parallo, a New Zealand-based IT services provider.
What does Rhipe do?
Rhipe is a global leader in cloud and technology solutions. The company provides licensing, business development and knowledge services in the growing cloud market.
Clients such as Microsoft, VMWare, Citrix and others utilise Rhipe’s platform to build and support their cloud licence programs. Most notably, Rhipe’s services and support division is the industry leader in Microsoft’s 365 implementation.
Rhipe announced this morning it was buying Parallo for NZ$4.25 million. The 100% acquisition will support Rhipe’s customers by developing infrastructure technology to drive growth and opportunities.
In the past 9 years, Parallo has invested in service offerings focused on Microsoft Azure and VMware software, Rhipe’s two largest software vendors. The purchase is anticipated to strengthen Rhipe’s brand positioning, and leverage cost and revenue synergies.
The acquisition will be completed in the next four weeks.
What did management say?
Rhipe CEO Dominic O’Hanlon was happy with Parallo’s achievements. He said:
Parallo has done an outstanding job as one of the leading IT service providers, delivering cloud-services and solutions that drive value to their local ISV market. This investment is significant in helping us achieve an enhanced product and services offering initially in New Zealand and Australia. As well as being cloud software and infrastructure focused, the majority of Parallo’s revenue is annuity based, which is very similar to rhipe’s revenue profile.
Mr O’Hanlon went on to say:
We intend to continue investing in the Parallo business to support its expansion into the Australia market, leveraging Rhipe’s existing employee and partner footprint. We look forward to utilising the skills and expertise of the Parallo team, combined with Rhipe’s extensive channel, to deliver greater outcomes for our partners.
Should you invest
The Rhipe share price has tumbled since the beginning of the year, down 12% from $2.06. However, in the months following, the Rhipe share price has been relatively flat, reaching a 52-week low of $1.16.
With a market capitalisation of $287 million and a price to earnings (P/E) ratio of 52, I would urge caution buying Rhipe shares. I think there are plenty of other ASX shares that are less high risk and offer more growth opportunities.
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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.