Oracle May Acquire Rival BEA Without Raising $6.7 Billion Offer

Oct. 29 (Bloomberg) -- Oracle Corp., the world's third- largest software maker, may land BEA Systems Inc. without raising the $6.7 billion hostile bid rejected by its California rival.

BEA's board says it wants more than $8 billion, and let Oracle's offer expire yesterday at 8 p.m. New York time. Because no other suitors have emerged, Oracle may renew its bid or offer a lower price than its $17 a share proposal, said Peter Goldmacher, a Cowen & Co. analyst in San Francisco.

"BEA is badly miscalculating Oracle's desire,'' said Goldmacher, who rates Oracle shares "outperform'' and doesn't own them. "Oracle doesn't need BEA. At some point, Oracle will buy these guys, but it's completely at Oracle's discretion.''

Oracle said yesterday after the offer expired it is now up to shareholders to take "appropriate action'' if they disagree with the BEA board's decision. Billionaire investor Carl Icahn, BEA's largest shareholder, stepped up demands on the company last week, insisting it put Oracle's bid to a shareholder vote if there isn't a higher offer.

"There's so much pressure on BEA from shareholders that they will have to ultimately succumb to an acquisition at $17,'' said Chris Hickey, an analyst for London-based Atlantic Equities. "Time is on Oracle's side.''

A merger with a larger company may help BEA grow faster. BEA's sales of new software licenses, its main indicator of future growth, fell 11 percent in the six months ended July 31. BEA sells so-called middleware programs that help different computer applications share information.

Redwood City, California-based Oracle disclosed its bid Oct. 12. The offer was 25 percent more than BEA's closing price the previous day. Last week, San Jose, California-based BEA said its stock was worth $21, calling Oracle's bid ``unacceptable.''

BEA fell $1.03 to $16.50 on Oct. 26 in Nasdaq Stock Market trading. Oracle added 35 cents to $21.35.

No Bidders Likely

BEA's board repeatedly refused to meet Oracle officials to discuss the offer, and shareholders shouldn't assume Oracle will make another offer later, Oracle said in a statement last night.

"BEA's business might materially weaken, the stock market can fall further from its recent record highs or Oracle may have committed its capital elsewhere,'' Oracle said. "If the BEA shareholders are unhappy with the behavior of the BEA board, it is up to those shareholders, not Oracle, to take the appropriate action.''

Oracle Chief Executive Officer Larry Ellison sought to buy BEA to get its software-maintenance revenue, Goldmacher said. Oracle would cut costs by firing most of BEA's employees, he said.

Oracle spokesman Bob Wynne and BEA's Kevin Hayden didn't return calls seeking comment.

Business Objects

Ellison, whose company trails Microsoft Corp. and International Business Machines Corp. in total software sales, said last month he wants to ``beat IBM'' in middleware.

No other company will match or exceed Oracle's offer because no one else stands to gain as much from the purchase, said Charles Di Bona, an analyst at Sanford C. Bernstein in New York. He rates BEA ``underperform'' and Oracle "market perform'' and owns neither stock.

BEA's counteroffer of $21 a share would make a deal more expensive than Oracle rival SAP AG's purchase of Business Objects SA, based on the price paid divided by revenue. That wouldn't make sense because Paris-based Business Objects is growing faster than BEA, said Brad Manuilow, an analyst at American Technology Research in San Francisco.

A bid without the BEA board's support wouldn't succeed because of takeover defenses including a so-called "poison pill'', Goldmacher said.

Tailspin

While BEA once dominated its market, the company lost that lead to Armonk, New York-based IBM. BEA plans to restate results to cut profit by $425 million, before taxes, for fiscal 1998 through the first quarter of fiscal 2007 to account for misdated stock-option grants and severance contracts.

"BEA is in a tailspin,'' Goldmacher said. "At $17, it would be a graceful exit for BEA, which has been in rough shape for a while.''

A bright spot is BEA's maintenance fees, which rose 21 percent to $714.9 million in the past four quarters. Such fees are Oracle's "highest-margin business unit,'' the company said in a filing this month.

While lucrative, that revenue isn't central to Oracle's efforts to take customers from IBM and Walldorf, Germany-based SAP. That means Oracle may just walk away from the BEA deal, analysts said.

"The only person who really knows if this gets done is Larry Ellison,'' said Manuilow, who rates Oracle "buy.'' "He's the one who ultimately pulls the trigger.''

Author: Ville Heiskanen @ Bloomberg.com

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Oracle Starts Two New Centres In India

Located at Gurgaon, the two centres will be a part of the 19 R&D and solution centres network spread across Asia Pacific.

Thursday, October 25, 2007: Oracle has launched two new centres – the Oracle Asia Research and Development Center (OARDC) and Partner Solution Center (PSC) – in India. The Gurgaon-based centres will focus on delivering Oracle and partner solutions to the Indian market and also to the Asia Pacific region. The hardware infrastructure at the Oracle PSC has been sponsored by SUN Microsystems and AMD. With today’s launch of the OARDC and PSC, Oracle now has seven development and solution centres in India. Oracle’s investment in India over the past five years has crossed $3 billion.

Oracle Partner Solution Centre will enable strategic partners to build, port, enable and test their solutions on Oracle technologies. With this, independent software vendors (ISVs), system integrators (SIs), value added distributors and resellers (VADs & VARs) can leverage Oracle’s product expertise and tools at PSC to build their industry-specific solutions on top of Oracle’s technology and applications platforms.

OARDC India will engage in research, requirements analysis, prototyping and architecture design with the aim of solving a specific problem through the delivery of a product. OARDCs focus on four main areas: product development, solution development, strategic projects and partner enablement. OARDC India will aim to innovate in the areas of m-governance, inclusive computing and ubiquitous computing.

"The Oracle Asia Research and Development Center and Partner Solution Center will undertake India-specific projects to enhance our capabilities in our E-Governance Center of Excellence, which was established in Gurgaon in 2003," said Krishan Dhawan, managing director, Oracle India. "We expect these three centres which are co-located in Gurgaon, to work towards increasing the scope and usage for Oracle technology and applications amongst Indian industries and governments."

Source: efytimes.com

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Oracle says no to BEA's $8.2 bln pricetag

BEA Systems Inc (BEAS.O) said on Thursday it is willing to sell itself for $8.2 billion, but the price was rejected as "impossibly high" by Oracle Corp (ORCL.O), the only company that has publicly expressed interest in the software maker.

BEA, which is under pressure from billionaire investor Carl Icahn to find a buyer, said it was worth $21 per share, which is a 24 percent premium to the $17-per-share bid that Oracle offered on October 12.

Oracle said BEA's price represented an 80 percent premium to its shares before activist shareholders started pushing for a sale of the company, and nearly 11 times BEA's revenue from software maintenance services in the last 12 months.

"Nobody would seriously consider paying that kind of multiple for a software company with shrinking new license sales," Oracle President Charles Phillips said in a letter to BEA's board.

He said Oracle was standing by its $6.7 billion bid which expires at 5 p.m. California time on Sunday, adding "at which time Oracle will move on and evaluate other potential acquisitions."

When asked to respond to the letter from Phillips, a BEA spokesperson referred to a statement issued earlier in the day in which the BEA's board said "We continue to believe that Oracle's unsolicited proposal to acquire BEA at $17 per share significantly undervalues BEA, and is therefore not in the best interests of BEA shareholders."

Shares of BEA had closed at $17.53 on the Nasdaq, down 2 cents as investors appeared to also believe that the $21 price set by the business software maker may be too optimistic.

Some analysts still thought a deal was possible as BEA's software, called middleware because it helps connect business computer systems, could be added to Oracle's database programs to help it better compete with SAP AG (SAPG.DE)

"Nobody is more interested in this than Oracle," said Bart Narter, an analyst with financial research and consulting firm Celent. "I think there is a lot of posturing. Maybe they'll get a little higher price. Maybe."

The $21 price had marked the first time BEA gave a price point for negotiations with Oracle, the world's third largest software company with a market value of about $100 billion.

"Over the last several weeks, Oracle has repeatedly asked us for the price at which we would be willing to begin negotiations," BEA's board said earlier on Thursday. BEA is "prepared to authorize negotiations with third parties including Oracle at a price of $21.00 per share," it said.

Talk of a buyout for BEA began in August when Icahn said he had begun acquiring shares in the business software maker and called on its board to put the company up for sale. Chief Executive Alfred Chuang had rebuffed the billionaire activist investor, who boosted his stake to about 13 percent, making him the company's biggest shareholder.

Besides Oracle, other companies that have been touted as possible buyers of BEA include International Business Machines (IBM.N), Hewlett-Packard (HPQ.N) and SAP.

An SAP spokesman said the company was not interested in buying BEA, while representatives for Hewlett-Packard and IBM declined comment. Icahn could not be reached for comment.

Jefferies & Co. analyst Katherine Egbert said earlier on Thursday another suitor may be talking to BEA behind the scenes. "For the BEA board to make the claim that they are worth $21 (per share) without any detailed supporting analysis could mean that they have another interested party," she said.

BEA said that after consulting with its investment bank, Goldman Sachs, it believes Oracle or another company would still see earnings benefit if it paid $21 per share or higher.

But Phillips said in his letter, "We believe that your counterproposal at $21 per share price is an impossibly high price for Oracle or any other potential acquirer."

Author: Jim Finkle @ washingtonpost.com

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