Why Oracle's Tops in Takeovers

It appears it's now just a matter of when -- not if -- Oracle will complete its $6.7 billion takeover of embattled middleware software provider BEA Systems.

Despite the drama of hastily exchanged letters and rebuttals on Friday between the companies' executives, most financial and software industry analysts expect the deal to become official sooner, rather than later.

That's because Oracle -- thanks to a couple of painful, but educational, missteps along the way -- has become an expert at acquiring companies, whether they like it or not.

For now, BEA's management team and most of its shareholders believe -- or at least want Oracle to believe -- the company is still very much in play. However, Oracle's $17-a-share offer, which represents a solid 25 percent premium over BEA's closing price of $13.62 a share before the takeover bid became public, remains the only offer on the table.

SAP, which is surely loath to let Oracle snap up yet another prominent software company, is out. IBM and HP remain mum. EMC or any other long-shot candidate has yet to materialize.

This is no accident and reflects just how serious and seasoned Oracle has become in its quest to unseat SAP as the world's largest vendor of business applications in the enterprise.

Oracle had been pursuing BEA, on and off, for the better part of two years. That CEO Larry Ellison and President Charles Phillips made their intentions known less than a week after SAP said it would pay $6.8 billion to acquire Business Objects comes as even less of a surprise.

Assuming SAP would be likely to pass on a protracted, expensive bidding war so soon after making a massive purchase of its own, Oracle felt confident it could make an aggressive move without SAP's interference.

But the timing of Oracle's move was just one of several new tactics Ellison and company employed this time.

Unlike events leading to the bitter, protracted and largely unsatisfactory resolution to its hostile takeover of PeopleSoft in late 2004, Oracle approached BEA with what most consider a very generous offer. That's a marked difference from the low-balling it tried to do some three years ago in the PeopleSoft coup.

Also, by timing its move on BEA shortly after SAP's uncharacteristically bold purchase of Business Objects, Oracle demonstrated a further willingness to learn from the past. This time, it dodged what might have become another lengthy and expensive bidding war with its German rival, a process Oracle had already endured years earlier, when it sparred over retail software specialist Retek.

"Oracle has learned a great lesson from the PeopleSoft deal and other deals," Yefim Natis, a vice president and distinguished analyst at Gartner, said in an interview with InternetNews.com. "Nothing like that is happening this time. Oracle now has the vision and aggressive attitude it needs to execute this kind of deal."

Oracle learned further lessons from those turbulent acquisitions. In the PeopleSoft takeover, Oracle initially offered $16 a share to acquire what had been its most bitter rival for the better part of a decade. Two weeks later, it attempted to thwart resistance to the deal by upping the offer to $19 a share. Then, $24 a share.

Eighteen months and a lot of hard feelings later, Oracle finally wrapped up the deal at $26.50 a share, shelling out more than $10.3 billion.

That lengthy, contentious process not only cost Oracle more money upfront, but also cost it dearly in the following months and years. Industry watchers said that in the wake of the sale to Oracle, many of PeopleSoft's enterprise customers stopped doing business with the company, while its key sales reps and managers were giving less-than-stellar efforts on their way out the door.

In the Retek deal, Oracle initially countered SAP's $496 million offer with its own $525 million bid, or $9 per share. SAP went to $11 a share before Oracle prevailed at $11.25 a share.

"With PeopleSoft, Oracle learned that you don't kill the revenue stream to make the deal," Ian Finley, an analyst at AMR Research, said in an interview with InternetNews.com. "You could also say they learned that you don't get into a bidding war with SAP if you can avoid it."

"Today, Oracle is a much smarter acquirer of these large competitive products," he said. "Also, Oracle has become much better at maintaining multiple products that aren't necessarily compatible and merging them over time. You couldn't say the same about the PeopleSoft merger."

For now, BEA shares are still trading well above Oracle's $17-a-share offer. On Monday, the stock closed off 38 cents, or 2 percent, to $18.44 a share. BEA executives continue to insist the company is "worth substantially more to Oracle, to others and, importantly, to BEA shareholders."

Not so, says one industry watcher.

"Oracle came in with a higher-than-normal bid to give BEA a fair shake," Peter Goldmacher, an analyst at Cowen & Co., said in an interview with InternetNews.com. "I'm shocked that BEA is behaving like this is an undervalued asset. This was a $10 stock three months ago. They should consider themselves lucky to get $17 a share."

Author: Larry Barrett @ internetnews.com

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Oracle offers $6.7 billion to buy BEA Systems

Oracle announced on Friday that it has offered to buy middleware vendor BEA Systems for $17 per share in cash.

Oracle said it had written to BEA's board of directors on Tuesday to make the offer, which represents a premium of 25 percent over BEA's closing share price on Thursday. The Wall Street Journal valued the offer at $6.66 billion.

BEA was a pioneer in the market for Java application server software used to deploy and manage business applications, competing with products like IBM Corp.'s WebSphere. It has been rumored to be an acquisition target on numerous occasions but managed to retain its independence.

"This proposal is the culmination of repeated conversations with BEA's management over the last several years," Oracle President Charles Phillips said in Friday's statement. "We look forward to completing a friendly transaction as soon as possible."

BEA executives were not quoted in the statement, however, and there was no indication early Friday as to whether the company was open to being acquired. That raises the possibility of a lengthy takeover battle like the one Oracle waged to buy PeopleSoft a few years ago.

Oracle said buying BEA would help it to beef up its own middleware suite, an important area for the company that is serving to link several families of business applications that it has acquired. Oracle said it would protect the investments of BEA customers if the deal were to go ahead.

"Our continuing support commitment has been amply demonstrated with all of our previous acquisitions, including PeopleSoft and Siebel. BEA will be no different," Phillips said.

Oracle's Fusion middleware already includes many of the products BEA sells, including an application server, portal server and development tools, meaning the acquisition would create considerable overlap.

Stephen O'Grady, principal analyst with RedMonk, said Oracle's primary motive is likely the expansion and solidification of its presence in the middleware market.

"For all that BEA is not at the heights that it once was, it still owns solid accounts across global enterprises, and while Oracle obviously isn't lacking for presence in those accounts, BEA's middleware is often more highly regarded," O'Grady said.

BEA was an early leader in applications servers but saw its lead whittled down gradually by IBM and later by Oracle, which built up a strong middleware business itself. Oracle CEO Larry Ellison often liked to predict BEA's demise, but the company has managed to cling onto a respectable market share by developing new SOA and business process management technologies.

It has been under pressure of late, however, notably from the billionaire investor Carl Icahn, one of BEA's large shareholders. Icahn said last month that he would press for the sale of BEA, believing the business would find it hard to stay afloat as an independent company.

In August BEA reported total revenue for its second quarter of $365 million, up 7 percent from a year earlier, although revenue from new license sales, an important measure of growth for a software company, declined by 9 percent to $123 million. The company didn't report full figures for the quarter because of an ongoing investigation into its stock options grants.

BEA's shares on the Nasdaq closed at $13.62 on Thursday, down from a 52-week high of $16.77. In premarket trading Friday morning the shares had jumped 31 percent on the news of Oracle's offer, to $17.84. Oracle shares were fluctuating around their closing price Thursday of $22.46.

The deal would mark yet another big acquisition for Oracle, which is on an unprecedented buying spree that has netted it more than 30 software companies in the past three years. They include the applications vendors PeopleSoft, Siebel, and JD Edwards, performance management vendor Hyperion, and database vendors TimesTen and Innobase.

Ellison has said the acquisitions are designed to win the company new customers and increase its economies of scale so that it can invest heavily to become a leader in the applications market.

The deals have catapulted Oracle into second place behind SAP in the business applications market, although analysts question how Oracle can manage so many different product lines and integrate them under one roof.

Oracle indicated earlier this year that it would ease off the blockbuster acquisitions while it integrated the other companies it has bought. However, Ellison has always seemed to covet BEA, and he may feel that the unrest caused by Icahn has given him a chance to act.

Author: James Niccolai @ IDG News Service

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A Success Year for Oracle CRM

Oracle today announced that Oracle’s Siebel CRM On Demand has been heralded by end users as providing unrivalled choice of application deployment scenarios and integration options for organisations of all sizes across Europe, Middle East & Africa. In the last year, Oracle expanded its relationships across the region to include leading brands such as, Amazing Global Technologies, Ambu A/S, Experian, Hôtels B&B, Netstore and SAS Cargo Group A/S.

With more than 12 years experience in delivering CRM solutions, Siebel CRM On Demand was identified by leading independent analyst firm, Forrester Research, as having a unique offering with over five crossvertical and industry specific CRM editions. In the April 2007 report “Oracle’s Siebel CRM On Demand is a Leader in Sales Force Automation”, Liz Herbert, Senior Analyst at Forrester Research wrote, “The vendor understands the needs of a range of industries and can provide best practice expertise in addition to prebuilt industry editions. Siebel CRM On Demand currently sells five vertical editions, which is five more than many of its SaaS CRM competitors.”

“This has been a particularly strong year for Oracle’s Siebel CRM On Demand, as demonstrated by the number of positive analyst reports and the growth of our customer base,” explains Loïc le Guisquet, Senior Vice President for Applications, EMEA. “One of our main differentiators is that customers can operate the Siebel CRM On Demand solution as part of a hybrid strategy that includes Siebel on-premise or other Oracle products. It provides them with a lot of flexibility, which delivers value in their business. Listening to our customers has shown us that on-premise and On Demand is not always a straight choice and that many organisations can benefit from using both solutions in different areas.”

Author: Fiona McGoldrick @ www.irishdev.com

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