Redwood City, Calif.-based Oracle Corp. announced Wednesday it has agreed to buy BEA Systems Inc. for about US$8.5 billion, or $19.375 per share.
The agreement follows a previous bid last October by Oracle for $17 a share, an amount that was turned down by the middleware vendors’ board of directors. BEA’s subsequent $21 per share counteroffer was rejected.
Following the announcement, Sheryl Kingstone, director of the enterprise research group with Boston, Mass.-based Yankee Group Research Inc., said the previous bid was below BEA stock value at the time, but “now the stocks are going down.”
“It’s a great offer, so now they’ve met their financial terms, which was one of the sticklers in the past,” said Kingstone.
Oracle was motivated to arrive at a deal earlier rather than later, she said, because it’s currently in the process of “really trying to come to market by 2009 with more of the Fusion Middleware, Fusion apps.” And, she added, BEA’s strong infrastructure offerings will enhance the Fusion suite.
Despite the companies’ overlapping portfolios, said Kingstone, the fact that BEA is a best of breed infrastructure middleware vendor is a good thing because it “is the future of where they need to go with bringing together components of all the different apps.”
Following BEA’s initial rejection of Oracle’s bid last October, David O’Connell, senior analyst with Wellesley, Mass.-based Nucleus Research, didn’t dismiss the possibility of a future agreement between the two parties especially considering he thought the fit was evident. “It would have made a really good match. But you never say never. An opportunity could come around again.”
David Senf, director of security and software research with Toronto, Ont.-based analyst firm IDC Canada, also then agreed that the union would be beneficial to Oracle. In particular, he said, it would garner Oracle more customers considering it’s had difficulty moving beyond its installed base; gain deeper traction in certain verticals; block rivals IBM Corp. and SAP AG; and expand its product portfolio around high-end middleware and business process management, for added cross-sell opportunity.
Also in October, another analyst shared thoughts on the possible impact of the union on the middleware space. Yefim Natis, vice-president and Gartner-distinguished analyst with Stamford, Conn.-based Gartner Inc., suggested that Red Hat Inc. and JBoss would be “somewhat of a beneficiary of this” because unhappy customers might leave BEA/Oracle for the rival independent middleware vendor.
Kingstone said such reaction is inevitable among customers favouring best of breed vendors. “You’re always going get the customer that gets concerned they’ve been eaten by the giant.” But she said the attraction for many customers to BEA’s suite is the graphical user interface for application development that few middleware rivals have.
The allegiance some customers have to best of breed companies is “a cultural issue that you’ll never get over.”
A busy day for Oracle
The BEA deal wasn’t the only deal that Oracle made Wednesday. Late in the day, it also announced the acquisition of Captovation, an Eden Prarie, Minn.-based provider of document capture solutions that streamline the process of capturing mission-critical content for access from within business applications and processes. In a statement, Oracle said it hopes the acquisition will strengthen its Enterprise Content Management (ECM) software portfolio.
“Oracle is committed to expanding its leadership in the ECM segment by creating the most complete, integrated, usable, manageable and hot pluggable content management platform through organic growth and intelligent acquisitions,” said Thomas Kurian, senior vice-president, Oracle Server Technologies. “By adding document capture to Oracle’s leading content management, process automation and back office applications, Oracle will be the only vendor that can provide customers with a fully integrated solution for automating back office operations.”
