Oracle buys Hyperion in US$3.3-billion deal

Oracle said it would create a more comprehensive business intelligence software suite following its US$3.3 billion acquisition of Hyperion on Thursday.

The two firms said the deal, which is expected to close sometime next month, would allow Oracle to integrate Hyperion’s business performance management software into its own business intelligence (BI) product. Oracle’s first BI product was released at the beginning of last year.

Hyperion started out primarily as a provider of financial reporting services but has also become successful with its online analytical processing (OLAP) engine, which allows users to quickly analyze complex queries. A few years ago, Hyperion made a strategic acquisition of its own when it spent US$140 million to buy Brio, which gave it an improved query tool.

“This will represent the most comprehensive business intelligence line compared to Cognos and Business Objects, who tend to have few analytic applications and no database,” said Oracle president Charles Phillips.

Companies such as Toronto-based Iconomics Inc. which specialize in helping clients perform upgrades to Hyperion System 9, said Oracle’s products are often a component of those kinds of projects.

“It’s a great thing, I think, from my perspective,” said Iconomics president Tim McCutcheon. “The Oracle database has been top-notch and has certainly been in demand among my customers.”

Hyperion’s most recent update to its flagship product, called System 9, was released last year. It consists of a common base called Foundation Services, on top of which run optional Applications Plus, which includes planning, financial management, strategic finance, professional scorecard software, and BI Plus, a business intelligence module.

Hyperion chief executive Godfrey Sullivan said the Oracle acquisition made sense because customers are seeking software suites that can help power a range of operational and strategic decisions. Oracle’s R&D budget and its commitment to the BI space were also important considerations. “We’re confident our customers will see their investments protected and extended,” he said.

Keith Gile, senior advisor to the chief strategy officer of Business Objects, said Oracle’s announcement focused primarily on performance management and very little on Hyperon’s business intelligence capabilities. The acquisition will mean little to Business Objects, he said, because Hyperion and Oracle had little market share.

“The two together just create a little bit more confusion in the marketplace,” he said. “With Microsoft getting into this area (with the upcoming Office PerformancePoint Server 2007) and SAP want to extend into this area they clearly wanted to make a move.”

Phillips said the Hyperion purchase was part of its “surround SAP” strategy, whereby it acquires software firms that are closely linked to the SAP platform and within SAP’s customer base. Many SAP clients, for example, close their books and manage accounts with Hyperion. Phillips also said Hyperion enjoys a positive reputation among chief financial officers.

“This is the system of record for regulatory filings and compliance for most of the Fortune 500,” he said.

Phillips said Oracle would be building upon Hyperion’s existing sales and consulting arm by creating a distinct group for enterprise business performance management.

The deal makes it likely Ottawa’s Cognos Inc. and Business Objects either acquire a competitor or get acquired -– possibly this year — said Ray Wang, a Forrester Research enterprise applications analyst. Buyers could include Hewlett-Packard and IBM.

“This is one of those cascading domino effects where you take out one of these (BI) vendors, the next two or three become vulnerable or become potential talks for acquisition. It’s too valuable a space for anyone to give up.”

The purchase of Hyperion extends Oracle’s march into applications, he said. “Talking performance management allows them to talk to key executives at the CFO and CEO level, which changes the way they sell their products.”

SAP, in his opinion, is a loser in the deal. “SAP needs to make a move in BI or performance management. Its stated strategy to not acquire a company is going to come back and haunt them.

“Growth by acquisition is giving Oracle so much opportunity to build a bigger customer base. At some point in the next five years you can expect Oracle to potentially catch up to SAP.”

Microsoft is unaffected by Hyperion deal, Wang said, because it’s building its own performance management tools.

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