Oracle Finally Gets BEA

Thursday, January 17, 2008

Oracle led a fresh round of consolidation in the software industry yesterday as it pulled off the $8.5bn purchase of BEA Systems, a middleware company it has stalked since last summer…..Oracle won over BEA’s board as it raised its offer for the company by 14% to $19.375 a share.  The move echoed a pattern also seen with its purchase of PeopleSoft, the landmark deal that triggered wider software consolidation, when Oracle eventually paid considerably more than it originally offered, in spite of threats to reduce the value of its offer.  While lower than the $21 a share that BEA’s board had said it wanted, the final price still represents a partial victory for Alfred Chuang, BEA chief executive.  Oracle’s decision to go public with its interest in BEA, a company it had pursued off and on for years, came after shareholder activist Carl Icahn had taken a stake in BEA and called for a sale of the business…..The acquisition will put Oracle almost neck-and-neck with IBM in terms of its middleware, a layer of software in complex corporate IT systems that has become increasingly important amid the rise of the internet, said Ian Finlay, an analyst at AMR.  Also, with a presence in application software that IBM does not have, and a stronger middleware business than SAP, Oracle is now the only company other than Microsoft able to sell a full “stack” of software to corporate customers, he added…..Big Blue’s main entrant in the middleware market is a series of products grouped under a brand called WebSphere. SAP, meanwhile, pitches a middleware offering called NetWeaver.  “From a competitive standpoint, this deal will materially improve Oracle’s position against IBM in the middleware/SOA space and will further extend its leadership over SAP,” says Credit Suisse software analyst Jason Maynard…..

An ambitious internal project called Fusion that aims to develop such software has suffered numerous setbacks and delays since Oracle launched the effort in 2005.  The addition of BEA technology to Fusion should put the project back on track, analysts say…..Among other things, BEA will add to Oracle its WebLogic and AquaLogic SOA and BPM tools, as well as its Tuxedo transaction processing monitoring software.  BEA’s Java Virtual Machine technology also could push Oracle deeper into the hot market for virtualization software.  The deal would immediately increase Oracle’s share of wallet from large enterprise software buyers such as Pfizer, DHL, Airbus, and Halliburton — all current BEA customers.  Oracle said it does not plan to discontinue any BEA products as a result of the proposed acquisition and said BEA customers will be able to use their BEA software in a standalone fashion or as an integrated piece of Oracle’s middleware suite.

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