What Oracle’s BEA Bid Means for CFOs

The software giant has offered to pay $6.7 billion for the middleware leader.
Stephen TaubOctober 12, 2007

Acquisition-hungry Oracle has made another buyout bid, once again raising doubts and uncertainty for users of business-related software. This time the software giant has made an unsolicited offer to acquire BEA Systems for $17 per share, or $6.7 billion.

If its offer is accepted, Oracle would further solidify its leadership position in the software that underlies Corporate America’s business transactions. Indeed, Oracle has spent the past three years shelling out about $25 billion to buy 30 companies, including PeopleSoft, in its plan to overtake SAP in sales of business applications, according to the Associated Press.

BEA is considered a leader in middleware, which helps a company’s various applications run together. BEA’s software supports such business activities as billing, supply-chain management, and securities trading by bridging those programs with such back-end systems as databases, The Wall Street Journal noted following Oracle’s announcement on Friday. Its customers crave its software for helping them conduct more transactions over the Internet.

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Where does Oracle’s bid leave those 15,000 existing BEA customers that generate more than $600 million in revenue for software maintenance and upgrades, as the AP noted? Published reports speculated on Friday that some BEA customers could end up with little or no support for their products. However, Oracle president Charles Phillips says Oracle intends to protect the investment customers have made in BEA’s products by supporting those customers and products for many years: “Our continuing support commitment has been amply demonstrated with all of our previous acquisitions, including PeopleSoft and Siebel. BEA will be no different.”

Phillips also asserts that both Oracle and BEA customers will benefit from this increase in engineering investment as they migrate to modern SOA (service-oriented architecture) technologies.

For its part, SAP offered $6.79 billion earlier this week to buy Business Objects SA, which is known for its business-intelligence tools that help top corporate executives track their companies’ performance, according to the AP.

Meanwhile, the wire service speculated that either IBM or Hewlett-Packard might weigh in with their own bids for BEA. The AP explained that IBM already is a major player in the middleware market and may make a bid for BEA to prevent Oracle from strengthening its position. The move could be compared to how rival sports teams react when a top player comes up for a trade or becomes a free agent.

As for HP, the company has expressed interest in expanding into the middleware market and could do so by buying either BEA or Tibco Software Inc., according to the AP.