Will BEA Sell to

By Darryl K. Taft  |  Posted 2007-10-12 Print this article Print

Oracle?"> BEA Systems may have rejected Oracles initial offer of $6.7 billion, but that may not deter the software giant from continuing its pursuit. Given Oracles history of aggressively pursuing the companies it wants—most notably eventual acquisition of PeopleSoft in 2004 after months of sometimes bitter resistence—and the fact that top BEA investor Carl Icahn has been pushing BEA officials to sell, the idea of a more hostile takeover by Oracle is not far-fetched.
In addition, despite months of protests by BEA officials to the contrary, a sale to Oracle would make sense for the company, its shareholders and its customers, according to industry observers.
BEA officials were not available for comment Oct. 12, after Oracle made its bid public. However, at a Bank of America investment conference in September, Kevin Faulkner, BEAs head of investor relations, said the San Jose, Calif., company would not consider selling because it would get lost inside a bigger sales force. Faulkner at the time was trying to put to rest rumors about a potential BEA sale based on pressure from Icahn, who had just upped his investment in the company from 11 percent to 13 percent and had wanted to sell. Despite the earlier protestations by Faulkner and other BEA officials, industry observers believe a sale—to Oracle or someone else—will happen. "BEA is in play," said John Rymer, an analyst with Forrester Research. "I believe it is just a matter of time...and money." Marc Fleury, whose JBoss organization is said to have been courted by Oracle, in a blog post, said BEA Chairman and CEO Alfred Chuang "is going to put up at least a simulacrum of a fight. … [Chuang will] put a heartfelt final battle into this; he has probably already super-glued his naked chest to the BEA boardroom table. It is going to get nasty and he will be dragged out kicking and screaming." Click here to read more about BEAs focus on virtualization. On the financial front, Fleury said Icahns "shareholder activism" has put into the public realm the case that BEA is more valuable to stakeholders if its acquired rather than by going it alone. "The 52-week stock price range on that puppy is $10/$17, so $18 [what Oracle is offering per share] sounds damn good," he said. "I cant wait for the first official communication from BEA." In a brief interview with eWEEK, Fleury said the deal makes sense, given that buying companies and integrating them is how Oracle grows. "BEA software will go in maintenance mode and [Oracles] Fusion-plus-WebLogic/AquaLogic [from BEA] will merge," he said. "That will take time. Who stands to gain? IBM and Red Hat. Some people may leave BEA if Oracle is taking over, but I doubt it will be a big effect." "My first impression is that this is very much akin to Oracles PeopleSoft play—buy market share," said Tony Baer, founder of onStrategies, a New York consulting and research firm. "This is further inevitable consolidation in the market. BEAs obviously squeezed; nature abhors a vacuum." Baer said that businesses are not buying just middleware anymore, theyre buying platforms. As proof, he said even JBoss is now part of a Linux technology stack though its acquisition by Red Hat. "BEAs tooling would help Oracle fill out its rather schizoid Eclipse strategy," he said. "Yup, theyre a member of the board, they lead a couple projects, but nope, their main development tool will never be Eclipse compliant." However, Baer said he expects BEAs tools will survive. "Just as Oracle on the ERP [enterprise resource management] side has preserved support for J.D. Edwards, Peoplesoft, etc., it will enable Oracle to say, We support two styles of development, Eclipse and not," Baer said. "Oracles goal aint dominating the world with JDeveloper; its getting the world to come together under its Fusion big tent." Forresters Rymer said he expected somebody to bid on BEA, but that he thought officials with Oracle, of Redwood Shores, Calif., would wait until someone else made the first move. Still, he said, "This move fits Oracles recent pattern. It trying to buy something it doesnt have today—a presence in high-end Java Web applications. BEA has that in spades. Second, it is buying healthy maintenance revenue stream. Way down on the list, they are filling some technology gaps in portal and advanced Java implementations in particular." Rymer said there are many synergies that exist between the two companies. For instance, BEA has established enterprise platforms in Tuxedo and WebLogic Server. The company also has a strong integration business in WebLogic Integration, which competes with IBM, Software AG/WebMethods, Sun/SeeBeyond and Tibco. "Oracle is investing to attain this sort of market presence," he said. Moreover, BEA has a large presence in telecommunications and brokerage that Oracle would love to have, Rymer said. In addition, BEA and Oracle both have strong a presence in the public sector, although BEA casts a larger shadow in middleware in that sector is stronger than Oracle does, he said. Oracle also is seeing high growth rates from middleware and wants to expand its addressable customer base and its product set, Rymer said. BEA also would give Oracle a footing with large customers, which would enable Oracle to better compete with IBM in middleware, Rymer said. Still, this acquisition would force Oracle to deal with significant product overlaps, he said. Page 2: Will BEA Sell to Oracle?

Darryl K. Taft covers the development tools and developer-related issues beat from his office in Baltimore. He has more than 10 years of experience in the business and is always looking for the next scoop. Taft is a member of the Association for Computing Machinery (ACM) and was named 'one of the most active middleware reporters in the world' by The Middleware Co. He also has his own card in the 'Who's Who in Enterprise Java' deck.

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