Oracle Still Shopping, Snatches Stellent, SPL

The company pursues its vertical and horizontal strategies with more acquisitions; industry watchers give high marks to the Stellent buy.

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Oracle continued its two-and-a-half year shopping spree with the acquisitions of Stellent Nov. 3 and SPL Group on Nov. 2.

Oracle agreed to pay about $13.50 per share, or $440 million, for Stellent, which develops enterprise content management software that works across a companys business applications—be they for public Web sites or internal governance management.

SPL, whose purchase price was undisclosed, brings vertical functionality to the Oracle fold. The company, which was acquired from private equity funds managed by GFI Energy Ventures, develops revenue and operations management software for the utilities industry as well as tax management software for government organizations.

More specifically, SPLs software manages customer care and billing, mobile work force management, and outages and distribution management and asset management designed for electric, gas and water utilities. The public sector tax management software helps government agencies manage relationships with the public.

The acquisition fits in with Oracles plan to continue to build out its vertical offerings—particularly in areas where it believes it will prevail against chief rival SAP, which is also making a push into vertical markets and currently has a suite of utilities products and public sector offerings.

SPLs management and employees, based in San Francisco, will form a global utilities business unit within Oracle, although theyll continue to support the tax management software, Oracle officials said.

The acquisition of Stellent, on the other hand, fills a more horizontal need at Oracle. While the company already has a content management offering with its Content Database software, the Stellent buy brings deeper functionality for handling unstructured and corporate data. ECM in general is becoming increasingly important as the sheer amount of content, unstructured data and documents builds up within companies, and there is an increasing need to automate and manage that content.

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"Stellents enterprise content management solutions enable a variety of people within an organization to create, capture, store, manage, publish, view, search and archive all types of documents across their entire life cycle," said Thomas Kurian, Oracle senior vice president, in Redwood Shores, Calif.

Oracles Content Database software stores and centrally manages unstructured content in the Oracle database. Stellents Universal Content Management software—which already works with Oracles database—will add additional capabilities for document management, digital asset management, Web content management, information rights management, records and retention management, imaging and governance, and risk and compliance management.

Not surprisingly, the ability to provide state-of-the-art ECM capabilities is becoming an increasingly competitive differentiator amongst Oracles major rivals—SAP, IBM and Microsoft.

Oracle, on this front, is playing a bit of a catch-up game. SAP has had an ECM suite for some time. IBM has been building out a single platform on which to manage and search across structured and unstructured information for the past couple of years. And Microsoft is moving into the ECM space with its Office 12 release.

Given the competitive environment, analysts say they believe the Stellent buy is a good one for Oracle.

"Oracles acquisition of Stellent is directly in line with the IBM acquisition of FileNet this past summer," Murray Beach, president of M&A International and Boston Corporate Finance, in Westwood, Mass., said in a Nov. 3 research note. "On a combined basis, we believe that this acquisition will significantly strengthen Oracles offering in the convergence of structured and unstructured data within their customers."

Sue Clarke, a senior analyst with the Butler Group, of Butler Direct, based in Hull, England, said in another Nov. 3 research note, "Stellent will benefit from the financial backing of Oracle, which will provide the ability to make further acquisitions that extend its capabilities, and will also enhance the credibility of the company when competing against large vendors such as IBM."

Clarke said she believes the Stellent acquisition will provide Oracle with a competitive advantage over SAP particularly. "For years SAP has benefited from the lack of ECM functionality from Oracle as it has its own capabilities," Clarke said, in London.

Clarke, like many other analysts, said she believes the Stellent buy is just one more merger amongst others on the horizon—and that SAP needs to act accordingly to keep up.

"In view of the fact that it is unlikely that any of the independent pure-play ECM vendors will survive intact much further into the future … if SAP wishes to regain the initiative over Oracle it needs to become a major ECM player, which can only be achieved through acquisition."

In contrast to Oracles expansion-oriented approach—the acquisition of Stellent marks Oracles 24th buy in about as many months—SAP has said it will expand primarily through organic growth, adding smaller point-solution companies where appropriate.

True to Oracles growth-through-acquisition strategy, the Stellent buy brings a healthy portfolio of 4,700 customers, including the likes of Proctor & Gamble, Merrill Lynch & Co., The Home Depot and Bayer. The deal, subject to regulatory conditions, is expected to close by the end of 2006 or early 2007.

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