Oracle to Acquire Hyperion for $3.3 Billion

The move fuels discussions of further BI consolidation despite a very short list of potential suitors.

Oracle announced March 1 that it intends to acquire business intelligence software developer Hyperion for about $3.3 billion, or $52 a share.

Oracle expects the transaction to close, pending standard regulatory approvals, in April.

About a year ago Oracle (along with other business applications developers) started focusing heavily on BI, moving away from software geared toward Oracle-only environments, officials said, to a best-of-breed approach. As part of that effort the company released a new suite of software, Oracle Business Intelligence Enterprise Edition, which includes BI tools, applications and a data integrator.

The Hyperion suite of products, assuming it enters the Oracle fold, will extend that strategy with an enterprise planning system, financial consolidation software and a multisource OLAP (online analytical processing) server. Oracle intends to combine its and Hyperions software to offer an Enterprise Performance Management suite that offers planning; consolidation and operational analytics; BI tools; reporting; and data integration.

The Hyperion acquisition is approximately Oracles 27th buy in less than three years. The buying spree began in earnest with the hostile takeover of PeopleSoft—and by default JD Edwards, a company that PeopleSoft had acquired—and continued with both applications and technology acquisitions. Hyperion is on the larger end of the scale in terms of pricing. Oracle paid $10.3 billion, or $26.50 per share for PeopleSoft in 2005, Last year, Oracle acquired Siebel Systems for $5.85 billion.

While the PeopleSoft and Siebel acquisitions brought quite a bit of product overlap—PeopleSoft with two ERP (enterprise resource planning) suites and Siebel with both on-demand and on-premises CRM (customer relationship management) suites, which Oracle, PeopleSoft and JD Edwards have—the Hyperion acquisition will have little overlap, Oracle executives said in a conference call the morning of March 1.

While Oracle already has some BI capabilities through its Siebel acquisition, those capabilities fall mainly around core BI analytics and not financials. As Goldman Sachs analysts Christopher Sailer and Rick Sherlund pointed out in a research note released March 1—just prior to Oracles official announcement—Hyperions consolidation tools are most often used in complex financial systems, functionality that would be complementary to Oracle given its numerous ERP systems. And "Hyperions Essbase OLAP platform would be complementary to Oracles 10 g database offering as a more competitive answer to Microsofts SQL Server Analysis Services," wrote Sailer and Sherlund.

"The acquisition of Hyperion makes Oracle the category leader in the high-growth enterprise performance management market," said Oracle CEO Larry Ellison, in a statement.

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Some investment analysts are viewing the acquisition favorably.

Goldman Sachs Sailer and Sherlund said that Hyperions financial analytic applications and strong relationships in large enterprise finance departments fit well strategically with ERP vendors including Oracle and SAP and could potentially lead to a bidding war for Hyperion, though the likelihood is slim.

"SAP states as recently as Tuesday at our conference that it is not interested in acquiring a large BI vendor, however, Hyperion is a SAP partner and we believe many SAP customers use Hyperions applications for financial planning and consolidation," wrote Sailer and Sherlund. "Given SAPs organic growth strategy and recent comments we would not expect a bidding war, however, we believe Hyperion is also more complementary to SAP than either Business Objects or Cognos."

If SAP made a bid for Hyperion, it wouldnt be the first time Oracle and SAP battled over a company. In 2005 SAP announced its plans to acquire retail software maker Retek, a company Oracle had been courting for a year. Oracle countered SAPs bid and despite Reteks board of directors backing SAPs proposal, Oracle won out.

With Oracle acquiring Hyperion, Goldman Sachs points to a dampening in the buyers market for other BI vendors—most often pointed to as Cognos and Business Objects, the other leading vendors in the BI space. The two main acquirers left standing, according to Sailer and Sherlund: SAP and IBM, though Microsoft seems just as likely a candidate given its focus on BI with its Dynamics ERP build-out that will consolidate by next year four major ERP suites.

SAP, however, has stated again and again that it intends to grow organically, acquiring smallish companies to fill out technology holes; in February the company acquired Pilot Software to build out its analytics applications suite. SAP also ended its OEM agreement with Business Objects last year, according to Goldman Sachs. IBM, on the other hand, has fairly close ties with Business Objects.

Hyperions connection to SAP isnt lost on Oracle.

"Thousands of SAP customers rely on Hyperion as their financial consolidation, analysis and reporting system of record," said Charles Phillips, Oracles co-president, in a statement. "Now Oracles Hyperion software will be the lens through which SAPs most important customers view and analyze their underlying SAP ERP data.

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