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Oracle proposes to buy BEA

Friday, October 12, 2007 by

Oracle today confirmed

that it delivered a letter to the Board of Directors of BEA Systems, Inc. (NASDAQ: BEAS) on October 9 in which Oracle proposes to acquire BEA for $17.00 per share in cash. The $17.00 per share offer is a 25% premium over yesterday’s closing price of $13.62.

This acquisition has been long-discussed so I can’t say I find the news particularly surprising, particularly with Carl Icahn recently upping his stake in the company. I think this just makes it more likely that Oracle’s proposal will be accepted.

This is primarily as a market share grab by Oracle. It does plug some gaps in the portfolio – particularly around business process management (based on BEA’s Fuego acquisition), where Oracle only has basic BPEL web services orchestration; adds some telecoms vertical market capabilities to complement Oracle’s vertical market push and the virtualisation work that BEA has done with the WebLogic Virtual Server Edition. Also, there’s the opportunity for Oracle to tap into the healthy Tuxedo base. With a significant chunk of Oracle’s profitability coming from maintenance, the revenue from BEA’s customer base will suit its business far better than it did BEA which was suffering with its inability to grow license revenues.

This is yet another example of the bigger specialist players getting squeezed out by the industry goliaths – IBM, Microsoft, Oracle, SAP – and the open source, smaller best-of-breed players. SAP’s recent acquisition of Business Objects is another example (although that did plug a few more gaps). It leaves some of the other bigger specialist players – TIBCO, SoftwareAG (and to a lesser extent Progress and Red Hat) in an interesting position. On the one hand they will be more attractive, particularly for SOA and BPM, to customers looking for an application-independent infrastructure offering. On the other, though, taking market share for those customers from BEA is one thing: taking it from Oracle quite another. Ultimately, IBM is the big beneficiary in this regard.

In summary, then, I see: the acquisition going ahead; BEA’s customers looking worried as they see themselves with an application-dependent infrastructure stack; IBM looking happy at the prospect of providing those customers with an application-independent alternative; the likes of TIBCO and Software AG pondering their options; and SAP and Microsoft carrying on in there own sweet way.

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4 Responses to Oracle proposes to buy BEA

  1. Anonymous says:

    You mention “where Oracle only has basic BPEL web services orchestration”. I am not going to discard BEA’s (acquired) Fuego product, but I completely disagree with your view on Oracle’s solution in this space. BPEL is where all of the industry is going (incl. BEA in their latest releases), Oracle has always had the most sophisticated implementation (also based on an acquisition, Collaxa), and has takem the basis BPEL engine to great heights with a very solid installed base. Just tossing this as a basic Web Service orchestration tool does not do it right.

  2. Anonymous says:

    You mention “where Oracle only has basic BPEL web services orchestration”. I am not going to discard BEA’s (acquired) Fuego product, but I completely disagree with your view on Oracle’s solution in this space. BPEL is where all of the industry is going (incl. BEA in their latest releases), Oracle has always had the most sophisticated implementation (also based on an acquisition, Collaxa), and has takem the basis BPEL engine to great heights with a very solid installed base. Just tossing this as a basic Web Service orchestration tool does not do it right.

  3. Neil Ward-Dutton says:

    Well, it depends on what you think BPEL is good for. Is BPEL enough to support real-world business processes? We don’t think so – we’ve said many times on many occasions that the “BP” in “BPEL” is misleading. BPEL is an application integration execution language. Even when you add in the new extensions for human task management, the scope of BPEL is still quite limited. Collaxa had a good implementation and Oracle has a good installed base – but it’s still not BPM.

  4. Neil Ward-Dutton says:

    Well, it depends on what you think BPEL is good for. Is BPEL enough to support real-world business processes? We don’t think so – we’ve said many times on many occasions that the “BP” in “BPEL” is misleading. BPEL is an application integration execution language. Even when you add in the new extensions for human task management, the scope of BPEL is still quite limited. Collaxa had a good implementation and Oracle has a good installed base – but it’s still not BPM.

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