Market shake-up: $8.5-billion acquisition makes Oracle instant SOA market leader
Sidney Hill, Jr., executive editor -- Manufacturing Business Technology, 1/16/2008 12:46:00 PM
Acquiring BEA Systems would make Oracle the leading player in the service-oriented architecture (SOA)software market. The deal also could bring benefits to both Oracle and BEA customers.
Oracle announced Wednesday that it has agreed to pay $8.5 billion for BEA, a leading middleware supplier. The deal comes three months after BEA rejected a $6.7-billion offer from Oracle.
A recent report from Boston-based AMR Research placed BEA and Oracle fourth and fifth, respectively, in terms of the number of companies executing SOA projects on their technology platforms.
Currently, the most widely used SOA platforms are Microsoft .NET, with a 59-percent share of active projects; and IBM WebSphere, which is supporting 44 percent of active projects, according to the AMR study.
But the numbers for BEA’s WebLogic (35 percent) and Oracle Fusion Middleware (31 percent) would make the combined entity leader of the SOA software pack.
“Companies that were considering stand-alone middleware solutions didn’t always automatically look at Oracle,” says Ian Finley, author of the AMR Research report titled SOA: The State of the Market. “With this acquisition, those companies will have to put Oracle on the list.”
That’s because adding BEA’s WebLogic and AquaLogic platforms to its portfolio lends credence to Oracle’s argument that it offers an open middleware stack that can support the linking of applications from any number of vendors. Finley says Oracle Fusion Middleware already is capable of supporting such integration strategies, but there may have been some skepticism on the part of users because Oracle is known primarily as a database and applications supplier and it was logical for users to assume its middleware was compatible only with those products.
SAP—the leading supplier of enterprise applications—suffers from the same perception in regard to its NetWeaver middleware stack. Unlike Oracle, however, SAP has not developed a strategy for selling NetWeaver as a stand-alone product.
That could change, however, should SAP find Oracle selling its newly fortified middleware offerings to large numbers of SAP customers. “This definitely gives Oracle a way of getting into more SAP accounts, and it could make it harder for SAP to sell NetWeaver to some of its own customers who are looking to connect non-SAP applications. Some SAP customers may think they actually need Oracle or BEA middleware to integrate non-SAP applications.”
The negotiations for this merger were handled quietly, in stark contrast to some previous Oracle acquisitions. Oracle’s 2005 acquisition of PeopleSoft, for instance, remains infamous within software industry circles for the public acrimony that preceded it.
This time, Oracle made a bid and set a deadline for BEA to accept. When the deadline passed without an agreement, Oracle ceased its pursuit—at least publicly.
“It appears that BEA took time to get some advice from the investment community, and possibly to see if there were any other possible offers,” says AMR's Finley.
Last October, MBT reported that there were no other likely suitors for BEA, and its consultation with the investment community apparently revealed that fact. Oracle’s original offer for BEA amounted to $17 per share. The BEA board rejected that bid and said it would begin looking for potential buyers willing to pay at least $21 per share. The eventual selling price of just more than $19 per share indicates both sides compromised in what obviously have been quiet negotiations over the past several months.
“Maybe Oracle learned something from the PeopleSoft experience, which was a long, drawn-out process that probably hurt both companies,” Finley says.
It has become clear to most industry observers that Oracle changed its approach to customer relations following the PeopleSoft deal. Instead of following through on its early pledge to kill all PeopleSoft products, Oracle did a complete about-face and is now following a strategy of supporting—and even enhancing—the PeopleSoft product line for as long as users want to deploy those products. Oracle has promised to take the same approach with BEA’s products, and Finley says that will be good for customers.
“Not only have they pledged to support the BEA product line, they also said they will take the best ideas from BEA and put them into Fusion,” Finley says. “That’s a plus for Oracle customers. And for BEA customers, they no longer have to worry about the future of their product.”
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