Sidney Hill, Jr.: Software industry mergers are no longer big deals

It was just a couple of years ago—January 2005 to be precise—when Oracle finalized its acquisition of PeopleSoft, ending what amounted to an 18-month-long soap opera.

Oracle made its initial bid for PeopleSoft in June 2003, touching off a series of events that included former PeopleSoft CEO Craig Conway and Oracle Chairman Larry Ellison trading insults in various media outlets. At one point, the U.S. Department of Justice tried to block the merger on antitrust grounds, only to be overruled by a federal court.

Once all the wrangling—legal and otherwise—was done, Oracle had agreed to pay $10.3 billion for PeopleSoft—more than twice its initial offer of $5.1 billion.

Why am I bringing up this bit of old news? Because I was initially surprised at how little fuss was made about two recent merger announcements:

• SAP's friendly acquisition of Business Objects; and
• Oracle's semi-hostile bid for BEA Systems.

The business media reported both stories, but I saw very little analysis of how these deals might affect the business software market, or even the people who use these companies' products.

Oracle's offer for BEA has met resistance, with the BEA board calling Oracle's opening price of $17 per share—or $6.7 billion total—too low. After twice rejecting that price, BEA said it would listen to offers from anyone willing to purchase the company for $21 a share, or $8.15 billion.

That statement came a day after Oracle had set a deadline for BEA to accept the $17-dollar-per-share bid. That deadline had not passed at the time of this writing; so I don't know if Oracle followed through on its pledge to walk away from the deal if BEA didn't accept its original price.

What I do know is that the atmosphere surrounding software industry mergers and acquisitions has change dramatically in years. Therefore, it wouldn't surprise me if Oracle quietly abandoned its pursuit of BEA if it really feels the price isn't right.

There was a time when software vendors bought other companies for one of two reasons:

• To obtain new, potentially market-changing technology, or
• To put a competitor out of business.

At the beginning of its campaign to take over PeopleSoft, Oracle indicated its primary motive was eliminating a competitor and taking over its customer base, not its products.

As the negotiations dragged on, however, Oracle witnessed the apprehension spreading among PeopleSoft customers—many of whom feared being forced to adopt Oracle applications.

Suddenly, Oracle pledged to continue supporting the PeopleSoft product line.

Why the change of heart? It's simple: Even if their leaders despise the competition, corporations all exist for the same reason—to make as much money as possible. And the Oracle executive team realized its best chance of maximizing revenue from PeopleSoft customers was by keeping them happy. Oracle said it would take the same approach with BEA customers.

Other acquisitive vendors seem to have adopted that same philosophy. I guess that's why we haven't seen a replay of the Oracle-PeopleSoft drama, even as the pace of software industry mergers has accelerated in recent years.