David Mitchell
Buy buy BEA - hello Oracle!
Yesterday Oracle announced that it is to acquire BEA for $19.38 per share. This brings to an end the acquisition bid which started in October last year with a $17 per share offer.Comment: This deal has gone through various phases of public posturing, with executives from both BEA and Oracle making statements on what would or would not be acceptable commercial terms. In reality it was always likely that the bid would go ahead and that negotiations would take place behind the scenes - unless, of course, the much speculated white knight bid from another industry giant emerged. The price paid is 'on the full side' and represents a good return for the BEA stock holders.The middleware market is one of the most significant markets within the technology industry, with competitors like Oracle, IBM, Microsoft and BEA vying with numerous niche technology providers. It is also a market that has been consolidating and will continue to consolidate further yet. It is a hot market, with strong growth and lots of interesting dynamics - new entrants, new technologies, integration with legacy, evolving standards, etc_. Oracle has already amassed a range of middleware products from organic development and through other acquisitions, assembling these into Fusion Middleware. BEA products are likely to form a part of this domain, with its standards-based architecture allowing this to happen.Oracle has been successful in three elements of its enormous acquisition spree and we expect these to continue into the BEA acquisition. Firstly, it has a very solid structural integration programme which ensures that as little distraction to business operations as possible is experienced. This sees the main elements of integration completed with 30-90 days. Key within this area is the integration of the sales and go-to-market teams, to ensure that little loss of sales traction is found. This has ensured that Oracle has been able to cross-sell and up-sell within their account base with some notable level of success. Recent strong revenue figures give evidence for this trait. Second, Oracle has brought together its various products into a relatively coherent architectural vision around Fusion, both for applications and for the underlying technology. Thirdly, it has re-assured customers about existing investments through guarantees over the longevity and support of existing products. We expect Oracle to focus on these three themes. We also expect that Oracle's appetite is still not satiated, although the volume of medium to large scale targets on the market is now reducing. Expect the next moves to be in the industry specific applications category.
