Oracle bids for BEA Systems

There seems to be no end to Oracle's acquisition campaign. The latest move is a $6.7 billion bid for BEA Systems, one of the leading vendors of middleware. A successful bid for BEA will greatly strengthen Oracle's middleware and tools business and take a major competitor out of the picture.

Oracle has been hounding BEA, unsuccessfully, to sell for years. But BEA's recent share price decline, driven by its problems in accounting for stock option grants, has put BEA in a much weaker position. It hasn't helped that last month Carl Icahn purchased 13.2% of BEA's shares, hoping to force BEA to sell out to someone.

So now Oracle has stepped in as a willing buyer.

An AP story on Oracle's bid points out that Oracle has demonstrated its willingness to fight in order to complete acquisitions in a hostile manner if necessary. Its PeopleSoft acquisition in 2003 is the best example. There, Oracle even fought the U.S. Department of Justice, which sued Oracle in order to block the deal on anti-trust grounds.

It doesn't sound as if Oracle will need to fight that hard for BEA, however. BEA is wounded, and too many stakeholders will rather see Oracle's bid succeed, at a 25% premium over BEA's share price yesterday.

But Oracle's problem might not be BEA's willingness to sell--it might be other bidders. Carl Icahn spoke to CNBC a few minutes ago and indicated that he expects other potential buyers to make offers. He specifically mentioned H-P and IBM.

To which I might add, what about SAP? It's unlikely, with SAP just having offered nearly $7 billion for Business Objects, but it sure would be make things interesting.

Update, Oct. 13. As it turns out, according to the Wall Street Journal, Carl Icahn has already mentioned SAP as a potential alternative bidder for Business Objects. However, there appear to be reluctance on the part of all three bidders (IBM, SAP, and H-P) to make offers.

A person familiar with IBM's thinking said IBM is unlikely to enter the bidding fray, because IBM typically buys small software companies, and the Oracle offer for BEA is already about twice as much as IBM has ever paid for an acquisition. Plus, this person said, there is enough overlap between IBM's WebSphere software and BEA products that it would probably raise antitrust scrutiny. An IBM spokesman declined to comment.

A person familiar with SAP's thinking said the company would be unlikely to be interested in buying BEA because it wants to focus on a competing product, called NetWeaver. An SAP spokesman declined to comment.

An H-P representative said H-P isn't interested in entering BEA's market, but declined to comment specifically on whether it had any interest in buying the company.

If so, Oracle may not find much competition to its offer.

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