Monday, October 29, 2007
Oracle let its offer for BEA expire over the weekend, effectively kicking the ball over to Carl Icahn and other BEA shareholders that have been pushing for a sale of the company.
Oracle's offer was $17 per share. At first, BEA didn't respond. Then when it did, it said $21 was a fair price. Oracle said no, $17 is more than fair. No one else--such as IBM, H-P, or SAP, stepped in as an alternative bidder. So, Oracle let its offer expire.
David Parker at SunTrust Robinson Humphrey has more insight on what is likely going on behind the scenes at BEA:What a Mess. Oracle followed through on its resolve and terminated its $17 per share offer for the company on Sunday. Activist shareholder Carl Icahn will likely have to follow through on his threat for a proxy battle as our research for some time has concluded that BEA’s Board of Directors had likely given Alfred Chuang, the company’s CEO, yet another chance to try and right the ship operationally, under the auspices of the company’s latest grand technology play, Project Genesis. Project Genesis is described as a new application-tier platform that is meant to converge its service-oriented architecture (SOA) technologies, business process management (BPM), Web 2.0 technologies and other tools and allow for both business and IT users to quickly assemble new application functionality.BEA is in a tough position. The company has long prided itself on its independence, a position that is increasingly difficult to maintain in the current wave of technology vendor consolidation. Although business for tech vendors has been quite strong this year, softness in consumer spending due to the weaker dollar and housing downturn could spread to business spending. Furthermore, as Parker points out, questions about BEA's future is likely negatively affect is ability to close new deals in the coming months. If so, its share price could weaken, making any future offer from Oracle likely to be even lower than its $17 bid.
We believe investor fatigue with BEA and its inability to drive sustained license growth is notable and few want to hear of BEA espousing yet its latest and greatest platform technologies that will disrupt enterprise computing. We hear internally there is a rallying cry to do everything possible operationally to stay independent and we believe even the heretofore closed cash coffers are being opened up to belatedly invest in needed sales, marketing and acquisitions. Even if the current drama ebbs and somehow the company is able to stay independent, those investors that are willing to re-engage on fundamentals must grapple with the potential for increased operating expenses in order to grow the business, potentially disruptive technology/product transitions and risks around acquisitions.
Ultimately we think there is still a probability greater than 50% that BEA is taken out and Oracle is the winner....The company may very well scrape by but recent events are likely to disrupt larger enterprise transactions.
Oracle bids for BEA Systems