The announced bid by Oracle (ORCL) for BEA Systems (BEAS) makes me pause some and wonder about the reasons behind it. We talk about the reasoning indepth here.
One thing I want to mention is why they're doing it in reference to their existing strengths in the "middleware" field. "Middleware" is used to integrate various data and applications in a business.
Oracle already has a strong and growing presence in this market, and it looks like paying $6.7 billion or more for BEA wouldn't do much but add some incremental value to the category. That's a lot of money for Oracle to pay to do what they would probably be able to do as a business growing organically. They may buy some time, but that's about it.
So why make this type of buy? It looks like they're doing it as a defensive move against cometitor SAP AG, who is trying to compete in this space, but haven't done too well.
Maybe they're trying to circumvent SAG before they become formidable. Some think if SAP doesn't get it, in a couple years they'll have to put themselves up on the block.
While BEA makes the typical assertion the offer by Oracle doesn't value the company high enough, it's a little puzzling to see why they would pay that type of prize for the limited value they would receive.
I understand the competitive side, but Oracle is doing well in this space now. To simply buy it to prevent a competitor from getting it, doesn't make a lot of sense to me. If Oracle is doing so good in the "middleware" space, why not just push and grow organically as it is?
The one reason they may be willing to offer this much, is they are integrated with the BEA software, and some believe Larry Ellison isn't willing to allow SAP to buy the company with that in place.
Some in the industry believe the offering price could end up as high as $21 a share. That will depend on if any other competitors enter into the competition and bid it up.
Still, this is a steep price to pay for a business that doesn't add a lot of value to the company.
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Posted by: mysoretrendz | October 3, 2008 11:50 PM | Permalink to Comment