BEA Systems' channel partners expressed mixed feelings -- but little surprise -- at Oracle's unsolicited $6.6 billion bid to acquire the middleware vendor. While they see potential benefits from combining the two companies' product lines, the loss of another vendor in the rapidly consolidating enterprise software industry could mean less choice for customers and reduced leverage for resellers.
Late Friday BEA responded to the Oracle bid saying the offer "significantly under-values BEA Systems." But, interestingly, the statement, which included the text of a letter sent to Oracle president Charles Phillips, did not directly rule out the prospect of a buyout. "BEA is worth substantially more," the company's board said in a letter to Oracle.
Industry analysts expecteded BEA to turn down the proposed deal -- if for no other reason than to try and get Oracle to sweeten the $17-per-share offer. Earlier this week corporate raider Carl Icahn disclosed that he has purchased more than 51 million BEA shares giving him a stake of more than 13 percent in the company.
Icahn said Friday he was glad Oracle made the bid, Reuters reported. Icahn added that he expected higher offers to emerge from Oracle rivals, naming International Business Machines Corp and Hewlett-Packard Co as potential bidders.
Others said Oracle appeared to be a good fit for BEA. "I think it's a really good marriage," said Rob Wolfe, CEO of AvcomEast, a Vienna, Va.-based solution provider that's a channel partner with both Oracle and BEA. He said Oracle gains BEA's customer base and the ability to enhance its middleware offerings with BEA's technology. BEA, in turn, can leverage Oracle's sales force and partner program resources and sell it's products as part of Oracle's broader product line.
"BEA is at a point in it's life that something is going to happen," said Deke Johnson, VP of the Oracle practice at Idhasoft, a San Carlos, Calif.-based solution provider. He said BEA acquisition rumors have been floating around for some time and Johnson thought Hewlett-Packard was a more likely suitor.
Idhasoft sells $15 million to $20 million of Oracle software a year and a couple million dollars of BEA products annually. "Oracle's our bread and butter, so I see it as a positive," Johnson said. "The sad thing is that BEA has such a great channel philosophy."
One reseller who asked not to be identified because he has relationships with both companies said BEA has become somewhat marginalized with its narrower product line. Oracle has done a good job leveraging its broad lines of database, middleware and application software to close deals. BEA also has found itself competing with open-source products as well. "I think this is something BEA needs," the channel partner said.
BEA channel partners also might benefit from the fact that Rauline Ochs, senior vice president for Oracle's North America Alliance and Channels organization, previously worked at BEA and helped launch the company's Star Partner Program.
There would appear to be a lot of overlap between the two vendors' product lines -- but product overlap didn't stop Oracle from acquiring application vendor PeopleSoft for $10.3 billion in 2005 in what began as an unsolicited offer.
BEA's middleware offerings include the WebLogic application server, the Tuxedo transaction processing system and the AquaLogic line of SOA-based integration software. Oracle, which clearly sees middleware as a growth area, has been building up its own Fusion middleware product line. But Fusion hasn't been perceived as a solid competitor to middleware from IBM, BEA or Tibco, said a report from Bart Narter, a senior analyst with Celent, a Boston-based financial research and consulting firm. Buying BEA provides Oracle with "top notch" application server, enterprise service bus and business process management software, according to the report.
A report from the Friedman, Billings, Ramsey & Co. brokerage said buying BEA would eliminate a major competitor for Oracle, add a recurring revenue stream to Oracle's top line and provide a large customer base into which Oracle can cross-sell other products.
In August BEA reported a 7 percent increase in sales in its second quarter ended July 31 to $365 million. But that quarter also included a worrisome 9 percent drop in license fees. Earlier this week BEA said it would take a $425 million charge against earnings to clear up stock option-backdating issues.