Five Reasons BEA Is Better Off Being Bought By Oracle
1. BEA doesn't have the product or talent to go head to head against IBM or Microsoft in Software. Oracle Does.
BEA hasn't been a world class competitor to IBM since 1999. It had a great Web server early on that was a worthy competitor to IBM's WebSphere. But it fell off the map somewhere around the dot.com bust. For my money, IBM's software prowess has always been overrated in terms of innovative software that has an impact beyond the enterprise. In WebSphere, it had the flat out leading product in the market. IBM had a hit. And to its credit, it outmarketed and out-developed BEA to no end.
As for talent, BEA has been bleeding talent for the last several years. The list of BEA executives that have left for greener pastures is long. How ironic that former BEA Systems Chief Marketing Officer Marge Breya, who left BEA last December to join Business Objects as chief marketing officer, found herself at the center of another blockbuster software acquisition when SAP earlier this week made its move to acquire the business intelligence vendor. Just another sign that the software industry has moved from a best of breed product business to an integrated end-to-end comprehensive suite from one of only several software giants. Pick your poison partners: Oracle, SAP, IBM or Microsoft?
2. BEA's Channel Commitment Was Lackluster At Best. Oracle Is A Channel Stayer.
BEA was the classic blowing in the wind channel company. It's strategy and commitment changed every three or four years. My favorite headline from the CRN BEA archives: an oldy but goody from 2004 titled: Should You Trust BEA? Trust indeed.
It's no mistake that Oracle Channel Chief Rauline Ochs left BEA in April 2002 after she learned that BEA founder, chairman, CEO and president Alfred Chuang was putting the whammy on the channel. Chuang wakes up this morning to find that one of the most talented executives he let slip through his hands is for all practical purposes likely to be calling a lot of the sales shots for BEA.
Ochs took an organization that was fervently anti-channel and turned it into a channel savvy organization that is embracing partners broadly and deeply. It's no small matter that Ochs, senior vice president for Oracle's North America Alliance and Channels Organization, was named CMP Channel Group 2007 Executive of the Year. Ochs developed no-nonsense rules of engagement to rein in Oracle's direct sales force when she took the Oracle channel job. As far as channel culture, the Oracle sales organization is night and day from what it used to be. In the summer, Ochs pulled off what at one time was unthinkable: a move to push the Oracle database into the heart of the small medium business market with new partnerships with broadline distributors Ingram Micro, Tech Data and specialty distributor Arrow.
What it means is that solution providers, who once viewed the Oracle database as out of reach and were forced to settle for Microsoft's SQL Server at every turn, can now get their hands on Oracle 11G, Oracle Standard Edition (SE) and Standard Edition One (SE One) database software without jumping through bureaucratic hoops and paying big money to become an Oracle partner.
Now Ochs is poised to lead Oracle in a head-to-head face off with IBM's $20 billion software organization. IBM should be worried: Ochs, who spent 15 years at IBM, including a stint as vice president of channel sales for IBM's Americas Software organization, has the knowledge and talent to do some serious damage to Big Blue. Oracle is on the channel rise. IBM is on the channel decline.
NEXT: BEA Has a Bric-A-Brac, Disjointed Set Of Products
3. BEA Has a Bric-A-Brac, Disjointed Set Of Products And Software Vision. Oracle Has A Comprehensive And Clear Product Set And Vision.
BEA has been doing its best imitation of IBM's software strategy and vision, while Oracle has pressed forward with a clear and compelling vision for its Fusion Middleware and its full ERP and CRM applications lineup. And by the way, Oracle middleware revenues were up over the $1 billion mark in 2006 with partners driving nearly half that revenue. And for fiscal year 2007, new middleware and database sales were up 18 percent. Those Oracle middleware numbers are worth revisiting today, given the BEA bid.
In sharp contrast to Oracle, BEA has struggled to piece together its bric-a-brac software acquisition binge which began in earnest with its buyout of enterprise portal software maker Plumtree for $200 million in 2005. BEA followed up that deal with its $87.5 million acquisition of business process management software maker Fuego in March 2006, and a then a deal to acquire Flashline, a metadata repository software provider, in August 2006.
Through it all Chuang has proclaimed BEA as the leader in enterprise portal, SOA, business process management, enterprise social computing and all out enterprise infrastructure software leader. Sound confusing? It is. And by the way, saying it doesn't make it so.
At the end of the day, Oracle CEO Larry Ellison and his software team have done a better job of picking and choosing what technology stays and goes from its numerous acquisitions, including PeopleSoft and J.D. Edwards. Whereas Chuang and his technology team got hung up on what to save and what to keep, Ellison and his team realize it's all about customer acquisition. File this one under: Oracle is clear and compelling, while BEA is hazy and uncertain.
4. Activist Shareholder and Corporate Raider Carl Icahn Is Wrong. IBM or Hewlett Packard Is Not Going To Try To Outbid Oracle. If Oracle Isn't Successful, BEA Will Languish In High Tech Limbo.
The notorious Icahn, of course, in this case is in the right place at the right time. Just a day before the Oracle bid, he filed papers with the U.S. Securities and Exchange Commission, reporting an ownership stake of more than 51 million shares of BEA, or 13.22 percent of the company. Icahn obviously had a hunch that BEA was going to be in play. Not exactly rocket science since there has been widespread speculation that BEA was in play. That said, Icahn is dreaming of ways he can get an even higher premium for his BEA shares. But it ain't gonna fly. IBM has its own rock solid middleware story which is the centerpiece of its $20 billion software business. IBM likes to talk about how it's leaving the applications space to partners, while it focuses on middleware. There is simply no way IBM is going to pay dollar one for any piece of BEA.
As for Hewlett Packard, HP CEO Mark Hurd is doing a bang up job of driving operational and strategic improvements across the board in every single one of the company's businesses from printers to PCs and servers to software and services. HP has already voted that it's going to play in the heart of the data center software market with its $4.5 billion acquisition last July of information technology optimization software maker Mercury Interactive. Mercury's software fits nicely together with HP's solid OpenView system management product. HP software and services strategy is aimed at reducing data center costs. And by the way HP is eating its own dog food, becoming the perfect living and breathing case study for its software prowess by consolidating 85 data centers into six large data centers, all with the aim of saving the company $1 billion in annual IT expenses over the next few years. Why would you want to muck up that story with a bric-a-brac bag of diverse middleware technology from BEA? You wouldn't. Hurd is not a fool. He's not about to buy what has to be, with the Oracle bid, the most overvalued company in high technology.
5. BEA Is A Financial Mess. Oracle Is A Financial Rock Of Gibraltar.
BEA has been a financial mess over the last year. BEA shares took a beating in February after the company forecast softer-than-expected sales for its fiscal quarter ended April 30. This after BEA became embroiled in the stock options scandal that wracked technology companies. BEA's own investigation showed that for nearly 10 years company officers manipulated grant dates to maximize the value of employee stock options and failed to properly record compensation expenses associated with options. For its quarter ended July BEA reported a 9 percent drop in software license fees -- a key indicator of growth, or lack thereof.
Oracle sales, meanwhile, have soared to $14.2 billion for fiscal 2007. With Dell founder Michael Dell struggling to revive Dell and Microsoft cofounder Bill Gates stepping aside, Larry Ellison remains one of the original kings of technology. Oracle has a clear and compelling strategy to provide the best end-to-end software stack in the business. BEA and its board on Friday issued a statement that says the Oracle offer undervalues the company. Undervalued. What a laugh! Chuang and the BEA board should take the 25 percent premium and run with it. In short: BEA should consider itself lucky to be bought by Ellison and company.