Five Reasons BEA Is Better Off Being Bought By Oracle

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.