Oracle Gets In The Game For Retek, Trumps SAP's Offer

Last week, Oracle trumped SAP's $8.50-per-share offer with an all-cash bid of $9 per share, or $515 million. The Redwood Shores, Calif.-based company also quietly picked up nearly 10 percent of Retek's outstanding shares, making Oracle one of Retek's largest shareholders.

Buying Retek's stock "sends a signal to SAP that to buy Retek they need the percent [of shares] we have," said Oracle President Charles Phillips in a teleconference for the press. "If we lose, we will still make a ton of money from SAP having to bid higher."

Under Retek's agreement with SAP, the Minneapolis vendor of merchandising, POS and retail-specific supply chain software would have to pay SAP $15 million if it backs out of the deal.

Solution providers report an increase in retail-related spending, which could explain Oracle and SAP's enthusiasm over Retek.

"It's an understatement to say [retailers] are cheap. They count pennies," said Joseph Ung, president of ThoughtDigital, an Oracle partner and systems integrator in New York. "This year, though, quite a few companies are slowly embarking on more projects."

So far, the bidding has increased in 50-cent increments. And financial analysts say a $12 share price would be fair for the 600-person company with $174 million in annual sales.

Now the market waits to see which of the potential buyers will blink first.

What makes Retek so attractive? For starters, it is an enterprise-scale, fully integrated suite targeted at retail customers. Competitors such as JDA Software and Tomax either target smaller customers or offer a combination of stand-alone point solutions. It also boasts a world-class roster of retail customers such as The Gap, Nordstrom and Sainsbury's.

"Retek brings a high level of credibility in this marketplace because they truly understand their customers," said Mike Witty, program director of demand strategies at research firm Manufacturing Insights. "That understanding is critical in this industry. That's why Retek is such a jewel to be fought over."

Witty estimates spending in the retail IT sector will grow 6 percent to 8 percent in the coming year.