Oracle Bids For BEA

Oracle's offer represents a 21 percent premium on the $14.01 closing price of BEA's shares on Oct. 8, the day before Oracle says it delivered its proposal letter to BEA. BEA's board has not yet publicly disclosed or commented on the offer.

Oracle President Charles Phillips said the offer capped "repeated conversations with BEA's management over the last several years," and that Oracle hopes to strike a deal for a friendly acquisition as quickly as possible.

"We intend to protect the investment customers have made in BEA's products by supporting those customers and products for years to come," Phillips said in a written statement. "Our continuing support commitment has been amply demonstrated with all of our previous acquisitions, including PeopleSoft and Siebel. BEA will be no different.

If Oracle succeeds, its BEA takeover will be its largest purchase since its acrimonious, $10.3 billion PeopleSoft buy in early 2005. Since then, the company has spent lavishly on dozens of technology acquisitions, including multi-billion-dollar buyouts of Siebel Systems and Hyperion.

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History suggests that if Oracle wants BEA, it will inevitably succeed in winning it, whatever reaction BEA's board has to Oracle's initial proposal. Oracle's landmark, hostile PeopleSoft bid took 18 months and roiled the software industry, but the company eventually won out of over the objections of PeopleSoft's management and the U.S. Department of Justice. In another deal, Oracle snatched retail analytics software maker Retek away from rival SAP, which announced a deal to buy Retek only to have Oracle jump in with a higher counter-offer. Several rounds of bidding later, Oracle emerged triumphant.

Buying BEA would do for Oracle's middleware business what buying PeopleSoft and Siebel did for the applications business: Bump Oracle into an uncontested number-one position in market share.

BEA's flagship product, the WebLogic Application Server, leads the distributed application server software market, according to IDC's research, which pegs BEA's market share in 2005 at 24.2 percent. But IBM and Oracle are close on its heels, and together, the top three vendors control 67 percent of the market revenue, according to IDC.

Middleware has been a focus for Oracle over the past few years as it strove to build that segment out to comparable strength with its applications and database software lines. Largely through acquisitions, it has grown its "Fusion"-branded middleware segment past the billion-dollar mark -- at which point company president Phillips began throwing jabs at BEA.

"We've caught BEA, after starting way back four years ago," Phillips proclaimed at a meeting with financial analysts last year. "I would say BEA is almost in our rearview mirror at this point."