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Oracle's $6.7 Billion Bid for BEA Turned Down
andy1307 writes to tell us that according to the Mercury News, Oracle has made an unsolicited bid to buy BEA Systems for about $6.7 billion. BEA confirmed that it rejected the $17 a share bid as too low. "BEA told Phillips that its board of directors believes BEA 'is worth substantially more to Oracle, to others and, importantly, to our shareholders than the price indicated in your letter.' Oracle's aggressive bid may be an attempt to pre-empt an acquisition by others, Finley said. Those named in the past as potential suitors include IBM, the German software company SAP AG and Hewlett-Packard. Trip Chowdhry of Global Equity Research said he expects a counterbid from SAP, which he said needs BEA to survive. 'If they don't get BEA, probably in two years SAP will be on the block to sell itself,' Chowdhry predicted. Oracle needs to keep BEA out of competitors' hands, he said. Chowdhry said the offer currently 'is not right. Probably at $21 the deal will get done.'"
Oracle buy one of the world's major munitions manufacturers... well, do you want to argue about which is the best database with people who manufacture JSFs and Typhoons? No? Me neither...
Real Daleks don't climb stairs - they level the building.
I work with BEA products, namely Weblogic and JRockit. Neither impress me. Weblogic is constantly failing to hand out connections (which is it's primary job) and the stack traces JRockit produces are formatted differently from those of Sun's JVM (which prevents my IDE from turning them into clickable hotlinks that take me to the lines of offending code). FSM knows why they made them different. Oh and the line numbers in your stack trace will be wrong unless you turn off optimization - which is the the whole point of using JRockit. (It's supposed to be faster than Sun's JVM - I've never seen proof).
Question everything
Perhaps I'm missing something. Can someone explain the great value in BEA? Why does SAP need this to survive? Does this guy own a million shares in BEAS or does he know something I don't. My knowledge in this space is a little weak. I do know that my company ( I shouldn't say who, but our market cap is a lot higher than BEAS ) very happily dumped Weblogic for jBoss. The transition went remarkably smoothly ( Disclaimer: We did have a jBoss god on staff ), and it saves us A LOT of money. We use it for hosting some very large, complicated, financial applications. Based on what I have seen, BEA sells a product that has become a commodity. It should no longer command a premium.
When the stock jumps well beyond the proposed acquisition price (to $18.82), that's a solid indication that the offer isn't going to cut it. One would normally expect a jump in price upon the announcement of a buyout offer at a premium, but typically the price will jump to some intermediate value between the previous market price and the offer price, in effect discounting for the chance that the deal will fall apart. Here the market response went well beyond that. Now the question is, will we see a bidding war? And with whom?
I don't have insider information. I am not a spokesperson at this time. This is just my opinion.
.NET rearing its head a lot. Sure, there is some JBoss (and a lot more Tomcat!). But, JBoss generates around $22 million annually. BEA makes that in under a week. And lest you say "But, this doesn't measure the free deployments!", we (and Oracle) don't care about those -- most companies aren't going to adopt an open source software solution for a production use without at least a support contract! Support , subscription, consulting, etc. is how RedHat is viable, it's also how BEA makes most of its revenue.
Basically, BEA wants to stay indepdenent, because it lets us do interesting things if we keep shareholders happy. And, by and large, we had been doing just that for the past 3 years, until licenses started to fall earlier this year. Wall Street forces a quarter by quarter mentality that's very hard to meet in a midsized company, in my opinion, given that the nature of "infrastructure software" involves longer sales cycles than when the dot-com bubble kept the "J2EE app server" purchase orders flowing in.
For those that suggest BEA's WebLogic is somehow commoditized and is the source of all of our woes, please understand a few things:
- BEA sells a *lot* more than an app server. Both Tuxedo and WebLogic Server have not been a sales focus for years at BEA, at least in North America -- Tux is still growing in Asia. The core products are still a cash cow, so we invest most of our R&D into it, but it doesn't account for the growth we've had since 2002. Most of that has been from Portal, Integration, and the new AquaLogic stuff.
- BEA contributes a lot to Java open source -- it's on the Eclipse board, it runs two Apache projects, is a major contributer and partner with Interface21 (the Spring guys), etc.
- Open source has never been BEA's biggest competitor. IBM and Oracle are. Really. The reason is that a major portion of BEA's sales focus is on enterprise license deals in the $million$ range. In the smaller deals, that's more likely where you see
- BEA's *new* license growth had fallen recently, but maintenance and overall revenue continues to rise. That means that, the *rate* in which our middleware is being acquired is slowing for us as of late, not that people have somehow stopped buying our stuff. So, yep, we could be doing a better job improving & selling what we have with AquaLogic and WebLogic, but it's not doom and gloom times here. Maybe it will be better under another company, I donno. Part of the problem is that pure "middleware" in general is a hard sell, as companies like TIBCO are also feeling right now -- SOA was the latest trend, with some reasonable enthusiasm and growth associated with it, but the real fortune was made in the peak of the dot-com boom, and it's hard to replicate that sort of hype. Oracle sells middleware along side applications, databases, security suites, etc., so it's not quite as hard to sell the business on the benefits.
- I have no idea what the article is talking about with regards to SAP. I think NetWeaver is a crap pile, but that doesn't mean they're dead if they don't buy us. They could go open source, or improve it.... People stick with SAP because they're locked in, not because NetWeaver is supposed to be better.
- Even if this deal doesn't go through, BEA is viable enough to stay independent. It has over $1B in the bank, it generates high free cash flow, and if we could get this stock options review over & done with, we could actually have some good information for the Street to price us properly. The question really is about the stock price -- whether the shareholders think we can raise it on our own, or someone else can do a better job of it.
Anyway, I've been pretty happy with the company for the past 3 years. Regardless of what happens, it's exciting times.
-Stu