Let the BEA bidding begin

My only question regarding Oracle’s hostile takeover bid for BEA Systems is, “What took them so long?”

It’s always been inevitable that BEA would be snapped up by a bigger company. It’s always seemed that BEA’s data-centric technology is the most synergistic with Oracle’s. It’s always been a question of when, not if.

Oracle’s move, publicly announced last Friday, was an all-cash offer representing a 25% premium over BEA’s previous share price. The timing may have been driven by SAP’s recent grab for Business Objects. BEA and SAP are the two big fish in the ERP/CRM pond, and neither company wants to come in second.

BEA’s letter rebuffing the offer made it clear: more money, honey. BEA’s officers saw what happened when Oracle aggressively pursued its takeover of Peoplesoft, making the offers better and better until, finally, there was no point in holding out any longer. As BEA’s William Klein wrote, “It is apparent to our Board, however, that BEA is worth substantially more to Oracle, to others and, importantly, to our shareholders than the price indicated in your letter.”

Will there be other suitors? SAP, of course, is a possible candidate, though it may not have the resources to match Oracle. IBM is another; many parts of BEA’s WebLogic platform would fit well within IBM’s WebSphere and DB2 product lines… and IBM hasn’t bought anything big for a while. Another potential bidder might be Hewlett-Packard. BEA’s software would be a huge help as HP tries to restart its enterprise software business, and has solid affinities with the Mercury products.

At the end of the day, however, we should expect Oracle to prevail. Larry Ellison has tons of cash, and isn’t afraid to spend it. He holds all the aces. IBM could match spending with Oracle, but probably won’t. HP and SAP couldn’t afford to keep up with Oracle – and even if they could, it’s not in their corporate character to buy size at any cost.

Buying BEA will cost Oracle a lot of money. But with BEA, Oracle stands to make even more money. It’s going to happen. The only losers here will be Oracle’s competitors, who will find Ellison to be an even more formidable foe, and of course, BEA’s customers, not all of whom will want to do business with Oracle.