January 17, 2008 2:27 am

Oracle acquires BEA for $8.5bn

Oracle led a fresh round of consolidation in the software industry on Wednesday as it pulled off the $8.5bn purchase of BEA Systems, a middleware company it has stalked since last summer.

Meanwhile, Sun Microsystems picked up one of Europe’s most closely watched young tech companies – open source database company MySQL – for $1bn, and SAP announced it had sealed enough support to close its €4.8bn ($7bn) purchase of Business Objects.

Oracle won over BEA’s board as it raised its offer for the company by 14 per cent to $19.375 a share. The move echoed a pattern also seen with its purchase of PeopleSoft, the landmark deal that triggered wider software consolidation, when Oracle eventually paid considerably more than it originally offered, in spite of threats to reduce the value of its offer.

While lower than the $21 a share that BEA’s board had said it wanted, the final price still represents a partial victory for Alfred Chuang, BEA chief executive.

Oracle’s decision to go public with its interest in BEA, a company it had pursued off and on for years, came after shareholder activist Carl Icahn had taken a stake in BEA and called for a sale of the business.

Since signing a confidentiality agreement with BEA that gave him access to internal company data, however, Mr Icahn has been largely silent, giving the company time to regroup and present a stronger case to Wall Street about its efforts to turn its business around.

The acquisition will put Oracle almost neck-and-neck with IBM in terms of its middleware, a layer of software in complex corporate IT systems that has become increasingly important amid the rise of the internet, said Ian Finlay, an analyst at AMR.

Also, with a presence in application software that IBM does not have, and a stronger middleware business than SAP, Oracle is now the only company other than Microsoft able to sell a full “stack” of software to corporate customers, he added. Meanwhile, Sun’s acquisition of MySQL marks the latest attempt to kick-start a software business that has frequently failed to live up to the company’s hopes. Jonathan Schwartz, Sun CEO, said his company would be able to sell other software and services around MySQL’s products.

Started by two Swedes and a Finn, MySQL has been the most successful of a number of open source database companies that have tried to challenge a market dominated by Oracle, IBM and Microsoft.

Marten Mickos, its CEO, is fond of saying that by distributing its software free of charge and selling service and support, his aim has been to reduce the size of the global database market by a third, and take a third of what was left.

Mr Schwartz said that MySQL had revenues last year of $70m, an increase of 50 per cent from the year before, and that he planned to continue its disruptive business model.

Additional reporting by Maija Palmer in London

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