Oracle to pay $3.3bn for Hyperion

Oracle Thursday agreed to pay $3.3bn for Hyperion Solutions, a move that could touch off a spate of acquisitions by other big software companies as they scramble for a leading position in one of the industry’s fastest-growing markets.

The deal will see Larry Ellison, Oracle’s acquisitive chief executive, add one of the leading providers of so-called “business intelligence” software to his growing slate of big purchases. Business intelligence software runs on top of the many separate applications and databases that big companies use, making it possible for executives to draw out and analyse information from different parts of their IT systems in a central place.

As such, it has been seen as one of the key areas for spending by corporate IT managers as they try to gain more value from their sizeable investments in underlying systems in recent years.

Analysts and industry executives predict that Oracle’s latest move could trigger a consolidation phase in this sub-sector.

Apart from Indian outsourcing companies, which have yet to experience a consolidation phase, “this is the last virgin market” in IT that has long been ripe for mergers, said Bruce Richardson, an analyst at AMR, a technology research firm.

Besides Hyperion, other leaders in the field are Cognos and Business Objects, both of which are public companies, and SAS, a private US concern.

Besides Oracle, IBM and SAP are both potential acquirers of business intelligence companies, said Mr Richardson. SAP, which is Oracle’s arch-rival in applications software for big companies, could be the one most directly affected by Thursday’s deal, because many of its own customers also use Hyperion’s software, he added.

Despite the risk to its business, SAP’s declared intention to avoid big acquisitions makes it unlikely that the German company will make a counter-bid of its own for Hyperion, said analysts at Merrill Lynch and Goldman Sachs.

Oracle said it had agreed to pay $52 a share in cash for Hyperion, or $3.3bn in all. That represented a premium of more than 20 per cent to its closing price the day before.

The valuation represents a premium to the prices Oracle paid for its other big acquisitions in recent years, its purchases of PeopleSoft and Siebel Systems, said Goldman Sachs.

Hyperion’s shares jumped by $8.69 on the news, to $51.53.

Hyperion is known, in particular, for its leading position in financial analytics software. Oracle has already tried to develop its own business intelligence business, through the expansion of a unit it acquired when it bought Siebel, and analysts said that effort was likely to be overtaken by its investment in Hyperion.