The $3.3 billion acquisition would be Oracle's largest since Siebel, and continues Oracle's focus on BI while undermining rivals; more BI acquisitions are to come, according to analysts.
Posted Mar 1, 2007
Oracle has agreed to acquire BI and performance management provider Hyperion Solutions for more than $3.3 billion in cash, renewing a shopping spree aimed at extending Oracle's set of BI products while gunning for rival SAP. When closed, the deal would be the biggest purchase by Oracle since its acquisition of Siebel Systems in January 2006, and the 27th acquisition since the start of 2005. The companies hope to close the acquisition by April, subject to customary closing conditions, with Oracle paying $52 per share for Santa Clara-based Hyperion. The price represents a 21 percent premium above the most recent closing price of Hyperion's stock, which has traded between $26.65 and $45.18 during the past year.
The purchase continues Oracle's strategy of growing its revenue and customer base through acquisitions and will combine Hyperion's corporate performance management software with its own BI and analytics tools to offer customers a broad range of performance management capabilities, including planning, budgeting, and operational analytics. While the deal will expand Oracle's portfolio of database applications and middleware with a set of BI products, it also presents the challenge of integrating the products and employees of yet another large company into Oracle, which is already juggling J.D. Edwards, PeopleSoft, and Siebel with Project Fusion.
Part of Oracle's motivation for the deal appears to be to poach customers from rival SAP. As is par for the course, Oracle executives took the opportunity to trumpet any advantages the acquisition gives Oracle. To Charles Phillips, Oracle president, the deal represents yet another shot across SAP's bow. "Thousands of SAP customers close their books with the Hyperion product," he said during a Thursday conference call. "Hyperion is the latest move to expand Oracle's offerings to SAP customers. We are achieving a critical mass in SAP accounts."
While Oracle had a handful of market-leading BI vendors to choose from, which also included Cognos and Business Objects, Hyperion was the best fit for Oracle both in terms of products and culture, says David Mitchell, head of global software research with Ovum. Oracle has been trying to build out is own BI business, offering tools for integrating data among a number of applications and technologies. But its offerings were focused primarily towards customers of its own software, Mitchell says. "Adding Hyperion to the family makes it a best-of-breed player, rather than just focusing on the traditional Oracle customer base." The acquisition could also start a "domino effect" in which other large BI vendors are acquired, Mitchell says.
John Hagerty, vice president and research fellow at AMR Research, agrees, and speculates that SAP, IBM, and HP might be "likely acquirers in this market space," he says. "Business Objects, Cognos, MicroStrategy, and Information Builders are potential targets, among a host of smaller players." He also says the acquisition is representative of the merging of performance management and BI, as Oracle positioned the purchase "as an extension of its overall BI strategy. BI and performance management are two sides of the same coin and should be executed in one broad strategy."
The talks with Hyperion had been under way for several months, with many Oracle executives having discussed improving the BI capabilities in its Oracle database. Buying Hyperion could also potentially give the company a selling point over database rival IBM, as Hyperion is among IBM's biggest BI partners. But Oracle is also close partners with BI provider Business Objects, a company that Oracle was rumored to be in acquisition talks with earlier this year. Oracle is currently developing a set of new products that integrate Business Object's products with IBM's data warehouse software, according to the company.
To help boost profits, Oracle has typically laid off a percentage of workers after its recent deals were completed. It wasn't immediately clear how many workers might lose their jobs after Oracle takes control of Hyperion next month. Oracle has already identified "substantial economies of scale," said Oracle CFO Safra Catz in a written statement. Hyperion has about 2,700 employees spread over 20 countries, according to its Web site. It reported revenue of $765.2 million for the fiscal year to June 30, 2006.
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