Article

Will Oracle outbid SAP for Business Objects?

Mark Brunelli, News Editor
It would be just like Oracle to try and outbid SAP for business intelligence (BI) software maker Business Objects -- but SAP executives are hoping that it just doesn't happen.

Their concerns are understandable given Oracle's track record and the fact that

is still subject to shareholder and regulatory approval. Back in 2005, Oracle, which has acquired some 30 companies over the past four years, won a lengthy bidding war with SAP for retail software maker Retek Inc. of Minneapolis, Minn.

"Obviously, our hope is that we can rapidly conclude this [Business Objects acquisition]," Doug Merritt, head of SAP's business user development organization and a member of SAP's executive council said with a laugh. "It's a very dynamic market, and you just don't know what's going to happen, and I'd never put anything past Oracle."

IT industry analysts wouldn't be surprised by an Oracle counteroffer, either.

"There's a possibility Oracle may do this to defend their base," said Ray Wang, a principal analyst with Cambridge, Mass.-based Forrester Research Inc. "I believe [Oracle co-presidents Charles Phillips and Safra Katz] have this contingency scenario planned out. However, the $7.5 [billion] to $8 billion required to outbid [SAP] could be better used for acquisitions in other verticals that will ultimately surround SAP."

But while Oracle and its founder, Larry Ellison, have a reputation for buying out the competition, many agree that a counteroffer probably won't happen this time, primarily because Oracle already gained a bigger slice of the BI software market when it

More on the SAP-Business Objects deal:

SAP buys Business Objects

"It's not like all of a sudden Business Objects just became a competitive offering [for Oracle]," said Tony Baer, principal of onStrategies, a New York-based IT market research and consulting firm. "Before this deal it was a competitive offering because Oracle already bought into this space. So I don't think the deal changes things that much -- maybe just by a matter of degrees -- in that now there's going to be a little bit more of a grudge match."

Baer added that following the acquisition, SAP will undoubtedly try to woo Oracle customers over to SAP as it always has, but he doesn't anticipate a major shift in sales numbers resulting from the buy.

"They both try and spread

An uneasy alliance

If SAP's acquisition of Business Objects goes through unfettered, SAP will find itself forced to deal with the large number of sales agreements and joint development partnerships that Business Objects has with Oracle.

In some ways, Oracle and SAP already work together; many SAP enterprise resource planning users run the Oracle Database -- but analysts agree that the SAP/Business Objects deal introduces a whole new level of "co-opetition" between the archrivals.

SAP said it knew this going into the deal, and the company has stressed its commitment to support any Oracle customers that also run Business Objects.

"If we look back to what we've done with the [governance, risk and compliance] division and with the corporate performance management division, we've maintained a strong focus on being able to integrate with Oracle, PeopleSoft, JD Edwards, and other third-party apps," Merritt said. "We've got to be open to not just Oracle's offerings, but also IBM's, Microsoft's, [and] Salesforce.com's, for crying out loud."

Market reaction

SAP's stock tumbled 4% yesterday -- its biggest decrease in eight months -- after the company predicted that the Business Objects deal will reduce earnings next year before adding profit in 2009.

Baer said he believes the stock tumble resulted from the general feeling on Wall Street that SAP is paying too much for the BI heavyweight.

"My take is that SAP is not used to doing deals like this," Baer said. "They're not in the type of practice that Oracle is when it comes to pricing these deals."

SearchSAP.com news editor Jon Franke contributed to this report.


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