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BEA rejects Oracle bid

Business software is just so hot right now

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Updated Oracle has made a surprise $6.7bn bid for middleware developer BEA Systems.

The database giant has tabled $17 per share in an all-cash bid, a 25 per cent premium on yesterday's closing price. It comes just days after Oracle's bitter German rival SAP said it would lay down $6.7bn for Business Objects.

BEA has become something of a bit part player in the business software market as IBM, Microsoft, Oracle and SAP seek to barge their way into more and more market niches.

Oracle president Charles Phillips said: "This proposal is the culmination of repeated conversations with BEA's management over the last several years. We look forward to completing a friendly transaction as soon as possible.

"We intend to protect the investment customers have made in BEA's products by supporting those customers and products for years to come. The acquisition of BEA by Oracle will enable an increase in engineering resources that will in-turn accelerate the development of our world-class suite of middleware."

BEA is being urged to sell by the billionaire activist shareholder Carl Icahn. He increased his stake in the firm from 11 per cent to 13.2 per cent last week.

Once BEA gathered its wits, the company managed to make a public response to Oracle by releasing a letter aimed at Oracle's Phillips.

The note starts out nice enough, saying "Dear Charles - Our Board of Directors acknowledges your interest in BEA as expressed in your letter of October 9, and is considering it in consultation with our advisors."

But, er.

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. As we have indicated to you previously, we believe that the absence of current financial information in the public markets limits investor visibility into our performance. We expect that this will be corrected in the near future when we become current on our SEC filings, and can communicate more fully with the investment community.

Ah, the old "once we get current on our books" trick.

BEA’s most recent numbers, back in August, showed revenues up seven per cent to $364m in the second quarter. However, license revenues were down from $136m to $123m.

While it claimed $61m in positive cash flow, BEA couldn’t declare a net income figure as it is still working its way through an internal review of historical stock option grants. It has said this will have a "material adverse affect" on historic figures, and figures yet to come.

Still, that results statement was more prescient than anyone might have thought at the time. CEO Alfred Chuang claimed “We are on the cusp of the next era in enterprise IT, which will represent a disruptive shift.” Who could have guessed at the time the disruptive shift would be up Highway 101 to Oracle’s base in Redwood City.

Oracle's official announcement is here. ®

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