Oracle's Siebel buyout might stifle creativity

Sep 13, 2005

Software group Oracle's bid for Siebel Systems for a cool $5.85 billion Monday was greeted by many Wall Street analysts as a signal of the return of mega-mergers and better still -- renewed confidence in the information technology sector.

After all, earlier in the day online auction house eBay announced it will be acquiring Internet telecommunications group Skype for $2.6 billion.

As the world's biggest database-software company, the Silicon Valley-based Oracle would be acquiring a group that is one of the biggest players in customer relation management software, tracking marketing data, client information and other data that helps companies be more efficient in their sales strategies. The deal is still subject to U.S. government regulations under the auspices of the Department of Justice, but while some industry analysts have high hopes for Oracle making the most of the acquisition, others are not so certain.

One thing, however, is certain. For Thomas Siebel himself, founder and chief executive of the company and once himself an Oracle executive, the deal is a very good one as Siebel Systems was faced with a growing number of rivals, while not many companies expressed interest in taking it over. Meanwhile, for Lawrence Ellison, Oracle's chief executive, it could well be that he finally would feel vanquished after years of bitter and public animosity with Siebel following his departure from Oracle.

"The combination of Siebel applications with the development capacity of Oracle to enhance our (client relation management) product set ... is a very beneficial business combination that will allow us to be even more effective in delivering high quality, leading edge solutions," Thomas Siebel said in a news release.

Ellison too was equally ebullient about the deal, stating that "in a single step, Oracle becomes the number one CRM applications company in the world. Siebel's 4,000 applications customers and 3,400,000 CRM users strengthen our number one position in applications in North America and move us closer to the number one position in applications globally."

Analysts, however, were less effusive about the planned buyout, even when they agreed it could be a mutually beneficial deal.

Credit raters Standard & Poor's, for instance, said the deal would have "no impact" on Oracle's rating or outlook, even as it pointed out that the acquisition "is expected to significantly strengthen Oracle's global market position, especially for customer relationship management software applications."

This is, of course, not Oracle's first major acquisition. The company finally got approval to buy out PeopleSoft in a hostile takeover bid earlier this year for $10 billion, after a long transatlantic dispute between the U.S. government and the European authorities on antitrust concerns.

While the bid for Siebel will certainly not be as controversial, some analysts including Janet White at Info-Tech Research Group of London, Ontario, argued that the purchase could actually stifle Oracle's longer-term prospects.

"By purchasing Siebel, Oracle has acquired an additional 3.4 million CRM users and the maintenance fees that go with that kind of installed base. However, where Oracle may be able to compete with (German rival) SAP on numbers in the short term, they may have trouble competing longer term on product innovation," White said.

She also argued that "Oracle is an applications company and it only makes sense that they will want to eventually move acquired customers over to their technology stack. But how much time will Oracle really have to integrate its existing portfolio, or create innovative new products, when it has to spend most of its time maintaining disparate, monolithic systems acquired through its recent acquisitions of PeopleSoft, JD Edwards and now Siebel," White said.

Oracle will be paying $10.66 per share for Siebel's stock, considerably above Siebel's Friday closing price of $9.13. Thomas Siebel owns about 55 million shares, or just over 10 percent of total shares. The deal is expected to go through by early next year.

Copyright 2005 by United Press International

Explore further: Simplicity is key to co-operative robots

add to favorites email to friend print save as pdf

Related Stories

Oracle CEO: about 1,000 layoffs planned for Sun

Jan 28, 2010

(AP) -- Oracle Corp. CEO Larry Ellison cheered the closing of his company's $7.4 billion acquisition of Sun Microsystems on Wednesday, vowing that Sun will immediately add to Oracle's profits. He said layoffs ...

Oracle Reaches Out to Apps Partners

Apr 22, 2007

The company's new Application Integration Architecture is helping to bring in partners in its applications business—a cultural shift for Oracle.

SAP Brings Good Q1 News to Sapphire

Apr 22, 2007

SAP reported its first quarter 2007 earnings April 20, highlighting a jump in profits. Net income for the quarter was $413 million, up from $282 million a year ago, and total revenue jumped 6 percent to $295 billion, in what ...

Recommended for you

Simplicity is key to co-operative robots

5 hours ago

A way of making hundreds—or even thousands—of tiny robots cluster to carry out tasks without using any memory or processing power has been developed by engineers at the University of Sheffield, UK.

Freight train industry to miss safety deadline

5 hours ago

The U.S. freight railroad industry says only one-fifth of its track will be equipped with mandatory safety technology to prevent most collisions and derailments by the deadline set by Congress.

IBM posts lower 1Q earnings amid hardware slump

6 hours ago

IBM's first-quarter earnings fell and revenue came in below Wall Street's expectations amid an ongoing decline in its hardware business, one that was exasperated by weaker demand in China and emerging markets.

Microsoft CEO is driving data-culture mindset

7 hours ago

(Phys.org) —Microsoft's future strategy: is all about leveraging data, from different sources, coming together using one cohesive Microsoft architecture. Microsoft CEO Satya Nadella on Tuesday, both in ...

User comments : 0

More news stories

Microsoft CEO is driving data-culture mindset

(Phys.org) —Microsoft's future strategy: is all about leveraging data, from different sources, coming together using one cohesive Microsoft architecture. Microsoft CEO Satya Nadella on Tuesday, both in ...

Floating nuclear plants could ride out tsunamis

When an earthquake and tsunami struck the Fukushima Daiichi nuclear plant complex in 2011, neither the quake nor the inundation caused the ensuing contamination. Rather, it was the aftereffects—specifically, ...

Patent talk: Google sharpens contact lens vision

(Phys.org) —A report from Patent Bolt brings us one step closer to what Google may have in mind in developing smart contact lenses. According to the discussion Google is interested in the concept of contact ...

Quantenna promises 10-gigabit Wi-Fi by next year

(Phys.org) —Quantenna Communications has announced that it has plans for releasing a chipset that will be capable of delivering 10Gbps WiFi to/from routers, bridges and computers by sometime next year. ...