• E-mail
• Print
• Comment
• Font Size
• Digg
• del.icio.us
• Discuss article

Analysts Speculate on Next Takeover Target in Software Industry

Posted on: Tuesday, 14 December 2004, 00:00 CST

Dec. 14--Who's next?

Now that Oracle will take over rival PeopleSoft after an acrimonious 18-month battle, analysts and investment bankers Monday were trying to predict which companies would be the next to fall as the business software industry consolidates.

"Everyone is still potentially a target," said Peter Coleman, an analyst with ThinkEquity Partners in San Francisco.

Even before Monday's $10.3 billion merger announcement, Oracle's take-no-prisoners campaign to acquire PeopleSoft had roiled the industry.

During the Oracle federal antitrust trial last summer, Microsoft acknowledged it held unsuccessful talks to acquire Germany's SAP, the biggest business software maker. Meanwhile, internal memos from IBM, introduced at trial showed Big Blue feared that an Oracle merger with PeopleSoft would hurt its database business. Oracle itself put BEA Systems, Siebel and Lawson Sofware on its list of takeover targets.

"There has already been a lot of consolidation going on. Vendors are trying to acquire critical mass because more of their sales are to their existing customer base," said Paul Hamerman, an analyst at Forrester Research. "It's a trend that is continuing."

In the federal case, the judge's finding that a merger of Oracle and PeopleSoft would not violate antitrust laws could prompt further consolidation, analysts said.

"I think that will open up, not the floodgates, but I think it will encourage multibillion-dollar enterprises to do other multibillion-dollar acquisitions," said Paul Crisci, a managing director at Broadview, a division of Jeffries, an investment banking firm.

Analysts said potential targets include BEA of San Jose, which competes directly with IBM in some markets, and Siebel Systems of San Mateo, which develops customer relationship management software.

Microsoft has the biggest pile of cash to play with -- its reserves will reach about $30 billion next year, according to estimates. Microsoft officials could not be reached for comment.

Another company that has the wherewithal to do a big deal is IBM. The world's largest computer maker has bought 19 companies since 2001 and integrated them into its software group. IBM is a leader in developing middleware. Middleware is the software that sits between a computer operating system and a software application.

"We have no intention of re-entering the applications market and are focused on finding new, clever ways to support of independent software vendor partners," said IBM spokeswoman Clay Helm.

During Oracle's takeover campaign, IBM formed a software development and marketing alliance with PeopleSoft valued at $1 billion.

Coleman, the ThinkEquity analyst, noted that BEA's products would complement the offerings of IBM, Sun Microsystems or Hewlett-Packard.

Said BEA spokesman Dick O'Donnell: "It's nice to be loved. Our customers love us, our partners love us, and apparently some of our competitors love us, too."

Officials at Siebel did not return calls seeking comment.

Forrester analyst Hamerman said that he believes companies that sell business software over the Internet also may also be ripe for consolidation. Companies such as Salesforce.com in San Francisco, NetSuite in San Mateo and Employease in Atlanta provide software on a subscription basis to corporations that don't want to own and manage complex software applications themselves.

Albert Pang, an analyst at market research firm IDC, said the number of software mergers could double next year, up from 30 deals in 2004. He cited accounting and business software developer Sage in the United Kingdom and personal finance software maker Intuit in Mountain View as potential merger candidates.

"We are entering the thick of software consolidation right now," Pang said.

Mercury News Staff Writer John Boudreau contributed to this report.

-----

To see more of the San Jose Mercury News, or to subscribe to the newspaper, go to http://www.mercurynews.com.

(c) 2004, San Jose Mercury News, Calif. Distributed by Knight Ridder/Tribune Business News. For information on republishing this content, contact us at (800) 661-2511 (U.S.), (213) 237-4914 (worldwide), fax (213) 237-6515, or e-mail reprints@krtinfo.com.

ORCL, PSFT, MSFT, SAP, IBM, 6680, BEAS, SEBL, LWSN,

Source: San Jose Mercury News

More News in this Category