Oracle adds Hyperion to its Kitty

Business software giant Oracle will soon add California-based Hyperion Solutions to its kitty. The move will cost Oracle $3.3 billion and Hyperion investors will get $52 per share. Thanks to Hyperion’s business intelligence software, Oracle will now enter the business performance management market in a big way.

``This deal is what you do when you can't grow organically rapidly enough,'' said Richard Williams, director of research at ICAP, one of the largest inter-dealer stock brokers, in Jersey City, New Jersey.

Oracle, the world’s third largest software company, develops tools for database development, database management systems, enterprise resource planning (ERP), supply chain management (SCM), and customer relationship management (CRM) software.

Oracle Corp. has seen Lawrence Ellison as its CEO since its inception in 1977. Through this acquisition, Ellison hopes to put up a tough fight against its major rival SAP AG by selling business-management software to its customers.

The software company is the second-largest maker of business-management software, ranking behind SAP. Microsoft Corp. and International Business Machines Corp. rank ahead of Oracle in global software sales.

“The acquisition of Hyperion makes Oracle the category leader in the high growth enterprise performance management market," said CEO Larry in a press release, on 1st March, in Redwood Shores, California.
Founded in 1972, SAP is the largest software company in Europe. It is also the largest ERP solution provider.

Oracle is on a buying spree since October 2004 and has already spent around $20 billion in the process. The list of companies under its wing includes PeopleSoft Inc. and Siebel Systems Inc. Oracle has a host of offers to provide such as PeopleSoft HR, Siebel CRM, G-log, Demantra, i-flex, Oracle retail, and Oracle Fusion Middleware.

According to Hyperion CEO, Godfrey Sullivan, "Requirements for Performance Management and Business Intelligence solutions are increasingly converging. Given the critical need for managers across the enterprise to align operational decisions with strategy, now is the right time for Hyperion to combine with a strategic partner like Oracle to deliver the first, integrated end-to-end Enterprise Performance Management System."

Business-intelligence software will win more first-time buyers than any other application this year, according to Forrester Research. With around 12,000 customers in its kitty, Hyperion Solutions Corporation located at Santa Clara, California, targets at the business analysis & Business performance management market. In 2007, Gartner, an IT advisory firm, placed Hyperion as the leaders in corporate performance management & business intelligence platforms. The company recently received orders from BT Group Plc, New York University, and RadioShack Corp. consequently, revenue is expected to increase to up to $895 million.

$52 per share, the purchase price, is 21% more than Hyperion’s closing price of $42.84 on Wednesday. After the announcement, Hyperion’s share value increased upto 20% touching $51.55 on Thursday, as indicated by the Nasdaq stock market. Shares of Oracle declined by 2.4% to $16.83 which is 40 cents lower then its previous value. The purchase will increase Oracle’s earning per share. 2008 will witness an increase of 1 cent per share, while 2009 may witness an increase of 4 cents per share, hopes Oracle.

In a conference meeting on Thursday, Oracle’s CFO Safra Catz has stated that On a GAAP basis, the purchase will be ``modestly dilutive'' in 2008, before starting to contribute to earnings. Catz also indicated that Oracle will benefit from cost saving, as both the companies target a similar market.

The acquisition has had an effect on various other companies’ shares as well. Shares of SAP fell by 2.9% before rising up again. A report in German magazine Wirtschaftswoche stated that a private-equity firm is on the lookout to buy the company. Hyperion’s competitors Business Objects, based in San Jose, California, and Levallois-Perret, France, and Ottawa-based Cognos, the No. 2 maker of corporate- analysis software behind Business Objects, both saw a decrease in share prices.

While shares of Business Objects plunged by 6.8% in Paris, Cognos witnessed a decrease of 2.9% in Nasdaq trading. It is being analysed that the purchase reduced a chance of these companies being bought which resulted in a drop in their share prices.

This acquisition may act as a catalyst for a string of acquisitions elsewhere. Societe Generale analyst Stefan Slowinski said in a note from London today that the purchase of Hyperion by Oracle leaves no logical buyer for Business Objects, except SAP. According to AMR Research analyst Bruce Richardson, Cognos would invite a bid from IBM Corp.