Oracle today agreed to acquire Santa Clara, Calif.-based Hyperion Solutions Corp. for $3.3 billion in a step that now makes Oracle No. 1 in the business intelligence software market, according to Charles Phillips, Oracle president.
The Redwood City, Calif.-based database giant announced the move early this morning, just hours after it closed its third quarter books. The deal represents a cash tender offer of $52 per share. The transaction is subject to customary closing conditions and is expected to close in April 2007.
The announcement comes after a string of acquisitions by Oracle, many intended to bolster its Project Fusion initiative. This latest, "strategically important acquisition" will make Oracle the category leader in the corporate performance management (CPM) market, and will support its burgeoning business intelligence (BI) business, according to Phillips.
"This extends our business intelligence strategy of a year ago, when we launched Oracle business intelligence. That's been one of our highest-growth product lines," Phillips said in a conference call this morning. "We now have the most comprehensive BI product line."
In fact, responding to a question from a financial analyst as to whether this accelerated Oracle's stated goal to be No. 1 in BI by 2010, Phillips said that moment had arrived.
"I think we probably are the leader in BI now with Hyperion," Phillips responded.
The acquisition is also likely to put other BI vendors at risk, according to R. "Ray" Wang, senior analyst with Cambridge, Mass-based Forrester Research Inc. The move may set off a domino effect on the market as other large vendors seek to compete.
"IBM may buy Cognos, HP might end up buying Business Objects or Business Objects may buy another competitor. There will be a lot of pressure on these vendors to react to this acquisition," Wang said.
Hyperion and its popular Essbase product has "almost no overlap" with existing Oracle products, Phillips said. But there is overlap between the PeopleSoft performance management products Oracle acquired in 2003 and Hyperion's products. The PeopleSoft products will become part of a new enterprise performance management division, Phillips said. Oracle has had a "small" performance management product that "wasn't that pervasive in the market," he said, and it considers Hyperion a complementary, best-of-breed vendor,
Instead, Oracle has focused on building out the underlying infrastructure required for BI, he said, and the Hyperion acquisition will give it critical analytical applications to layer on top of its data management and BI technologies. Specifically, the acquisition gives Oracle an enterprise planning system, a financial consolidation product, a powerful OLAP engine and a "dedicated" field sales organization. Oracle also believes the move will help it in its battle's with rival SAP. Many SAP customers use Hyperion, Phillips said, and Oracle is achieving "critical mass" within SAP accounts.
"Now Oracle's Hyperion software will be the lens through which SAP's most important customers view and analyze their underlying SAP ERP data," he said in an earlier statement.
For its part, Hyperion believes Oracle will help accelerate its performance management strategy by giving it access to Oracle customers, research and development resources, global sales channels and extensive partner network, according to Godfrey Sullivan, CEO.
"Oracle's expertise in BI tools, operational analytics and data management combined with Hyperion's expertise in financial planning, consolidation and multi-source OLAP provides a best-of-breed solution for customers," Sullivan said during the conference call. "We're confident that our customers will see their investments protected and extended by Oracle."
Hyperion has more than 12,000 customers worldwide, including 91 of the Fortune 100, according to executives. Oracle has 275,000 customers and the two vendors have many common customers, including Alcoa, BT, Cisco Systems, IBM, Wells Fargo and the Bank of America, Phillips said.
Hyperion and Oracle customers will most likely feel little impact from the deal, according to Wang. If anything, they may be able to look forward to better BI and CPM products.
"The only difference is that the Siebel analytics team was supposed to build the next generation of BI products. I think now it will be the Siebel team and the Hyperion team working with each other to figure out extensions to CPM, working to incorporate some of the Siebel analytic capabilities and some of the business activity monitoring capabilities," Wang said.
But a few major questions remain, he said. He wonders how well Siebel, Hyperion and PeopleSoft staff will work together. And, despite Phillips assertions during the press conference that nothing will change with Fusion, Wang wonders whether that will hold true.