Oct. 17 (Bloomberg) -- Investors may want to think again before following activist shareholder Carl Icahn into BEA Systems Inc., assuming that a bidding contest will drive up Oracle Corp.'s $6.7 billion offer.

The 71-year-old billionaire and former corporate raider is a magnet for investors looking to profit from his initiative, even though his overall record is mixed. He hit pay dirt on MedImmune Inc., Lear Corp. and BEA. Biogen Idec Inc. shares gained 14 percent this week after Icahn said he may make a bid.

Icahn produced temporary spikes that petered out after he pushed for the sale of Blockbuster Inc. and a seat on Motorola Inc.'s board. His 15 percent stake in homebuilder WCI Communities Inc. is worth $5.93 a share, 73 percent less than the $22 offer he made in March that was rejected.

``A lot of investors just follow him in, sight unseen,'' said Chris Young, head of merger research at RiskMetrics Group in Rockville, Maryland, owner of proxy adviser ISS. ``He agitates for change that will increase the share price in the short run. Over the long term, the return for investors is unclear.''

BEA, based in San Jose, California, rejected Oracle's $17- a-share offer as too low and the stock rose 11 percent above it on Oct. 12 in anticipation of a competing bid.

That probably won't occur because Oracle's offer is high and potential buyers are few, said Robert L. Chapman, managing member of Chapman Capital LLC in El Segundo, California. BEA has lost share in the market for programs that link computer applications and systems, called middleware.

``The timing was good for Oracle, which could make a knockout bid from day one,'' Chapman said. He said he planned to sell short BEA stock.

Potential Bids

Oracle is ``committed'' to $17 and the offer reflects ``a substantial premium'' to a stock price that was already inflated by speculation of a possible sale, Charles Phillips, president of the Redwood City, California-based company, said in a letter released Oct. 12.

``Was Icahn talking about it enough to get Oracle to make a bid, or would it have happened anyway? I don't know,'' said David Rudow, an analyst for Thrivent Financial for Lutherans in Minneapolis, which held 1.1 million BEA shares in June. ``Any time you have a major shareholder push management to unlock value, it's the right thing for investors.''

BEA fell 20 cents to $18.35 at 4 p.m. New York time in Nasdaq Stock Market trading. Analysts at four brokerage firms said they don't expect another company to bid. Jefferies & Co.'s Katherine Egbert and Pacific Crest Securities' Brendan Barnicle said Oracle may increase its offer.

No SAP Bid

International Business Machines Corp., Hewlett-Packard Co. and SAP AG were mentioned as possible acquirers by analysts including Ray Wang at Forrester Research Inc. in Foster City, California.

SAP, based in Walldorf, Germany, won't try to buy BEA, said spokesman Frank Hartmann. Hewlett-Packard spokeswoman Emma McCulloch in Palo Alto, California, and IBM's James Sciales declined to comment. Oracle's Bob Wynne didn't return a call seeking comment.

BEA has risen 54 percent since Icahn first disclosed a stake on Aug. 14, calling for a sale one month later. He paid $663.8 million for a 13.2 percent holding now worth $950.9 million, a potential profit of $287.1 million.

Icahn's holding in Biogen Inc. has increased by 48 percent, or $71 million, since June 30. The Cambridge, Massachusetts- based drugmaker said on Oct. 12 it is considering a sale.

Icahn's Impact

MedImmune Inc., maker of Flumist flu vaccine, almost doubled in price this year after Icahn forced its $15 billion sale to AstraZeneca Plc in June. Automotive-seat maker Lear, whose shareholders rejected an Icahn buyout in July, has climbed 18 percent in the past year.

Icahn isn't always right. Motorola dropped as much as 19 percent in August from a high of $19.95 set Feb. 1, after Icahn demanded a board seat. It closed at $19.30 today. Icahn also called for the sale of Blockbuster Inc., whose shares are down 41 percent since he first reported a stake in February 2005.

BEA fits Icahn's typical profile of a struggling company he considers undervalued. He has said in filings and in interviews it is too small to compete with larger competitors.

Six years ago, BEA dominated the market for programs that deliver applications over the Web, according to researcher IDC in Framingham, Massachusetts. Last year, BEA was second behind IBM, based in Armonk, New York.

Losing Share

IBM led the broader market for middleware software, with 35.5 percent share in 2006, according to IDC. BEA was second with 10.6 percent while Oracle had 9.1 percent. Oracle expanded sales by more than 40 percent, the fastest among the top makers.

In Oracle's most recent quarterly conference call, Phillips said middleware sales more than doubled while BEA's fell. ``They have become less relevant by the day,'' he said.

While BEA's new license sales have dropped, Oracle may be attracted to its financial services and telecommunications customers, as well as a software-maintenance business that increased revenue by 21 percent in the past four quarters to $714.9 million.

That stream of revenue is worth about $12 of BEA's share price, said John DiFucci, a New York-based analyst with Bear Stearns & Co. Larger companies may have better luck selling BEA's ``innovative'' products, Icahn said the Sept. 14 filing.

In a letter to BEA's board Oct. 12, Icahn said he agreed the company is worth more than $17, adding that remaining independent would be ``almost dangerous'' to shareholder value.

``I strongly suggest that you use the momentum afforded by the Oracle proposal to seek to sell the company'' in an auction or ``by accepting a preemptive bid at a compelling valuation.''

To contact the reporter on this story: Rochelle Garner in San Francisco at rgarner4@bloomberg.net

Last Updated: October 17, 2007 16:23 EDT