Oracle: Consolidation Catalyst?

Larry Ellison is spending $3.3 billion on Hyperion to turn up the heat on SAP; more deals in the business-intelligence software sector are likely

After a four-month respite, Oracle (ORCL) Chief Executive Larry Ellison returned to his acquisitive ways, snapping up software maker Hyperion Solutions (HYSL) on Mar. 1 for $3.3 billion in cash. The deal is designed to put the hurt on rival SAP (SAP), and it's likely to trigger more buyouts in the fast-growing market for data-analysis software. But Oracle's latest purchase could also open new fronts in Ellison's wars with IBM (IBM) and Microsoft (MSFT) and incite competition with hardware companies that have traditionally left Oracle alone.

Oracle has spent some $20 billion over the past three years to acquire more than 25 software companies. The company needs to buy growth as the market matures for database software and competition with SAP heats up in applications, the software used to help businesses manage everything from payroll to inventory. Hyperion—a maker of software that helps companies distill reams of business data into reports they can use to plan budgets, close their books, and spot profitable customers—will give Oracle's results a shot in the arm. The target booked $765 million in sales last year, and Oracle expects the deal to add a penny a share to earnings in the fiscal year that ends in May, 2008, and 4¢ a share in 2009. It could also help Oracle snare accounts from its German rival; more than half of Hyperion's customers also use SAP.

"Everybody's looking for information and insights about their business," says Bruce Richardson, chief research officer at AMR Research. "This is an area where SAP is starting to admit, 'We need to do a lot more work.'"

Appealing Targets

Now, the question is which makers of so-called business-intelligence software—a category relatively untouched by the wave of consolidation sweeping the industry—will be acquired next. The answer could shift the tectonics in the IT market as both hardware and software purveyors try to sell their customers products that can help them reap more information from the technology they already own. "The dam has burst in this sector," says Murray Beach, president of Boston Corporate Finance, an investment bank that advises technology companies. "Business Objects can't be far behind."

Bankers and analysts expect business-intelligence software makers Business Objects (BOBJ) and Cognos (COGN) to be acquired this year. Potential buyers include SAP, IBM, Hewlett-Packard (HPQ), and EMC Corp. (EMC). Customers of IBM, HP, and EMC are pushing their executives in finance, sales, and operations to provide better insight into corporate performance, and none of those vendors has the best business-intelligence technology on the market, says Beach (see, 2/28/07, "HP's New Soft Spot for Software").

Also on the block could be Teradata, a maker of data warehouse systems that is being spun off by parent NCR Corp. (NCR). And OutlookSoft, a Stamford (Conn.) maker of software for planning budgets and forecasting financial results that's backed by funding from General Electric ( 2 Next Page

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