Oracle buys BEA Systems for $7.85 billion

At an asking price of nearly $8 billion, BEA Systems was finally talked into an Oracle buyout. But with Oracle's long history of software buyouts, will it cut BEA -- and its many business customers -- enough slack?

Oracle raised its offer, and at the crack of dawn this morning in California, we learned that this time, BEA Systems simply couldn't refuse it. With a deal in the works now for the database giant to acquire the middleware vendor for a whopping $7.85 billion, pending regulatory approval, the two combined "powerful masterbrands" may now be in a better position to fend off middleware rivals IBM and Microsoft.

Since last October, Oracle has been trying to negotiate the upper hand on BEA. Yet in December, BEA turned down a $6.6 billion buyout bid.

"This combination (of Oracle with BEA) geta us where we need to be, a leadership position at every level of the software stack across more industry verticals in more geographic locations around the world," contended Oracle CEO Larry Ellison, during a conference call this morning.

Oracle will benefit from the deal by gaining BEA's middleware, along with a large customer base that will boost its stature against rivals in both the database and enterprise resource planning (ERP) spaces, industry observers widely agree.

But the acquisition by Oracle will also be good for BEA, according to some analysts.

"A lot of people thought that (Oracle's bid for BEA) was a dead issue. But as it turned out, the offer was still on the table, and BEA was just waiting for the right price," noted James Kobelius, senior analyst for data warehousing at Forrester Research.

Under Oracle's wing, middleware specialist BEA will no longer stand alone in competition against "powerful masterbrands such as IBM, SAP and Microsoft," Kobelius told BetaNews.

Meanwhile, another powerhouse -- Sun Microsystems -- made moves to enter the database arena with today's announcement of its intent to buy MySQL AB for $1 billion.

On a technology level, Oracle and BEA both use code based on Java, as opposed to Microsoft's .NET approach. In that sense they're well matched.

But the impact on BEA's existing customers is not yet as clear. For instance, will Oracle maintain BEA's middleware line-up as a separate and autonomous product group, so that customers can keep buying the same software, but simply through a different vendor?

Or to the contrary, will Oracle soon set out to integrate BEA's middleware into its own line-up of database and enterprise application software?

On that score, Oracle holds a good track record with its long string of previously acquired software companies, according to Kobelius. After buying up companies such as Siebel and Hyperion, he told us, Oracle has continued to offer and develop its software under separate branding.

Meanwhile, other recent events have shown that customers of acquired companies -- particularly those of PeopleSoft, another firm that originally resisted Oracle's advances only to relent later -- still hold strongly anti-Oracle sentiments.

Many of them have contracted for software support with outside companies such as TomorrowNow. Since having been acquired by SAP, the customer support firm found itself hauled into court by Oracle, on allegations that TomorrowNow officials hacked Oracle's Web site.

Other entities previously bought up by Oracle have been application software -- as opposed to middleware -- vendors.

However, it's only in Oracle's best interests to treat BEA and its customers quite well, according to some experts.

"Net/net, the acquisition is a win for both Oracle and BEA. But Oracle does need to cut BEA a lot of slack," Kobelius suggested.