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Ellison says BEA purchase will beef up Java software stack

Ellison says BEA purchase will beef up Java software stack

Oracle CEO commits to supporting and upgrading BEA middleware products

Oracle touted its pending acquisition of BEA Systems as a way to gain a middleware stack that will provide better value than those from rival Microsoft and popular open-source alternatives.

So said Oracle CEO Larry Ellison Wednesday in a conference call providing details about his company's agreement to acquire BEA for US$19.375 per share, or approximately US$8.5 billion. Ellison projected that the deal, which was unanimously approved by BEA's board of directors after several months of negotiations, will close in October.

The deal comes just three months after the middleware vendor turned down an earlier offer of US$6.7 billion.

In the call, both Ellison and BEA CEO and co-founder Alfred Chuang sought to reassure BEA customers that Oracle will continue to support and invest in BEA's middleware products. However, the executives did not take questions from investors or the media during the call.

"This agreement reflects the exceptionally strategic fit between our two companies," Ellison said. "Although we both have numerous middleware products ... [BEA's] product line and vertical solutions are overwhelmingly complementary to our Fusion Middleware. We believe this transaction will accelerate the adoption of standards-based Java middleware as an alternative to Microsoft's closed .Net architecture."

Specifically, Ellison added that BEA would provide messaging products and vertical software in areas like telecommunications to help round out Oracle's own middleware stack.

"This acquisition also provides scale to our middleware business," Ellison noted. "Scale in the middleware business ... is critical to increase innovation."

Ellison added that most BEA customers already use Oracle's database or business applications and an increasing number use middleware from both companies. "Oracle plans to aggressively support BEA's products in a manner similar to other recent Oracle acquisitions."

While Ellison noted that as its Fusion Middleware remains the "center" of Oracle's middleware focus, he added that "WebLogic and other BEA technologies will be an increasingly important part of our offering going forward."

Yefim Natis, an analyst at Gartner, noted that BEA has 15,000 companies using its technology.

"It would be suicide for Oracle to do something to scare off [BEA's] customers," he said. "It is certain that Oracle will offer support for all the existing customers." Longer term, he added, Oracle is likely to adopt some of BEA's products in place of its own.

"For example, [BEA's] WebLogic server ... is a much better version of a Java EE engine than Oracle's, and it's possibly going to be adopted," he said. "It is a mixed prospect with some of the BEA products to be adopted and some of the BEA products over time will become outdated, but all will be supported."

James Kobielus, an analyst at Forrester Research, said he expects there to be several areas where the two companies will have complementary product offerings. For example, BEA has no data warehousing offerings, a strong area for Oracle. At the same time, he said, BEA's strong middleware for on-demand and real-time application integration is complementary to Oracle's batch-oriented data warehousing.

"My sense is that Oracle will keep BEA ... at arm's length for quite some time to allow BEA to move down those development paths in those areas where they have developed traction in," he added.

Kobielus also said that Oracle has developed a good track record in preserving technology from other acquisitions, including PeopleSoft. For example, he noted that Oracle is taking "a considerable amount of time to think through the conversion and synergies" with Hyperion Solutions, which Oracle acquired in April.

Oracle hasn't discontinued or announced any plans to discontinue any Hyperion tools and allowed Hyperion to continue along the product development road map it laid out before the acquisition, he added.


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