Oracle and BEA: Getting Uglier By The Minute

Pull up a chair, this is going to be fun to watch.

Oracle (ORCL, in announcing its an unsolicited $17-a-share-bid for BEA (BEAS), early Friday, made every attempt to sound friendly. But then BEA went and rejected the bid, asserting that the company is worth “substantially more,” and already you could see this was going to deteriorate into some entertaining ugliness.

And as it happens, the ugly quotient already has been ratcheted up a notch.

In a release Friday afternoon, Oracle fired back a response to BEA’s letter, which suggests in not so many words that BEA is not behaving itself very well, and in fact canceled a planned meeting between the two companies.

Here’s the text of the latest letter:

October 12, 2007

Board of Directors
BEA Systems, Inc.
2315 North First Street
San Jose, CA 95131

Dear Members of the Board of Directors:

As discussed with your management team, Oracle remains available to discuss and complete a transaction quickly and efficiently.

We believe that it is important to clarify the sequence of activities that have transpired over the past few days. Upon receipt of Bill Klein’s letter dated October 11, I contacted him to address any process concerns. Bill and I agreed on an accelerated process that would be, by anyone’s standard, “short in duration” and not “open-ended” and that would permit BEA to not “divulge competitively sensitive information.”

BEA’s management agreed to meet this morning at 10:00am Pacific time to commence a process intended to result in the execution of definitive agreements before the open of business on Monday, October 15. Unfortunately, BEA cancelled the meeting late last night and declined our invitations to reschedule. In my subsequent discussions with Bill earlier today, I asked whether there was any process that BEA would prefer to follow to move towards a friendly transaction and was told that BEA had no such process in mind.

We are available to proceed immediately with a process that would lead to a friendly transaction. In the meantime, we remain committed to our proposed price of $17.00 per share, provided that the BEA Board and management team do not institute any measures which reduce the value of the company or shift value from BEA’s shareholders to the management team. Our proposed price is a substantial premium to an already-inflated stock price that reflected speculation of the potential sale of BEA and represents a more than 40% premium to BEA’s stock price before the appearance of activist shareholders in mid-August of this year.

Sincerely,

ORACLE CORPORATION
Charles Phillips
President

I love a good Oracle-style takeover battle, don’t you?

Comments

[Kill theInnovation]

It may make sense for investors, but Oracle buy will definitely kill the innovation in BEA. Oracle has been struggling to get to the cutting edge and standard compliance for there middleware products, but have not been successful.Same will happen to the BEA products if they buy it. Over the period of years the products will be out of standard compliances and out of innovation.Broken Oracle support will further deteriorate it.

Oracle intention is to kill the competition in the middleware market from BEA. If the customer who have invested in the BEA technology have to reamain happy stay in the leading edge using the BEA products in the long run BEA should remain as BEA...

-Anil

[peoplsoft]

Amen, look at the Peoplesoft acquisition. Oracle wanted their cash and their maintenance stream. They wanted to get rid of a competitor in the application space. they've accomplished all three.

but this is business, not about value to the customer.

The line in their letter 'shift value from BEA’s shareholders to the management team' that is ALL THIS IS EVER ABOUT, except now it is shift BEA's value to ORACLE's MANAGEMENT staff. Oh sure, oracle's stock will go up a little bit for big short term stockholders who will then sell. But it's really about their ultimate hurt, feeling 2nd fiddle to microsoft always.

[MuggleLiaison]

I believe an Oracle acquisition of BEA has made sense for quite some time. Oracle has the fastest-growing line of middleware products and has systematically strengthened them over the past few years through both internal innovation and acquisition of technology to broaden their capabilities. Competition from BEA has become much less threatening than it was 5 years ago. This acquisition appears to be more about increasing market share than it is about elimiinating competition (BEA has been doing a good job of eliminating itself without help from Oracle). Also, Oracle's concern about 'shifting value to BEA's management team' is right on target...they don't want this to be an opportunity for BEA executives to line their pockets at shareholder expense.