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Oracle Corp.’s (NYSE:ORCL) offer last Friday to buy software developer BEA Systems Inc. (BEAS) for US$6.66-billion is yet another sign that the business application market remains highly competitive, as larger players continue to snap up high growth software companies.

Along with Oracle’s tentative deal and SAP’s (NYSE:SAP) purchase of Business Objects SA (BOBJ) last week, RBC Capital Markets analyst Mike Abramsky said the chance of other mergers and acquisitions for other software companies happening now is high.

“You’re seeing acceleration of some dynamics in the market that are clearly going to increase the probability they will be going to be acquired,” Mr. Abramsky said in a phone interview. “Those trends include the slowing in growth of some of the bigger players that have been dominating the market like SAP, Oracle and Microsoft (NASDAQ:MSFT), and the need to fuel that growth through acquisitions.”

“Call it the urge to merge,” he added. “Ever since the tech bubble, there’s always been to some extent overcapacity in the application software marketplace.”

Oracle offered US$17 per share in cash for BEA, which closed Friday at US$18.82, up more than 38%.

The unsolicited offer has not been approved by BEA’s board and the company surprisingly canceled a meeting with Oracle to discuss the bid last Friday. Reports from Reuters said BEA’s board thought the offer Oracle made was too low.

Another company such as International Business Machines Inc. (NYSE:IBM) or Microsoft Corp. can still swoop in with a better offer for BEA, but Oracle said in a press release that it would commence the process to acquire the company in a friendly takeover. In IBM’s case, they’ll be monitoring for new developments closely, as BEA’s software directly competes with its propriety Websense suite.

Of Canadian software companies prime for acquisition, Mr. Abramsky says Open Text Corp. (NASDAQ:OTEX) and Cognos Inc. (COGN), which has been the subject of takeover rumors for some time, are ideal candidates.

“Both of these companies are in fast growing markets, Cognos with business intelligence and Open Text in content management, both have global customer bases and both have strong technology that is of relevance to large enterprises globally,” said Mr. Abramsky. “So, from that perspective, they make a strong compliment to some of these larger players that are talking to those same customers.”

Stuart Williams, a senior software analyst with independent research firm Technology Business Research Inc. said larger business application companies like Oracle, HP (NYSE:HPQ), and IBM look to small-to-medium sized companies to fit their innovative software applications within their own software stacks in order to offer customers as much options in one shot.

For now, Mr. Williams feels that Cognos is safe from consolidation for about a year.

“People want to see how the market settles down,” said Mr. Williams. “But there are some firms like HP that are acquiring pieces of its software business and who are looking to expand its analytical offerings. It could be a good match for HP and Cognos. IBM already has business analytics, so they tend to partner with other providers and it may not make sense for them to acquire Cognos.”