Analysts Give BEA Scant Hope For Alternative To Oracle Bid

Includes: BEAS, ORCL
by: Eric Savitz

Could someone announce a competitive bid to Oracle’s (NYSE:ORCL) $17 a share offer for BEA (BEAS)? Sure. But many analysts who have looked at the possibilities have come up largely empty on just who that would be.

The most obvious alternatives include SAP (NYSE:SAP), IBM (NYSE:IBM) and Hewlett-Packard (NYSE:HPQ), but there are obstacles in each case. Cisco (NASDAQ:CSCO), EMC (EMC), CA (NASDAQ:CA) and Sun Microsystems (JAVA) are all viewed as potential, but unlikely, white knights.

Here’s a rundown on some of the current thinking on the proposed deal and potential alternatives:

  • John DiFucci of Bear Stearns, downgraded BEA Monday to Peer Perform from Outperform on a valuation basis. “While there could be other potential bidders for BEAS, we do not believe it is likely that they will aggressively step forward in this case,” he writes. Neff notes that SAP has its hands full with its pending acquisition of Business Objects (BOBJ). He notes that IBM and BEAS are the two leading application server companies, raising potential regulatory issues. HP, he notes, partners not only with BEA but also rivals Oracle and JBoss (owned by Red Hat (NYSE:RHT)).
  • Steven Ashley, Robert W. Baird, writes that while IBM, Sun and HP have been mentioned as potential suitors, “we do not expect any of them to enter into the bidding.” He thinks Oracle and BEA will reach a deal by year end.
  • Jefferies & Co.’s Katherine Egbert says $17 is a “good not great offer,” and says the bid could go higher, though not due to competitive reasons. She also notes that Tibco (NASDAQ:TIBX) becomes “the last large standalone middleware player.”
  • Citigroup’s John Reilly Walsh downgraded the stock to Hold from Buy, while increasing his target to $20 from $15. He says that a bidding war “is unlikely.” He notes that IBM would have potential anti-trust issues; SAP is busy with BOBJ; he says HP “has publicly stated they are not interested; EMC and JAVA, he calls “possible, but not probable.”
  • RBC’s Thomas Curlin is a contrarian here, and writes that “HP may enter the strategic discussion,” noting the lacking of other merger candidates in the sector. Curlin says that “a strategic acquirer may be willing to pay $25 a share.” Again, he is out of sync with his peers.

BEA today is down 49 cents at $18.33, still sharply above Oracle's bid price.