As I predicted two weeks ago, Oracle’s public rebuff of BEA, and it’s subsequent and even more public dismissal of BEA as a purchase has turned out to be nothing more than predictable gamesmanship. BEA has agreed to be purchased by Oracle for a mere $19.38 – up a full $2.38 per share from the original $17 offer this Fall.

As Wendy Tanaka at Forbes points out, BEA’s patience paid off (BEA Waited And Reaped):

“Patience proved profitable: In total, BEA Systems reaped $18 million a day for each of the 98 days between Oracle's last offer and this one. That payoff amounted to more than BEA racked up in sales during the previous 12 months.

The final price from the Redwood City, Calif.-based Oracle was $19.38 per share, or $8.5 billion in total. This compares with Oracle's first offer of $17, or about $6.7 billion.  

BEA had hoped for more. After snubbing Oracle last autumn, San Jose, Calif.-based BEA said it wouldn't sell for less than $21 per share. Neither BEA nor Oracle would comment on the acquisition price, but analysts said Oracle didn't necessarily overpay.

JMP Securities analyst Patrick Walravens calculates that Oracle will end up paying more for BEA on a total revenue basis than it paid for Hyperion, Siebel Systems or PeopleSoft. But on a maintenance-revenue basis, the price tag is in line with Oracle's other acquisitions. Walravens says more than 50% of BEA's revenues come from maintaining existing accounts and Oracle will inherit a steady revenue stream of $870 million annually from that.” 

One analyst quoted by Tanaka, Technology Business Research analyst Stuart Williams, says Oracle may likely be looking at acquiring Tibco and Red Hat.

Regardless, the enterprise portal market is about to change; beginning with the elimination of one or two portal products. BEA has two portal products – WebLogic and AquaLogic Portals – and Oracle has two portal products – WebCenter and Oracle Portal products. Oracle is not not going to maintain four portal products. In fact, if I was Oracle I wouldn’t think twice about dumping Oracle Portal and BEA AquaLogic Portal.

Worse yet, some analysts are predicting price hikes for customers and slackening customer service (BEA, Oracle users fear price hikes, dumping of products):

“Burc Oral, a senior architect at Cambridge, Mass.-based government contractor CellExchange Inc., said that while the acquisition will give users the option of buying a database and an application server from a single vendor, he also expects a period of "confusion" for BEA users because of technology overlap. 

Oral, who also heads the New England BEA Users Group, said that he expects that the deal will likely mean the end of some products -- "a little from Oracle and a lot from BEA."

He said that Oracle would be well served to retain BEA's WebLogic product, which has a hearty following among users, who have been provided with good support from BEA over the years. "[BEA] had their [WebLogic] product out there many years before Oracle was out there," Oral said. "[It] is very easy to use, and BEA has always been very friendly to the user community with downloads and documentation. Oracle doesn't have this wide acceptance from the user community in terms of applications. With BEA, life is a lot easier." 

But, he noted that since Oracle made its first bid for BEA in October, the middleware firm has been less responsive than usual to the user group. In addition, Oral said that users from previous Oracle acquisitions including Siebel Systems Inc. and Hyperion Solutions Corp. appear to be "getting better value" from a larger organization that they did before the acquisition.

Jim Burgard, assistant vice chancellor of university computing and communication at the University of New Orleans, said that he doesn't expect the deal to significantly affect his organization, which uses WebLogic with Oracle's PeopleSoft applications. However, he added that he "does have some concerns about future licensing and maintenance costs now that all the components are owned by one vendor." 

Mike Gilpin, an analyst at Forrester Research Inc., said that Burgard's fear is not unfounded, noting that support costs for users of BEA's WebLogic Server, AquaLogic Service Bus, AquaLogic BPM, WebLogic Event Server and AquaLogic SOA Management products could grow after the deal closes later this year.

Gilpin did note that Oracle has promised "lifetime support" for BEA products that overlap Oracle's offerings. That means that BEA users won't have to dump their BEA products but may over time pay more for support, he said. If they do move to Oracle's technology, they'll have to pay for migration, Gilpin added.

"Oracle has assured us that they will be very mindful of protecting the interests of existing BEA customers, just as they have been for customers of PeopleSoft and Siebel -- and I find their assurances credible," Gilpin said. "It's not in Oracle's interest to aggravate these customers, In many cases, they are already Oracle customers, anyway."

Todd Langille, project manager of administrative computing at DartmouthCollege in Hanover, N.H., said that he has concerns over whether Oracle has a "clear coherent strategy" for its growing software portfolio, which includes many similar products.”

If you are a BEA or Oracle customer, my sympathies during this time of transition.

You will not be abandoned by Oracle, but there will be some severe growing pains, and you may pay the price. More changes in the portal market are sure to follow this year…

ADDITIONAL READING:
Oracle-BEA: A fight against IBM, Sun, and open source, and a nasty ...

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