Update: Oracle to buy Hyperion in $3.3B cash deal

The acquisition is at least the 28th for Oracle since early 2005

Oracle Corp. said today it has agreed to acquire business intelligence software vendor Hyperion Solutions Corp. for $3.3 billion in cash.

Oracle said it will combine Hyperion's software with its own business intelligence (BI) and analytics tools to offer customers a broad range of performance management capabilities, including planning, budgeting and operational analytics.

The deal, the latest big purchase by Oracle following its acquisitions of application vendors PeopleSoft Inc., Siebel Systems Inc. and others, will expand Oracle's portfolio of databases, applications and middleware with a set of BI products, which are used by companies to collect and analyze information about their businesses.

In a letter to customers, Hyperion CEO and President Godfrey R. Sullivan said the deal would be good for his company as well as Oracle.

The move continues Oracle's strategy of growing its revenue and customer base through major acquisitions. But it also presents Oracle with the challenge of integrating the products and employees of yet another large company. Oracle has announced at least 28 acquisitions since the start of 2005.

Oracle has agreed to pay $52 per share for Hyperion, or about $3.3 billion, a premium of 21% over Hyperion's closing share price yesterday. The companies hope to close the acquisition by April, subject to customary closing conditions.

Oracle had a handful of market-leading BI vendors to choose from, including Cognos Inc. and Business Objects SA. Hyperion was the best fit for Oracle both in terms of products and company culture, said David Mitchell, head of global software research at U.K. analyst firm Ovum Ltd.

Oracle has been trying to build out its own BI business, offering tools for integrating data among a number of applications and technologies. But its offerings were focused primarily toward customers of its own software, Mitchell said.

"Adding Hyperion to the family makes it a best-of-breed player, rather than just focusing on the traditional Oracle customer base," he said.

The acquisition could start a "domino effect" in which the other large BI vendors are also acquired, according to Mitchell.

Part of Oracle's motivation for the deal appears to be to poach customers from its chief applications rival SAP AG: Many SAP customers use Hyperion software, and the acquisition will bring them closer to Oracle, Charles Phillips, president of Oracle, said in a statement.

Hyperion says it has about 12,000 customers using its software and about 2,500 employees spread over 20 countries. It reported revenue of $765.2 million for the fiscal year that ended June 30, 2006.

Mitchell said he doubts the Oracle acquisition will make much difference to SAP, noting that companies make big investments in their ERP software and do not switch vendors lightly.

He predicted that Oracle will continue to support other databases with the Hyperion tools, rather than optimizing them for its own database. The vendor has continued to support other platforms with the business applications it has bought, he noted.

"Oracle has started to get heterogeneity these days, unlike the Oracle of old," he said.

Still, Oracle executives in the past have discussed improving the BI capabilities inside the Oracle database, and buying Hyperion could potentially give the company a selling point over database rival IBM. Hyperion is among IBM's BI partners. Rumors continue to circulate that should IBM look to buy a BI vendor, the natural choice would be Cognos.

IBM is also close partners with Business Objects and is developing new products that integrate its data warehousing software with Business Objects' products, sources familiar with those plans said this week. IBM also has a relationship with open-source BI vendor Pentaho Corp.

Copyright © 2007 IDG Communications, Inc.

  
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