Oracle to acquire Siebel

12-09-2005

by Deirdre McArdle

Continuing on its acquisition trail, Oracle has announced it is to buy rival Siebel Systems in a cash and stock deal valued at USD5.85 billion.

The business software giant claims that this latest acquisition positions it firmly as the top CRM (customer relationship management) applications company in the world. Oracle will pay USD10.66 per Siebel share, 16.8 percent more than Siebel's closing share price on Friday.

"Siebel's 4,000 applications customers and 3,400,000 CRM users strengthen our number one position in applications in North America and move us closer to the number one position in applications globally," said Oracle CEO Larry Ellison.

Troubled CRM provider Siebel has long been a potential takeover target; the firm has reported less than inspiring results for the past number of quarters. The company had also come under pressure from competitors like SAP and Oracle, who have been eyeing Siebel's CRM niche. Moreover, Siebel was increasingly facing competition from Salesforce.com, which provides CRM software as a rental service, thereby removing the need for capital investment in CRM software.

Both Oracle and Siebel indicate that the merger has been driven by their customers. "Our joint customers have consistently recommended this transaction to both companies for over a year," said Oracle President Charles Phillips.

As well as helping Oracle to improve its position in the CRM market, the Siebel acquisition will contribute to Oracle's stated goal of 20 percent annual earnings growth in the long-term, according to Oracle President and CFO Greg Maffei.

"Given the size of our existing R&D investment, scale of our global support infrastructure, and similarity of our back office requirements, we will recognise substantial efficiencies from combining our two businesses," Maffei added.

The CRM segment is widely seen as one of the fastest growing segments in the enterprise applications business; IDC predicts that revenue in the market will grow to USD10 billion by 2009, up from USD8 billion in 2004.

In the past year Oracle has made a number of acquisitions, most notable of course being the long drawn out fight to purchase PeopleSoft last year. In March the business software giant purchased retail software firm Retek after its rival SAP pulled out of the race. Both of these acquisitions along with the purchase of Siebel indicate that Oracle is still intent on stealing market share away from its German rival.