Oracle has agreed to acquire business applications vendor Siebel Systems in a deal valued at approximately $8.32 billion.
The deal marks Oracle's latest step in its bid to remake itself as a global business applications powerhouse, following the closure of its $14.65 billion acquisition of PeopleSoft at the start of the year.
Oracle plans to support the existing suite of Siebel products for "some time to come", says Larry Ellison, Oracle's chief executive officer. Oracle had been planning to include a CRM (customer relationship management) suite as part of Fusion, the company's vision for a next-generation suite of products. "Because Siebel is the leader and understands the category, it makes building the Fusion CRM function easier and less risky," he says.
Siebel's OnDemand offering, a hosted CRM solution, was a key reason that Oracle was interested in making the acquisition. "We think that's a very important asset and we want to preserve and invest in it," says Ellison. He expects that all features and functions in Siebel software will migrate to the OnDemand offerings.
In contrast to its hostile PeopleSoft takeover, Siebel's management is behind the deal. Chairman Thomas Siebel, along with the rest of the Siebel board, has agreed to vote in favour of the deal, Oracle says. Siebel's stockholders will hold a special meeting to decide whether to approve the deal. Oracle does not need the approval of its own stockholders to go ahead with the takeover, it says.
"It's just clear as day that this is in the best interest of our partners, customers, shareholders and employees," says Tom Siebel.
Ellison says that Siebel has agreed to continue to work with Oracle for some number of years, but doesn’t elaborate on how long or in what capacity.
Oracle executives expect that closing this deal and integrating Siebel into Oracle will be far simpler than the PeopleSoft acquisition. "This is drastically easier than PeopleSoft," Ellison says. That's because Siebel supports the deal and because Oracle now has the experience to digest a major acquisition. Also, PeopleSoft had just bought JD Edwards prior to Oracle buying PeopleSoft, adding complexity to that deal, Ellison says. "Siebel is a much less risky transaction and we're more experienced in doing integration," he says.
Observers agree. "The Oracle-Siebel integration will be much smoother than the Oracle-PeopleSoft integration. They're much more complementary," says Rebecca Wettemann, vice president research with analyst Nucleus Research.
Oracle executives say the acquisition will create duplicate functions, especially because both companies have CRM research and development teams. Oracle expects to choose the best personnel from the teams but won’t comment on how many workers might be laid off as a result of the acquisition.
In January of this year, Oracle announced it would lay off 5,000 people as a result of the PeopleSoft acquisition.
Oracle and Siebel expect the deal to close early next year, subject to regulatory approvals. Oracle was forced to battle the US Department of Justice over its PeopleSoft merger, due to complaints that the deal would be anticompetitive.
Buying Siebel would make Oracle surpass SAP as the world's largest vendor of customer relationship management (CRM) software, Oracle says, bringing it 4,000 customers and 3.4 million individual CRM software seats.
The deal is likely to put pressure on SAP. "SAP in the short-term will be challenged to show why and how it can deliver more value than Oracle and Siebel," analyst Wettemann says.
Oracle hopes the acquisition will strengthen its number one position in the applications business in North America and will move it closer to its goal of being number one globally, says Ellison.
The companies' joint customers have recommended the tie-up, Oracle says. Many Siebel implementations run on Oracle's database software. "Our customers haven't been shy about their opinions," says Charles Phillips, Oracle's president. He says customers want to form a single strategic relationship for all of their major enterprise applications and they want consistency with pricing terms and upgrade policies. Customers have also said they'd like to be able to access a single consulting organisation for consistent information about implementing a full suite of applications. The Siebel acquisition should help Oracle respond to those demands.