Oracle has agreed to buy Siebel Systems, probably the best-known vendor of customer relationship management (CRM) software, for some $5.8 billion. That’s a large sum, although not as much as the $10.3 billion Oracle paid last year for PeopleSoft.
Oracle has signed an agreement to acquire Siebel Systems.
If everything goes ahead, the deal should be finalized by early 2006. Siebel’s share price has been in the doldrums for some time now and the company has had a few quarters of relatively poor performance compared to its previous high growth figures. As the offer price represented a 17% premium on Siebel’s share price at the time of the agreement, the Siebel shareholders will certainly win.
Siebel still earns a significant amount from ongoing revenue from existing customers, most of whom will be unlikely to jump ship in the short term, but who will be wondering what the future now holds for them. Siebel customers are probably neither winners nor losers in that case, although Oracle claims joint customers of Oracle and Siebel have been recommending the merger for some time.
Oracle shareholders must have some concerns. The company has bought a number of other applications companies over the past year, and although it claims that the PeopleSoft merger is going well, it is always hard work to maintain shareholder value after mergers and acquisitions. With this in mind, Oracle shareholders are unlikely to win much in the longer term, even if Oracle believes the deal will add to earnings within the next two years.
The company will certainly become an even greater competitor to SAP in the enterprise applications market, and this is likely to have rattled SAP and probably many of the other enterprise applications vendors.
CRM has always been an interesting, ill-defined area, having evolved in part because existing enterprise applications were not well focused on customer relationships. However, one of the major reasons why CRM has not always been successful has been because it also needs to be integrated with the rest of the business systems in place. Thus, the days of large independent CRM vendors were always numbered, unless integration capability was designed in from scratch.
Source: OpinionWire by Butler Group (www.butlergroup.com)