Oracle to buy Hyperion for $3.7 billion


Oracle Corp. has agreed to acquire business intelligence software vendor Hyperion Solutions Corp. for $3.7 billion in cash, it said on Thursday.

Hyperion’s products, which include financial planning tools and a powerful online analytical processing (OLAP) engine, will complement Oracle’s family of business intelligence software, which it began to build out early last year, Oracle said.

The acquisition news was “quite shocking” said Gary Calcutta, a business analyst with SaskTel. The Saskatchewan-based telecommunications company has used Hyperion’s BI platform for more than 10 years and is now wondering if Oracle plans to kill off the tool set they are using.

“If they kill the one we’re on we’d like to know what kind of migration they’re offering, and then we’ll have to weight-out if it is worth migrating to their tool or do we get into another tool,” said Calcutta.

At this point, Calcutta said there just isn’t enough information but he wants to know what Oracle’s plans are for the Hyperion product line, and specifically the BI tools that SaskTel has been using for everything from reporting and analysis to operational monitoring and dash boarding.

“It’s hard to interpret until they actually say, but it’s a feeling I get that they wanted (Hyperion) for its financial products,” said Calcutta. “It looks like the BI products are more secondary.”

The deal is Oracle’s latest in a spree of acquisitions that have included business applications vendors PeopleSoft Inc. and Siebel Systems Inc. The vendor will extend its portfolio of database, applications and middleware products to include one of the broadest sets of business intelligence tools in the industry, company executives said.

The acquisition continues Oracle’s strategy of growing its revenue and customer base through major acquisitions. But it also presents the challenge of integrating products and employees from yet another large company into Oracle, which has announced almost 30 acquisitions since the start of 2005.

Hyperion says it has about 12,000 customers using its software, and about 2,500 employees spread over 20 countries. It reported revenue of $898.7 million for the fiscal year to June 30, 2006.

The Hyperion purchase was no surprise to George Goodall, a senior research analyst with the London, Ont.-based Info-Tech Research Group.

He said it’s no secret that Oracle is on an acquisition spree to grow market share, and he said the BI market has been particularly ripe for consolidation for some time. “This is really the first strike in what is going to be a wave of consolidation in BI.”.

Goodall said the Oracle move will put pressure on other players in the BI space, particularly pure-play BI companies like Micro Strategy and Ottawa’s Cognos.

“The concern, when you look at this kind of consolidation wave, is that Cognos may be the ugly girl at the dance,” said Goodall.

“We’re really not too sure what Cognos can do in this space, although it’s still very early days. It will be interesting to see what happens to Cognos.”

While a large part of the acquisition is about adding seats, Goodall said Hyperion also shores up what has traditionally been a weak area for Hyperion: Business Process Management.

As for Hyperion users concerned about the future of their platforms, Goodall said Oracle has learned from earlier acquisitions such as PeopleSoft and JD Edwards and has become better at managing user concerns.

With Oracle’s Fusion integration project slowing Goodall projects it will be four to five years before Hyperion is integrated into the Oracle platform.

“Users should take great comfort from that Oracle, believe it or not, really does have a great track record for transitioning people and calming those fears, giving the product support and providing a really palatable migration path,” said Goodall.

Users like SaskTel, however, have their reservations about Fusion.

Calcutta said they have looked at Oracle’s offerings and he said they weren’t too impressed and they had no interest in switching to the companies Fusion platform.

“[Oracle] didn’t fare well at all unfortunately,” said Calcutta, noting it wasn’t one of the top contenders. “The tool’s functionality is not bad but ease of use was really poor. It was not an easy tool to use.”

Oracle agreed to pay $61 per share for the company, a premium of 21 percent over Hyperion’s closing share price Wednesday. Oracle plans to launch its offer for Hyperion’s shares by March 14, and will need a simple majority of the shares tendered in favor of the deal, said Oracle Co-President and Chief Financial Officer Safra Catz.

The companies hope to close the deal by April subject to customary closing conditions, she said.

Oracle had a handful of market-leading BI vendors to choose from, which also include Cognos Inc. and Business Objects SA. Hyperion was the best fit because there is little overlap between the two companies’ products, said David Mitchell, head of global software research with the U.K. analyst company Ovum Ltd.

Oracle began to expand its BI software efforts last year, offering tools for integrating data among a number of applications and technologies. But its offerings are still focussed primarily towards existing Oracle customers, 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.

Like Goodall, Mitchell believes the acquisition could start a “domino effect” in which the other large BI vendors are also acquired.

Rumors have long circulated that IBM Corp. will acquire Cognos, for example.

Part of Oracle’s motivation for the deal was to bring itself closer to customers of its main applications rival SAP AG, many of whom use Hyperion’s software, Oracle Co-President Charles Phillips said during the conference call.

Ian Charlesworth, a senior analyst at Ovum, said those customers are unlikely to abandon significant investments in SAP and switch to Oracle applications. But buying Hyperion will give Oracle a portion of the dollars that SAP customers spend on IT, he said.

Phillips said Oracle will continue to support other vendors’ products with Hyperion’s software, including SAP’s. That continues the strategy Oracle has followed with its business applications, which have remained compatible with databases from other vendors.

“Oracle has started to get heterogeneity these days, unlike the Oracle of old,” Ovum’s Mitchell said.

Still, Oracle executives have discussed improving the business intelligence capabilities in the Oracle database, and buying Hyperion could give the company a selling point over database rival IBM Corp., which has counted Hyperion among its main BI partners.

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

Along with the products, buying Hyperion will bring Oracle more than 1,900 salespeople and consultants focussed on selling BI products, Phillips said.


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