Oracle to acquire Siebel Systems for $5.85 billion in cash, stock

Monday, September 12th 2005, 8:31 am

By: News On 6

SAN FRANCISCO (AP) _ Business software maker Oracle Corp. is buying its struggling rival Siebel Systems Inc. for $5.85 billion in cash, continuing a recent shopping spree that has eliminated two of its biggest competitors in nine months.

Under the terms of the deal announced Monday, Redwood Shores-based Oracle will pay $10.66 per share for San Mateo-based Siebel, a once rapidly growing maker of customer support software that has fallen on hard times during the past three years.

The price represents a 17 percent premium from Siebel's market value entering Monday.

Siebel shares rose $1.21 to $10.34 in premarket trading while Oracle shares rose 31 cents to $13.59.

Siebel has $2.24 billion in cash, reducing Oracle's net takeover cost to $3.6 billion.

The takeover further bolsters Oracle's aggressive bid to topple Germany's SAP AG has the world's largest maker of business applications software _ the computer coding that automates a wide range of administrative tasks.

With sales growth tapering off in Oracle's core business of database software, company CEO Larry Ellison set out in 2003 to become a more formidable force in business applications through acquisitions.

Oracle first launched a hostile takeover bid of PeopleSoft Inc., resulting in a bitter battle that culminated in an $11.1 billion sale nine months ago.

That deal pitted Ellison against one of its former Oracle lieutenants, Craig Conway, who spearheaded PeopleSoft's staunch resistance to the takeover bid until he was fired a few months before the two sides negotiated a truce.

Siebel Systems also is run by a former Ellison protege, Tom Siebel, who has occasionally sniped at his former boss since leaving Oracle.

But Tom Siebel, who is his company's largest individual shareholder, welcomed Oracle's takeover offer, calling it a ``wonderful, exciting event'' during a conference call with analysts Monday. In the same call, Ellison said Tom Siebel is expected to remain with Oracle for several years after the takeover, but didn't provide specific details.

Siebel Systems has been shrinking since 2001 amid weakening demand for its main product _ software that helps customers analyze their sales patterns and customer demands. Siebel's annual revenue has plunged from a peak of $2.1 billion in 2001 to $1.3 billion last year, a slumped that has dragged down the company's stock from its highs of more than $100 per share.

Hoping to turn things around, Tom Siebel stepped down as the company's CEO last year and turned over the reins to a veteran IBM executive Mike Lawrie. But sales continue to falter, prompting the company's board to oust Lawrie in April and replacing him with George Shaheen, an executive best known in Silicon Valley for overseeing the expensive demise of online grocer Webvan Group.

Despite Siebel Systems' troubles, the company remained the largest maker of so-called customer support software, with about 4,000 customers.

Oracle predicted that the addition of Siebel will begin to boost its profits in the fiscal year ending in May 2007.