Describing it as a continuation of the company's successful strategy in business intelligence software, Oracle Corp. today said it would acquire competitor Hyperion Solutions Corp., a developer of financial applications, business intelligence software, and data management services, for $3.3 billion.
Oracle officials positioned the acquisition of Hyperion's analytical applications as complementary to Oracle's analytical tool offerings, saying it creates what they claimed is the industry's first end-to-end software suite for what has become known as enterprise performance management (EPM).
"The acquisition of Hyperion is a strategically important acquisition and a continuation of a very successful plan to create the most comprehensive and open enterprise software stack in the industry," Oracle President Charles Phillips said on a conference call this morning. "Normally, we buy category leaders. This is no exception."
Phillips said that the acquisition of Hyperion will give Oracle all of what he described as the five major pieces of EPM: a business intelligence server, business intelligence tools, an online analytical process (OLAP) engine, analytical applications, and base transactional systems. Hyperion will bring to Oracle financial planning, consolidation, and multi-source OLAP technologies. "This is the first time in the history of our industry that one company is strong in all five categories," Phillips said.
Phillips compared the Oracle approach with that of such independent BI providers as Business Objects and Cognos, saying these companies offer only some of the pieces he outlined; but he reserved his sharpest comments for arch competitor SAP.
The Hyperion acquisition, he said, is the latest move in what Oracle calls its "surround SAP" strategy, which is designed to expand Oracle's offerings to SAP customers. He claimed that "thousands of SAP customers" use Hyperion software and that the acquisition of the EPM company's products, in combination with Oracle's PeopleSoft human resources, Siebel customer relationship management, G-Log transportation management, and other acquired applications used by SAP customers, furthers Oracle's surround strategy.
"We are achieving critical mass in SAP accounts," Phillips said. "SAP customers are increasingly comfortable with a co-existence strategy [with] both SAP and Oracle applications in their environments, both running on Oracle technology." Because of these mixed environments, Hyperion's products, he said, will remain open and based on standards.
William A. Wohl, Sr., vice president and head of communications for SAP's Product and Technology Group, downplayed Phillips' comments and said that Oracle has not made any headway in competing with SAP in its core business applications market.
"Oracle has always had a presence in SAP accounts — so what?" Wohl said. "The real strategic value comes from the business applications that are the underpinnings of business processes. That's our market and Oracle has made zero progress in it. In our market, we sold more software to companies in our fourth quarter than Oracle sold the entire year of 2006. We gained three points of market share."
Forrester Research analyst Ray Wang, who described Oracle's acquisition of Hyperion as a "great play," questioned whether SAP can continue to emphasize its organic growth strategy, rather than acquisitions. "This acquisition puts a lot of pressure on SAP," Wang said. "The real question is whether SAP will change strategy."
Wohl said SAP will continue with its strategy of organic growth complemented with what the company calls "fill in" acquisitions based on specific technologies or expertise.
During the conference call this morning, Phillips indicated that existing Oracle BI products, such as PeopleSoft's EPM line, will be combined with Hyperion's once the acquisition is completed.
In its fiscal year ended June 30, 2006, Hyperion posted revenues of $765.2 million, up 9% from the prior year. GAAP net income was $63 million, down from $66 million.
Hyperion, founded in 1981 as International Management Reporting Services, has 2,500 employees and claims 12,000 customers worldwide. The company's key products are Hyperion System 9, Hyperion System 9 BI+, and Hyperion System 9 Applications+.
A cash tender offer for all of Hyperion's shares, which was set at $52 per share today, is expected to be made by March 12. Oracle said it expects the sale to be completed by mid-April.