An Analysis of the mergers of Oracle and Hyperion
The acquisition of Oracle over Hyperion Solutions is yet another multi-billion dollar deal in the recent years for Oracle, which has delineated its starve for expansion via mergers. The software maker acquired customer relationship management software maker Siebel Systems for $5. 85 billion dollars in the last year, and archrival Peoplesoft for 10. 3 billion dollars in the year 2005 (Kawamoto, 2007).
Oracle’s intended procurement of Hyperion is a suitable fit for both the businesses. This merger has evoked concerns as well as downside risk for their respective customers, as was the early concern when Oracle purchased Peoplesoft and Siebel (Gardner, 2007). The innovative greater value for data, in all its appearances, is in its facilitation and assistance to the market, and not in its quick access to data across more sources and interfaces.
Data management and manipulation will consistently be about the approach and advantage in to the business activities and markets in the actual time. Both the companies, Oracle and Hyperion needed to propel towards a full-suite advantage, therefore, the strong fit mutually. Sales and channel overlaps are a part, although, not significant ones, which should lead to resource consolidation advantages for the companies.
The merger has brought the product lines of both Oracle and Hyperion added reach through their non-overlapping accounts and channels. Looking forward to expand its applications market share in both operations and analytics, Oracle’s aggressive acquisition strategy to attain Hyperion has provided it with strong performance management analytic implementations and suite for BI tools. This has also augmented Oracle’s move to heterogeneity and best-of-breed approaches, over a proprietary-stack strategy.
This merger has placed Oracle on a better footing against the biggest hallmarks including Microsoft, IBM, SAP because of the acquisition. This also follows HP’s currently declared ramp-up to further developer and facilitates BI offerings as well as services. Oracle has knocked over the first big domino in the major business software market which has led investors to wonder about the next business software merger.
The main reason for Oracle using the Hyperion acquisition is to rake aim at rival SAP, which is a leading software for enterprise resource management. Thousands of SAP customers rely on Hyperion as their consolidation, analysis and reporting system of record. The strategy of Oracle which is restricted by its inability to develop on its own, has resorted to attempting to acquire customers. This latest merger further muddies Oracle’s already cluttered implementation landscape.
The Hyperion deal is another way which Oracle attempts to hinder the fact that applications are not its core business, whereas, applications have always been the most significant part of SAP’s business, as quoted by many analysts. Hyperion makes business intelligence software as well as products which are used by the companies to strategically acquire the most out of all their data. This deal by Oracle has put innovative pressures on Hyperion’s chief rivals, Business Objects BOBJ and Cognos COGN (Bonasia, 2007).
Both of them are likely take-over aims, and most of the deals are almost genuine to go after. Industry scrutinizers have predicted a shake-out in the hot BI sector, which recorded a total estimated revenue of approximately $23 billion the previous year (Bonasia, 2007). The software is utilized in order to gather, sort, analyze and present business data to corporate and other enterprise users. Hyperion is prominent for the BI software which focuses on budgeting, planning and financial consolidation.
This acquisition which Oracle has accomplished pushes the database reign further along its target so as to develop through mergers and acquisitions. In appellation of vendors, it shrinks the business software arena. Oracle has spent tremendous amount of capital over acquiring various hallmarks and in carrying with itself a large software silhouette, Oracle anticipates to increase its sales comparatively more faster than it increases its expenses.
Over time, this tact could drive its gross profit margins to 50 per cent or more, as predicted by certain analysts. The deal of Hyperion is targeted at SAP, which is Oracle’s chief rival in business applications. Unlike Oracle, SAP has chased an organic development strategy as it has made only a handful of small mergers in the recent time. The Hyperion’s bid is Oracle’s most recent step in order to expand its offerings to the customers of SAP, as quoted by its president.
The Hyperion Software of Oracle will by the lens through which the most significant consumers of SAP will glance and analyze their underlying SAP. Majority of the Hyperion’s customers are clients of SAP as well and as a result, Oracle refers to this as their wedge strategy to break into the SAP accounts. It will provide Oracle a way to maintain relationships with all the customers of SAP.
Hyperion also provides Oracle the software products which are aimed at chief financial officers, for the reason that its sales have always targeted the chief financial officers as well as the information technology managers. Significantly, this provides Oracle the capability to do business amongst a new base of customers. The possible buyers of Business Objects, Cognos, and other similar business software vendors are inclusive of IBM, Microsoft, Hewlett-Packard or even SAP, as claimed by certain group of analysts and researchers.
Potential targets are inclusive of Informatica, MicroStrategy and SPSS. Along with these are the privately held BI firms which include SAS Institute, Information Builders and Cartesis (Bonasia, 2007). Business Objects and Cognos claim that the Hyperion deal has strengthened their positions in the market. Hence, Business Objects has planned to stay independent, construing to the fact that an independent card is still a strong card to play, since they believe to be a bigger player on their own.
Along with Business Objects, Cognos work with a belief that the loss of a top competent represents a significant and innovative opportunity. Their first big merger would likely generate a full-blown market shakeout, as is claimed by their Chief Strategy Officer. He further elaborated that with the exit of a single big BI firm, all the others disappear as well, as one merger combination would leave the remaining independent vendors looking scrawny and pathetic.
Researchers and analysts claim that the Hyperion acquisition will provide Oracle about a fifteen percent market share of the business performance solutions market, which is presently led by SAS, Cognos, and Business Objects. On the other hand, Hyperion is a strong performance management solutions vendor possessing high credibility amongst corporate financial officers. From its commencement, Hyperion has offered both strong BI tools as well as financially inclined oriented solutions, and its Essbase is one of the industry’s leasing OLAP engines (Schiff, 2007).
Oracle, as a result, had expected he acquisition in order to increase its per share earnings by at least a penny in FY 2008, and at least 4 cents in FY 2009 (Schiff, 2007). Oracle has demonstrated its capability to acquire the needed technology to commence its own. This delineates the commitment to develop its own abilities through both its development efforts and through acquisitions.
Hyperion’s presence in SAP shops will provide the Oracle sales force with an entry in to the additional accounts. Hyperion’s more than 12 thousand customers will represent Oracle with many up-selling as well as cross-selling opportunities and advantages which will prove to be beneficial to both the companies. In the announcement of press release, it was stated that Hyperion is the latest move of Oracle’s strategy in order to extend Oracle’s offerings to the customers of SAP.
Hence, Oracle will surely be able to claim that it is one of the only vendors who offer the entire set of cognizant and established software solutions that include enterprise applications, databases, BI tools, analytical applications as well as data integration technology. With the help of this suite of applications, Oracle will provide a comprehensive planning solution which includes financial budgeting, workforce and capital expense planning, and genuine strategic planning (Oracle Data Sheet, 2008). References 1.
Bonasia, J. 2007, Acquisition Strategy Continues Apace For Growing Oracle. Investor’s Business Daily, 1 March, 2007. 2. Gardner, Dana. 2007, Oracle and Hyperion combo moves them closer to the ultimate business dashboard. BriefingsDirect. March 1st, 2007 post. 3. Kawamoto, Dawn and Martin LaMonica. 2007, Oracle buys Hyperion for US$3. 3 billion. CNET News. com, 02 March 2007. 4. ORACLE Data Sheet. 2008, ORACLE Hyperion Strategic Finance. Oracle. 5. Schiff, Mike. 2007, SWOT: Oracle to Acquire Hyperion Solutions. TDWI. News, 3 July, 2007.