Oracle Seeks Top Spot In Business Apps With Siebel Buy

But whether Oracle can become the world's leading business-apps vendor remains to be seen.

The Redwood Shores, Calif.-based software vendor is still digesting its $10 billion-plus acquisition of PeopleSoft, which includes the J.D. Edwards business. Oracle also must face-off with German ERP software giant SAP, which has been the top dog in business apps, as well as Microsoft, which is sharpening its focus on business software.

Oracle announced the Siebel deal--valued at $5.85 billion, or $3.61 billion when the CRM vendor&s $2.24 billion cash trove is factored in--on Monday morning.

“In a single step, Oracle becomes the No. 1 CRM applications company in the world,” Oracle CEO Larry Ellison said in a statement. “Siebel&s 4,000 applications customers and 3.4 million CRM users strengthen our No. 1 position in applications in North America and move us closer to the No. 1 position in applications globally.”

Louis Cupo, CEO Sabre Systems, a longtime Oracle solution provider in Boca Raton, Fla., said the Oracle&s acquisition of Siebel will hit SAP hard and make it more difficult for Microsoft to make inroads into the enterprise market. "This is a huge acquisition. It's going to be a big profit maker for Oracle. In the near future, it gives a definite, decisive competitive advantage for Oracle over SAP and Microsoft,” he said.

What&s more, the deal moves Oracle closer to reaching Ellison&s vision of offering a full suite of products for the enterprise, according to Cupo. "Oracle is building a best-of-breed solution for all segments of the market, especially the enterprise. We now have best collaborative suite on the market. We have always had the best database. Now we have best of breed in financials, human resources and CRM. So watch out SAP. As for Microsoft, this really puts them out of the big enterprises for a total solution."

In addition, the acquisition comes as Oracle has been making progress in working more closely with channel partners, said Cupo, who praised Oracle Channel Chief Rauline Ochs. "She has done a fabulous job pulling people together. Before she came on board, it was almost impossible for a partner to really do business in the larger accounts. Now Oracle actually helps partners land some of those accounts and occasionally throws them a bone."

The long-rumored deal is ironic in that Siebel founder and chairman Tom Siebel is an Oracle refugee. He left the database giant to pursue his CRM vision independently after Ellison wasn&t interested. Since then, Siebel--with its top-down, personality-dominated culture--was seen by many industry observers as being more like Oracle than Oracle.

Oracle came to the CRM party late, when it realized that it needed to expand beyond its strong database business and into applications.

"I guess this proves you can go home again," said Jeff Matthews, general partner at Ram Partners, a Greenwich, Conn.-based hedge fund. "This reduces the fun quotient in the software space. Now we only have Larry [Ellison] to listen to. Tom [Siebel] was like Gilligan to Larry's Skipper."

San Mateo, Calif.-based Siebel Systems adds even more applications into Oracle's portfolio. Oracle had already bought PeopleSoft and its human resources, CRM and ERP applications after a bitter, drawn-out battle.

“The combination of Siebel applications with the development capacity of Oracle to enhance our CRM product set assures our customers continuing success. This is a very beneficial business combination that will allow us to be even more effective in delivering high-quality, leading-edge solutions into the hands of satisfied customers,” Tom Siebel said in a statement. Siebel will vote his shares in favor of the deal, but so far it&s unclear what role, if any, he would have at Oracle.

Oracle President and CFO Greg Maffei said in a statement that Oracle expects the Siebel transaction to be accretive to its earnings on a non-GAAP basis in its first full year, which would be fiscal year 2007. “Longer term, Siebel will contribute to Oracle&s stated goal of 20 percent annual earnings growth,” he said. “Given the size of our existing R&D investment, scale of our global support infrastructure and similarity of our back office requirements, we will recognize substantial efficiencies from combining our two businesses.”

When Oracle brought Maffei, the former Microsoft CFO, aboard earlier this year, speculation grew that its acquisition binge wasn&t over.

Although the CRM has struggled recently and Siebel Systems had brought on and then scuttled a high-profile CEO from IBM, the company still had lots of cash and a potentially valuable customer list, observers said. Nevertheless, Siebel had been facing hard times of late, as customers moaned about pricey, hard-to-implement CRM software and aligned with Microsoft and IBM in middleware.

“Oracle put Siebel investors out of their misery today. We have been doing that for Siebel customers for years,” Salesforce.com CEO Marc Benioff said in an e-mail statement about Oracle&s Siebel acquisition.

Should Oracle be able to integrate Siebel, which would be no small task, along with PeopleSoft it could field a formidable applications arsenal against SAP and Microsoft, according to observers.

Some Oracle watchers also said the timing of this deal is amusing. This week, Microsoft is kicking off its semi-annual Professional Developers Conference in Los Angeles, and now the Oracle-Siebel combination is likely to be a much-discussed topic at the event, they said.

STEVEN BURKE contributed to this story.