Oracle announced today that they were acquiring Hyperion Solution Corp. for approximately $3.3 billion or $52/share. Hyperion is one of the top BI pure-play companies with training 12 month revenue of approximately $830 million revenue and over 12,000 customers. Hyperion is regarded as the market leader in financial applications and its Essbase product is considered by many to be the premier multi-dimensional server in the industry.
No one should be surprised that Hyperion was acquired or that Oracle bought one of the top BI pure-plays. The only surprise by some was that it wasn’t Business Objects that Oracle bought (and its stock today reflects that news.) We have been talking about merger & acquisition (M&A) in this blog for a long time. This will not be the last DW/BI software firm gobbled up.
Is this a good for the industry? It depends on who you are. I think this is a terrific acquisition by Oracle. They needed to “upgrade” their BI and Performance Management offerings and Hyperion is a great option. But this acquisition is not just about technology products (more on that later) but also includes Hyperion’s large customer base, extensive financial application expertise and well established relationships with their customers’ CFOs and finance groups. The later is very strategic for Oracle and maybe why they acquired Hyperion instead of another firm.
How about the impact on their competitors? Eric Savitz in Barron’s Daily Trader posted a blog “Oracle Buying Hyperion; Bad News For Business Objects, SAP” where he clearly stated that it is bad news for Oracle’s competitors. He observes that many SAP customers use Hyperion for their financial consolidation, analysis and reporting system of record. With Oracle having already bought many other application vendors, Oracle has moved more into SAP accounts. And as I mentioned Hyperion’s account relationship is probably deeper than Oracle had with the finance group and they may be able to leverage that for future growth. All of Oracle’s competitors are busily preparing their FUD (fear, uncertainty and doubt) Microsoft PowerPoint slides to present to Oracle customers and prospects. Although FUD can have some impact, I am not sure if those fears are really going to have any significant impact given how well Oracle has managed their acquisitions in recent years (or at least how they have acted after the early stages of their hostile takeover of PeopleSoft.)
How about the impact on Hyperion? I’d say slightly negative to neutral in the short-term but positive in the long run. In the short-term, most companies that are acquired turn inwards while the transition is happening, even if it is considered a good thin. Product management starts looking at product roadmaps to determine what’s in, what’s out and what must change. And employees definitely are looking at what does this mean to me – my role, my compensation and even my job. It’s only human and it happens every time. Once the transition happens – products and people know where they are heading – then the acquired company can put their full attention to their customers. In the long-run, Hyperion’s people and products should get a boast from being under the Oracle family. Hyperion’s financial expertise has been both its strength and its chain holding them back in some ways…that should change.
But I’d be remiss if I did not offer some challenges that have to be dealt with because of the acquisition. Putting people issues aside (they are always there), product overlap is certainly going to befuddle customers and prospect such as:
Oracle will deal with all of these overlaps one way or another. If they make the right choices they will improve their business value to their customers.
Okay, the question is who’s next?
The Wall Street Journal this afternoon published an article “UPDATE: Oracle Buy Could Spur New M&A In Business Intel Mkt” which stated that “Oracle Corp.’s (ORCL) acquisition Thursday of Hyperion Solutions Corp. (HYSL) places renewed focus on the fast-growing business intelligence software market and could prompt further merger activity in the area…. The business intelligence sector is one of the fastest growing in the software industry, with an expected annual industry growth rate of about 10% over the next several years.” The article went on to say “Possible business intelligence targets include Business Objects SA (BOBJ) and Cognos Inc. (COGN) Business Objects has a strong customer lineup of small to medium size business, which might make it a good fit for Microsoft, according to Roth Capital Partners analyst Nathan Schneiderman. Microsoft is looking to expand in that area. IBM and Hewlett-Packard Co. (HPQ) could also be potential suitors for Business Objects, Wedbush Morgan Securities analyst Michael Nemeroff said in a research note.”
M&A will continue to be a hot topic. We’ll discuss other potential merger activity in the future.