Oracle Rains on SAP's Retek Parade

by Alex Woodie

Oracle made a $9-per-share bid for software maker Retek this week, barely a week after Oracle's chief rival in the ERP space, SAP, announced that it and Retek had signed a definitive merger agreement for SAP to purchase Retek for $8.50 per share, or $496 million.

The move clearly shows Oracle is not about to let Retek--a top provider of enterprise software to companies in the retail industry, a reasonably large player in the Unix market, and one of Oracle's top business partners--go to SAP without a fight. "The vast majority of Retek customers already have a strong Oracle relationship," said Oracle co-president Charles Phillips. "The Retek customers I've talked to said they'd prefer that Oracle buy Retek."

Oracle and Retek have been partners for 19 years, and last fall, the two companies discussed the possibility of merging, according to a letter from Oracle chief executive Larry Ellison to Retek's board. What's more, Ellison claims in the letter that 80 percent of Retek's customers are currently running Oracle software, and that most of Retek's applications are built with Oracle's technology and development tools.

Oracle's unsolicited $9-per-share bid puts the cost of an acquisition at about $525 million. Oracle began buying Retek shares on the open market Monday, and by Tuesday, it claimed to have purchased 10 percent, or 5.5 million, of the outstanding shares.

"Oracle's applications business in North America is larger than SAP's," said Oracle CEO, Larry Ellison. "We intend to defend our number one position."

Oracle says it has already put "extensive thought" into how it would integrate Retek's Java-based products with its own. "Since Oracle's products are complementary with Retek's, we will not need to rationalize duplicate product sets or customer migration paths," Ellison said in his letter. "Retek's existing products will simply become part of the Oracle E-Business Suite."

The incident is reminiscent of the timing of Oracle's bid for PeopleSoft in the summer of 2003. PeopleSoft, the number three ERP vendor at the time, had just announced plans to purchase the fourth largest ERP vendor, J.D. Edwards, when Oracle made an unsolicited bid for PeopleSoft, sans J.D. Edwards. PeopleSoft eventually completed its friendly acquisition of J.D. Edwards in August 2003, and Oracle eventually completed its hostile acquisition of PeopleSoft in January 2005.