Update: Oracle to buy Hyperion for $3 billion

Acquisition of Hyperion's BI products could give Oracle a leg up against rivals SAP, IBM

Oracle has agreed to acquire business intelligence software vendor Hyperion Solutions for $3.3 billion in cash, it said on Thursday.

Hyperion's products, which include financial planning tools and a powerful online analytical processing (OLAP) engine, will complement Oracle's family of business intelligence software, which it began to build out early last year, Oracle said.

The deal is Oracle's latest in a spree of acquisitions that have included business applications vendors PeopleSoft and Siebel Systems. The vendor will extend its portfolio of database, applications and middleware products to include one of the broadest sets of business intelligence tools in the industry, company executives said.

The acquisition continues Oracle's strategy of growing its revenue and customer base through major acquisitions. But it also presents the challenge of integrating products and employees from yet another large company into Oracle, which has announced almost 30 acquisitions since the start of 2005.

Hyperion says it has about 12,000 customers using its software, and about 2,500 employees spread over 20 countries. It reported revenue of $765.2 million for the fiscal year to June 30, 2006.

Oracle agreed to pay $52 per share for the company, a premium of 21 percent over Hyperion's closing share price Wednesday. Oracle plans to launch its offer for Hyperion's shares by March 14, and will need a simple majority of the shares tendered in favor of the deal, said Oracle Co-President and Chief Financial Officer Safra Catz.

The companies hope to close the deal by April subject to customary closing conditions, she said.

Oracle had a handful of market-leading BI vendors to choose from, which also include Cognos and Business Objects. Hyperion was the best fit because there is little overlap between the two companies' products, said David Mitchell, head of global software research with the U.K. analyst company Ovum.

Oracle began to expand its BI software efforts last year, offering tools for integrating data among a number of applications and technologies. But its offerings are still focussed primarily towards existing Oracle customers, Mitchell said.

"Adding Hyperion to the family makes it a best-of-breed player, rather than just focusing on the traditional Oracle customer base," he said.

The acquisition could start a "domino effect" in which the other large BI vendors are also acquired, according to Mitchell. Rumors have long circulated that IBM will acquire Cognos, for example.

Part of Oracle's motivation for the deal was to bring itself closer to customers of its main applications rival SAP, many of whom use Hyperion's software, Oracle Co-President Charles Phillips said during the conference call.

Ian Charlesworth, a senior analyst at Ovum, said those customers are unlikely to abandon significant investments in SAP and switch to Oracle applications. But buying Hyperion will give Oracle a portion of the dollars that SAP customers spend on IT, he said.

Phillips said Oracle will continue to support other vendors' products with Hyperion's software, including SAP's. That continues the strategy Oracle has followed with its business applications, which have remained compatible with databases from other vendors.

"Oracle has started to get heterogeneity these days, unlike the Oracle of old," Ovum's Mitchell said.

Still, Oracle executives have discussed improving the business intelligence capabilities in the Oracle database, and buying Hyperion could give the company a selling point over database rival IBM, which has counted Hyperion among its main BI partners.

IBM is also close partners with Business Objects, however, and is developing new products that integrate IBM's data warehousing software with Business Objects' reporting software, sources familiar with those plans said this week. IBM also has a relationship with open-source BI vendor Pentaho.

Along with the products, buying Hyperion will bring Oracle more than 1,900 salespeople and consultants focussed on selling BI products, Phillips said.

The Hyperion acquisition will be at least the 27th deal Oracle has announced since the start of 2005.

Copyright © 2007 IDG Communications, Inc.

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