BEA Says It's Talking to Other Possible Bidders

Oct 29, 08:40 PM

Current Headlines: SAN JOSE, Calif. _ BEA Systems has begun sounding out other potential bidders now that Oracle's nearly $6.7 billion bid for the San Jose company has expired.

The business computing company is checking what it could get from other buyers, a person familiar with the situation said. But BEA's board is insisting that the company is worth $21 a share, or $8.23 billion.

Some analysts questioned whether there are any serious bidders in the wings at this point.

The expiration of Oracle's $17-a-share offer on Sunday and its departure from the scene is giving BEA time to chat up other potential buyers.

The two companies most frequently mentioned as potentially having an interest in BEA are IBM and Hewlett-Packard, but there are also reasons for each company to pass up the opportunity, analysts said.

HP has no compelling reason to buy BEA, according to Bart Narter, senior analyst with Celent. HP hasn't shown interest in buying service-oriented applications software such as those BEA makes, he said.

He added that "BEA competes with more than complements IBM."

Oracle is the best fit for BEA, several analysts said, but in letting its offer expire, Oracle warned shareholders not to assume it will renew its $17-a-share offer in the future.

For its part, BEA needs to show interest from other potential buyers, or the uncertainty surrounding its future could stunt its licensing sales and drive its share price down. At that point, Oracle could make another bid for less.

"They have probably had low grade conversations going on with other folks for quite a while," said Ian Finley, a research director in strategy and best practices in IT governance at AMR Research of Boston. "Now, they are probably turning that up a notch, making board members available to see if other people are interested."

BEA's stance has infuriated its major shareholder, activist investor Carl Icahn, who has accused BEA's board of refusing to negotiate.

Icahn is pressuring BEA to schedule an annual meeting, which it hasn't held in 15 months, and an auction for the company. Oracle says the next move is up to BEA's stockholders, adding that "certain directors and officers of Oracle may participate in meetings or discussions with BEA stockholders."

On Monday, BEA closed at $16.50, unmoved from Friday's close by the developments over the weekend.

Analyst Trip Chowdhry of Global Equities Research said he thinks the conversations with third parties "are meaningless" at this point.

"If they are trying to find an alternate bidder at this time, it signifies that BEA's hand is weak," Chowdhry said. "I think right now there is no alternate bidder available, and I also don't see at these moments any alternate bidder stepping in."

As for BEA's $21 a share counterproposal, "you can say what you feel like, but there has to be a buyer," Chowdhry observed.

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