siebel acquisition by oracle - nirav khandhedia

Siebel’s

Acquisition

by Oracle

Key Findings

Nirav Khandhedia, 12030242017

Siebel’s Acquisition by Oracle

Siebel Acquisition by Oracle – VAM – Ex MBA – 2012-15 – Symbiosis Centre for Information Technology

2 Oracle, world’s leading Software maker, has followed organic and inorganic growth strategy in

much balanced way and has been successful in reaping sweets fruits of both.

On September 12, 2005 Oracle, the acquirer of Sun

Inc. and swallower of PeopleSoft declared that it will

acquire its rival Siebel Systems in a friendly deal worth

$5.8 billion, marking the second major competitor the

company has targeted since mid-2004. The mega-deal

was intended as a "major beachhead" against archrival SAP, which is the world's largest business-

applications seller.

Siebel specializes in Customer Relationship Management (CRM) software. Oracle said the Siebel

acquisition will add 4,000 customers and 3.4 million CRM users.

Larry Ellison, CEO - Oracle, said the deal was in part

fuelled by requests from partners and customers, such

as General Electric, that wanted to hold a single

company accountable for their applications and also

ease the integration process.

Oracle struck the deal with offer of $10.66 for each

share of Siebel stock, a nearly 17 percent premium over the company's $9.13 closing price Friday.

The acquisition comes less than a year after Oracle managed to culminate a hostile takeover of rival

PeopleSoft Corp. for $10.3 billion after a contentious battle that dragged on for nearly 18 months.

With good acquisition process laid down, Oracle was able to completely integrate PeopleSoft in

January. In April, the company purchased retail software maker Retek for just under $500 million. In

early July, Oracle bought pricing specialist ProfitLogic for an undisclosed sum. And in August, Oracle

took a $650 million stake in Indian banking software maker I-flex Solutions.

Siebel had been

struggling

financially in recent

years, as it has

become clear that

customers are

switching to companies that can offer a soup-to-nuts integrated suite, rather than a specialized

application, said Tom Siebel, founder and chairman of Siebel and a former Oracle executive under

Oracle has followed Organic and

inorganic growth strategies; it has

been successful in most of them

Siebel was suffering from financial crisis as customers were being

more inclined towards integrated solutions rather than just a

specialized application. Additionally, talks on possible acquisition by

Oracle had halted decisions of many customers

Oracle wanted to be world leader in

Business Applications and beat its

archrival SAP. Oracle had its own

CRM and People Soft too, but Siebel

was major rival in this area.



3 Ellison. "The shift in market dynamics has occurred over the last three to four to five years," Siebel

said. "A couple years ago, customers wanted best of breed in a couple of categories, but now

customers and partners are indicating they are really looking for a suite of applications to control

their costs going forward."

Oracle CEO Larry Ellison claimed in a

statement that his company "is now

the undisputed leader in customer

relationship management software.

Oracle’s focus on modern, standards-

based applications and middleware is

moving us into a leadership position in applications and on-demand services. Siebel accelerates that

move."

William Wall, a spokesman for SAP AG, said the acquisition won't cause SAP to change its strategy,

but rather thinks it could benefit from the

confusion the acquisition will cause both inside

Oracle and in the marketplace. "We always

anticipated that in order for Oracle to try to catch

up with SAP they would take this step." Mr. Wall

said. "We have the benefit of several years and we intend to leverage that."

Another company affected by the deal is Salesforce.com, whose chief executive, Marc Benioff, was

a longtime protégé of Mr. Ellison. Salesforce has grown considerably by providing customer relations

management software through a subscription service rather than a discreet product, a strategy that

many large customers have come to prefer. Siebel has in recent years begun moving toward a similar

model, and analysts say Oracle is clearly

trying to move in that direction with this

merger.

Nearly 99 percent of Siebel stock holders

voted in favour of a merger with Oracle.

Siebel has about 5,000 employees located in

the company's San Mateo, Calif.,

headquarters and throughout the world. While Mr. Ellison said the company will retain Siebel's

specialized sales force, an unspecified number of Siebel employees will likely be laid off as soon as

Siebel could see a future with Oracle, wherein CRM

and BI of Siebel will be well integrated with wide

product suite of Oracle and hence was ready to be

acquired

With Siebel acquisition, Oracle became world

class leader in CRM and also entered into

Subscription based CRM Services market to

beat SalesForce.

Siebel got its life back under hoods of

Oracle.

Through $5.8 billion deal, Oracle acquired

Siebel Inc. and also the 4,000 customers and

3.4 Million CRM Users.



4 the deal is completed. Oracle laid off nearly half of PeopleSoft's 11,000 employees shortly after that

merger was complete.

Mr. Ellison has ensured Mr. Siebel would stay on with Oracle for a few years without giving details

about what his role would be.

When Oracle said, Siebel will be the “centrepiece”, analysts and customers had experienced a sense

of worry. "They need to have some serious discussions and work out what will be the strategic

product going forward. If you follow the logic that Siebel CRM is the 'centerpiece' of Oracle CRM

going forward, that means Oracle and PeopleSoft CRM take a back seat. That means the data model,

relative to Oracle CRM, takes a back seat and

the Customer Data Hub takes a back seat." said

John Radcliffe, research vice president with

Stamford, Conn. - based Gartner Inc.

Consequently, customers about to embark on a

Customer Data Hub project held off their

decisions on any implementations until they had a clearer signal from Oracle or Siebel on the future

of the product.

Post acquisition, Oracle had to decide on which data hub to tie together the PeopleSoft, J.D.

Edwards, Siebel and Oracle applications within Fusion Middleware. Additionally, data quality and

data integration tools, like extract transform and load technology, being vital to successful CRM

projects, and Oracle had to make some choices about partnerships and development. Siebel has

been an [OEM] partner of Informatica, but Oracle has a competitive tool in Oracle Warehouse

Builder. Oracle needs to determine whether it will partner with Informatica or go internal. In terms

of functionality, Informatica is broader and deeper, though Oracle is making good strides with

Warehouse Builder.

With Siebel acquisition, "The new race Oracle and SAP are engaged in is about who can bring to

market faster 'business services' for both the midmarket and large enterprises -- i.e., application

components/services based on the 'open' service-oriented architecture," Zornes wrote in an alert

issued after Oracle broke the news of the acquisition. "At the end of the day, the upcoming vendor

battle is about who owns the customer record, given that everyone is moving to SOA and Web

services/components based on open source."

Oracle continued product support for Siebel's CRM technology for a number of years. Oracle

declared that it will use the company as a "centerpiece" in those efforts.

Having completed acquisition, Oracle laid

off considerable portion of Siebel Pre-

Merger employee base retaining key

product developers and sales team.



5 During the third quarter of fiscal 2006, Oracle Management initiated plans to restructure certain

operations of pre-merger Siebel Systems, Inc. to eliminate redundant costs resulting from the

acquisition of Siebel and improve efficiencies in operations. The total estimated restructuring costs

associated with exiting activities of Siebel were $577 million.

Oracle’s Siebel acquisition was thus beneficial for both the giants. Oracle could achieve its long seen

dream of being number one in CRM industry. It could thus improve its stand among Business

Application Makers. This has been a direct threat to SAP. With Siebel, Oracle has also been able to

enter into Subscription based CRM Services market and ruled out the threat from SalesForce.