Oracle’s Back to Its Bidding Ways

UPDATED: The price of Retek has just gone up.

Oracle late Thursday raised its tender offer for the retail software and services provider to $11.25 per share, hoping to spoil the acquisition plans of archrival SAP AG .

Earlier on Thursday, SAP increased its original bid to $11 per share, or an approximate offer of $629 million, to trump Oracle’s $525 million counter-offer for Minnesota-based Retek .

Oracle also taunted SAP, saying it has already purchased 5.5 million shares of Retek common stock on the open market. The number represents about 10 percent of total shares outstanding. Oracle also delivered a
statement on Friday saying that the U.S. Department of Justice issued an
“early termination” of its review of an Oracle acquisition of Retek,
clearing the way for the possible sale.

Having just finished his 18-month acquisition of PeopleSoft, Oracle CEO Larry Ellison said he is not accustomed to giving up so easily.

“Our North American applications business is larger than SAP’s,” Ellison said in a statement. “We intend to defend our No. 1 position. Customers have told us they want Oracle to buy Retek.”

Ellison continued: “Retek’s applications are built on Oracle’s technology platform. And Retek and Oracle share a vision of applications built using industry standards like Java, not proprietary programming languages like SAP’s ABAP.”

Executives with SAP were not immediately available to comment on
Oracle’s increased tender offer or its clearance by U.S. regulatory
officials.

Retek provides an integrated retail application suite to more than 200 customers in more than 20 countries around the world, making it an attractive target for companies like SAP and Oracle trying to broaden their footprint in the mid-market.

SAP’s original offer of $496 million for Retek was quickly countered by Oracle’s $525 million bid last week. But whereas SAP has taken the slow and methodical approach to acquisitions in the past, Oracle is accustomed to adjusting its tender offer to suit its long-term acquisition goals. Raising the price to sweeten the pot for shareholders or backing off to avoid overpaying are tactics Oracle used liberally during the PeopleSoft purchase.

Retek’s board will now have about 30 or so days to review Oracle’s latest proposal and then make its recommendations to shareholders … that is, unless SAP can revise its tender offer and increase the price-per-share once again.

If Oracle continues to escalate its offers for Retek, it will have to do so without the services of its CFO, Harry You. Oracle issued a statement Thursday saying You had resigned to become the CEO of BearingPoint, a 16,000-person consultancy and outsourcing firm based in Virginia. You had only been on the job for 8 months following Oracle chairman Jeff Hendly’s job change last year.

Oracle said co-president Safra Catz has been named to stand in for You as acting CFO until a replacement can be found.

Analysts Pull For Oracle

Because of its past history with Retek, market analysts including ones at Aberdeen Group are recommending that shareholders seriously consider Oracle as the suitable suitor.

“The preferred back office software for Retek was Oracle financials. Now, it looks like SAP is the one to have,” Paula Rosenblum, Aberdeen analyst and director of retail research said in a report to investors this week. “Retailers are as unlikely to want to take the time and resources to move from Oracle to SAP as they are to move from PeopleSoft to Oracle. A different financial package will not help any retailer win the heart and minds of consumers.”

Rosenblum also points out that Retek customers will need clear answers on upgradeability beyond vague promises that SAP’s NetWeaver technology will make it easier once the product roadmap is set.

“Throughout its history, Retek has been notably difficult to upgrade. A combination of custom code and sweeping technology upgrades have made moving from Retek 8 to Retek 9 or 10 a daunting task virtually equivalent to ripping and replacing the entire infrastructure. Even the announcement of Retek Xi talked little of upgrade paths, and more about a new generation of modular, but integrated software. Now with a pending reconciliation of functionality and technology with SAP Retail,” Rosenblum said in her report.

The analyst also found there would be less overlap with Oracle in the driver seat than with SAP. While many parts of Retek’s application portfolio are complimentary to SAP’s, others are directly competitive. Hot spots include financial planning, demand planning, supply chain management, purchase order management, data warehouse, warehouse management and sourcing.