Oracle gets CRM capabilities with Siebel purchase

Analysts are predicting Oracle Corp. will increase its footprint in the federal IT market through an agreement to buy customer relationship management provider Siebel Systems Inc. for $5.85 billion.

Purchasing Siebel would expand Redwood Shores, Calif.-based Oracle’s ability to provide enterprise resource planning solutions, said Ray Bjorklund, senior vice president and chief knowledge officer at Federal Sources Inc., a market research firm in McLean, Va.

“When you think about ERP [solutions], most people think about financials, which Oracle has already been pretty strong in,” Bjorklund said. “But here, what they’re intending to buy is CRM, which is often regarded as the fourth leg of ERP.”

Oracle is already strong in the other two legs of ERP—supply chain management and human resources—Bjorklund said. The company improved its human resources offerings when it acquired Peoplesoft Inc. earlier this year.

The acquisition of San Mateo, Calif.-based Siebel could result in support headaches for Oracle, but the deal will certainly boost the company’s market share, said John Kost, managing vice president of worldwide public sector research with Gartner Inc. in Stamford, Conn.

“Clearly, their acquisition of the Siebel contract base gives them a tremendous leg up, because Siebel has been doing more in the public sector successfully, in terms of winning deals, than any of the other CRM vendors,” Kost said.

“Oracle definitely got themselves a whole new bunch of customers that they’re going to have to manage and enjoy the revenue from,” he said. “But it remains to be seen how they’re going to handle their product strategy in all this. It’s going to be tough in the not too distant future to be supporting three different CRM products.”

Oracle agreed to buy Siebel for $10.66 per share. The offer is worth about $3.61 billion net, because of Siebel’s cash on hand of $2.24 billion.

“In a single step, Oracle becomes the number one CRM applications company in the world,” said Larry Ellison, Oracle’s CEO. “Siebel’s 4,000 applications customers and 3.4 million CRM users strengthen our number one position in applications in North America and move us closer to the number one position in applications globally.”

The board of directors of Siebel Systems has voted in favor of the transaction, and Siebel CEO Tom Siebel has agreed to vote his shares in favor of the acquisition. Siebel stockholders will convene in a special meeting to vote on the acquisition. Oracle stockholder approval is not required.

Doug Beizer is a staff writer for Government Computer News’ sister publication, Washington Technology.

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