Oracle, never a company to shy from head-on competition, announced todaythat it would outbid rival SAP in its attempt to buy software maker Retek,offering US$9 per share. SAP had agreed last week to pay $8.50 a share.
Oracle’s offer bumps the bid for the retail applications provider from $496 million to $524million. The database giant has already begun buying Retek stock. Companyfounder Larry Ellison said Oracle bought 5.5 million shares, or nearly 10percent of Retek, in the past two days. He portrayed the move as a necessarycounterpunch to keep the database giant at the top of the heap.
Who’s No. 1?
“Oracle’s applications business in North America is larger than SAP’s,” Ellisonsaid in a statement. “We intend to defend our number one position.”
Ellison, in his letter to the Retek board, laid out his arguments forOracle’s offer. The companies have been partners since Retek was founded in1986, he said. In addition, about 80 percent of Retek’s customers run Oracleand most Retek applications were built with Oracle’s developmenttools.
Evan Quinn, group vice president for applications at Forrester Research,sees the latest development as a smart move.
“In the U.S., Oracle has solid penetration in the retail industry in terms oftechnology, but in terms of applications it has often partnered with Retekto gain a footing,” he told CRM Buyer via e-mail. “Oracle provides the horizontal solutions (HR, financialsand procurement, for example), and Retek provides the industry-specificapplications, such as point-of-sale.”
He continued, “Oracle andRetek fit well together. Retek uses a fair amount of Oracle technology, andOracle possesses the international channel and localization technologiesthat could help Retek reach new markets.”
Andrew White, a research analyst with Gartner, concurred.”Retek, as a partner for Oracle today, is really ‘the’ retail strategy forOracle,” White told CRM Buyer in an e-mail. “If Retek left the marketand went to SAP, Oracle’s retail strategy would need to be redrawn. Coreretail applications are not in Oracle, they are in Retek — hence theOracle/Retek partnership.”
The next move is up to SAP.
“SAP needs to decide whether they want to counteroffer, invest further intheir own retail R&D, or look to an alternative supplier such as JDASoftware,” Quinn said. “It is interesting that JDA Software was upgradedtoday by Garban [Institutional Equities].”
White believes that SAP has less to lose in the retail market thanOracle. “SAP is less reliant on Retek than Oracle is, as SAP competes more withRetek,” he wrote. “SAP can goelsewhere (another buy?) or can keep working at retail” on its own.