By Michael Cohn

Oracle said Thursday it has agreed to acquire Hyperion Solutions for $3.3 billion, offering $52 per share for the enterprise performance management software vendor, in a move to enhance the effectiveness of Oracle’s business intelligence products and compete better with rival SAP.

The Redwood Shores, California-based company said it would integrate the two companies’ software to form a complete performance management system including planning, budgeting, consolidation, operational analytics, and compliance-reporting software.

Oracle has been making a string of high-profile acquisitions over the last several years, buying corporate software companies such as PeopleSoft, Siebel, J.D. Edwards, Demantra, and others as it builds a warchest of business applications to compete against German software giant SAP as well as Microsoft.

“Hyperion is the latest move in our strategy to expand Oracle’s offerings to SAP customers,” said Oracle President Charles Phillips in a statement. “Thousands of SAP customers rely on Hyperion as their financial consolidation, analysis, and reporting system of record.



‘Now Oracle’s Hyperion software will be the lens through which SAP’s most important customers view and analyze their underlying SAP ERP data.’

-Charles Phillips,

Oracle




“Now Oracle’s Hyperion software will be the lens through which SAP’s most important customers view and analyze their underlying SAP ERP data,” he added.

Oracle anticipates the transaction will be accretive to its earnings by at least a penny per share in fiscal year 2008 and by at least $0.04 per share in fiscal 2009, according to Oracle CFO Safra Catz.

The transaction is expected to close in April 2007. Shares of Oracle rose $0.50 to $16.93 in recent trading Thursday on the Nasdaq despite a drop in the Dow as investors weighed the possibility of a market correction, while Hyperion shares surged $8.71 to $51.55.

Deal Makes Strategic Sense

Analysts thought the deal was a sensible one for Oracle to make.

“The deal makes strategic sense, as it will bolster Oracle’s presence within the CFO suite and should augment the company’s current business intelligence portfolio,” wrote Bank of America Securities analyst Kirk Materne in a research note.

However, he noted that Oracle provided little commentary in its conference call announcing the deal about the company’s third quarter results, which the company plans to release on March 20. He believes that could mean a “choppy 3Q” and “a slowing organic growth rate, which would offset excitement around a strong strategic deal.”

Another analyst was more enthusiastic.

“We believe that this type of acquisition is the kind that can make the most sense for a consolidator such as Oracle,” wrote Deutsche Bank analyst Tom Ernst Jr. in a research note.

He believes Oracle will probably be successful in driving strong accretion out of the deal through cost synergies that could exceed 20 percent of Hyperion’s cost base, which would more than offset the “naturally elevated attrition and moderately deteriorated win rates” that he expects for Hyperion in the short term.