This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Oracle Keeps On Spending

Updated from 3:16 p.m. EDT

Wall Street -- the part of it that doesn't own a piece of Siebel Systems (SEBL), that is -- is less than ecstatic over Oracle's (ORCL) $5.85 billion takeout of the troubled software vendor.

The deal, expected to close in early 2006, vaults Oracle into the top spot in the $3.45 billion market for customer relationship management software, and puts heavy pressure on rivals SAP (SAP) and IBM (IBM).

Despite Siebel's inability to drive new license revenue in the last two years, the soon-to-be-devoured company has an installed base of some 4,000 customers, which in the second quarter pumped $122.8 million in recurring maintenance revenue onto the top line. Services and other revenue added another $112.5 million.

But those numbers don't add up to everyone on the buy side. "Did they pay too much? Any price would have been too much," says Pat Adams, chief investment officer of Choice Funds.

Although Adams reacted soon after the deal was announced Monday morning, he and other investors have had lots of time to consider it. Rumors about the deal have circulated for more than a year, getting stronger as Siebel continued to weaken.

Adams and other buy-side sources believe that when Oracle CEO Larry Ellison called the company "damaged goods" earlier this year, he had a point, even if he was using it to talk down the price. They say:

  • Siebel's core product, customer relationship management (CRM) software, has become a commodity with limited growth potential. Slow-growing Siebel, they say, will put the brakes on Oracle.

  • Oracle already has a mammoth job combining the code bases of PeopleSoft and J.D Edwards with its own into Fusion, its next-generation application platform. Adding Siebel makes it that much tougher.

  • Siebel has a huge options hangover . In 2006, the cost of expensing stock options will cost the company 22 cents a share, effectively wiping out its profit. "That kept me from buying their stock," says one portfolio manager, who spoke privately.

    Even so, industry analysts who specialize in CRM says many of the concerns are overblown and based, in part, on old information.

    "It's very telling that the same people who tout (CRM) on Wall Street are so negative about Siebel," says analyst Michael Maoz of Gartner, a technology research and consulting company. "If CRM is such a good story on the low end, how could it not be a good story on the high end? In fact, only 20% of the market has been penetrated so far."

    1 of 2

    Select the service that is right for you!

    Action Alerts PLUS
    Try it NOW

    Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

    Product Features:
    • $2.5+ million portfolio
    • Large-cap and dividend focus
    • Intraday trade alerts from Cramer
    • Weekly roundups
    TheStreet Quant Ratings
    Try it NOW
    Only $49.95/yr

    Access the tool that DOMINATES the Russell 2000 and the S&P 500.

    Product Features:
    • Buy, hold, or sell recommendations for over 4,300 stocks
    • Unlimited research reports on your favorite stocks
    • A custom stock screener
    • Upgrade/downgrade alerts
    Stocks Under $10
    Try it NOW

    David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

    Product Features:
    • Model portfolio
    • Stocks trading below $10
    • Intraday trade alerts
    • Weekly roundups
    Dividend Stock Advisor
    Try it NOW

    Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

    Product Features:
    • Diversified model portfolio of dividend stocks
    • Alerts when market news affect the portfolio
    • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
    Real Money Pro
    Try it NOW

    All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

    Product Features:
    • Real Money + Doug Kass Plus 15 more Wall Street Pros
    • Intraday commentary & news
    • Ultra-actionable trading ideas
    Options Profits
    Try it NOW

    Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

    Product Features:
    • 100+ monthly options trading ideas
    • Actionable options commentary & news
    • Real-time trading community
    • Options TV
    To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
    Submit an article to us!


    DOW 17,804.80 +26.65 0.15%
    S&P 500 2,070.65 +9.42 0.46%
    NASDAQ 4,765.38 +16.9840 0.36%

    Brokerage Partners

    Rates from

    • Mortgage
    • Credit Cards
    • Auto

    Free Newsletters from TheStreet

    My Subscriptions:

    After the Bell

    Before the Bell

    Booyah! Newsletter

    Midday Bell

    TheStreet Top 10 Stories

    Winners & Losers

    Register for Newsletters
    Top Rated Stocks Top Rated Funds Top Rated ETFs