A long-running rumor that Oracle ( ORCL) might buy BEA Systems ( BEAS) caused a mild stir on Wall Street Wednesday, but neither stock moved much. In fact, Oracle was up a bit -- a sign that the Street doesn't really expect to see the database giant shell out the $3.7 billion or more it would take to devour that morsel.

BEA finished the day up 4 cents, or less than 1%, to $10.59, while Oracle gained 61 cents, or 4.8%, to $13.26 a share.

Rick Sherlund, the high-profile Goldman Sachs software analyst, revived the rumor in a note initiating coverage of BEA Wednesday. He gave the company a rather cautious "in-line" rating and presented a mixed analysis of the company's outlook, highlighting increasing competition from IBM ( IBM).

"IBM is simply a lot bigger and getting better," he wrote, while noting that competitive threats from Microsoft and Oracle are real, but less serious. Goldman has an investment banking relationship with BEA, but not with Oracle.

BEA has lost market share to IBM recently, although there is some dispute about the accuracy of IBM's share, because Big Blue does not break out product revenues clearly.

Sherlund also was rather cautious about Oracle's prospects. He said that Oracle is being left behind in the Web services market and that its own application server is in a weak position because the company does not have the software infrastructure stack that would make it more competitive with BEA WebLogic or IBM's WebSphere. That led him to conclude that: "Strategically, we believe BEAS is a good fit with ORCL to address this shortcoming and ORCL management has publicly stated on several occasions that an acquisition of BEAS would make strategic sense, were the price at an attractive level."

But with a current market cap of $4.4 billion, $578 million in cash and equivalents, $554 million in long-term debt (trading at about a 5% discount), and $681 million in short-term investments, BEA would cost at least $3.7 billion, a high price for a company that has never made an acquisition approaching that figure.

Jason Brueschke, who follows enterprise software for Pacific Growth Equities, beleives Oracle would have to be pay significantly more than the enterprise value of BEA and that's not likely. "BEA would want a significant premium, and Oracle is not feeling that much competitive pressure," he said.

He noted that when Oracle CEO Larry Ellison in mid-January signaled interest in BEA "at the right price," the company was trading at about $13.50. BEA is worth less now, but would have to get much cheaper to be a likely buy. Brueschke's company does not have a banking relationship with Oracle or BEA.

Also initiating enterprise software coverage Wednesday was analyst Brent Hill of Prudential Financial, who gave Oracle a hold rating and set a $13 price target. In a note to clients, Hill wrote:

"We think the shares are fairly valued at a P/E of 25 times our $0.49 calendar-year 2004 EPS estimate and multiple expansion is unlikely given our growth expectations. Oracle still holds the combined database lead (we estimate Oracle's database business will represent 69% of FY03E revenue) on UNIX and Windows, but we believe the company's market share is being slowly eroded by formidable competitors, namely IBM and Microsoft."

Prudential does not have a banking relationship with Oracle.