Whether it succeeds or not, Oracle's ( ORCL - Get Report) unsolicited $5.1 billion attempted buyout of PeopleSoft ( PSFT) is shaking up the software industry and may well give even more impetus to a gathering M&A wave. In the short run, the bid floated a number of software boats on Friday, including those of competitors SAP ( SAP) and Siebel Systems ( SEBL). SAP, the leading supplier of software to manufacturers, added $1.32, or 4.5% to $30.72. Siebel, the troubled developer of customer relationship-management software, was up 10% at one point, but slipped and closed the day up just 19 cents, or 1.7% to $10.98. Why is SAP suddenly looking even better than usual? That's because Oracle said that if its bid is successful, it will not continue to develop new PeopleSoft applications or integrate the two product lines. And that could mean a lot of angry and confused customers thinking about whom they really want to buy sofware from. "They might not be willing to put all their eggs in the Ellison basket," said David Reynolds, head of European Technology Research at J.P. Morgan in London. Peter Dominy, an industry analyst with the Yankee Group, agreed, saying, "This could be a significant opportunity for SAP." He added, however, that whom to switch to is a complex decision, and would depend on the license terms Oracle and SAP present, and the specific applications customers are running. Asked if SAP might be looking for acquisitions in the immediate future, spokesman Markus Berner said the company is sticking to its policy of "adding know-how and technical expertise instead of acquiring customer base or market share. As for Siebel, it could be a take-over target by Oracle if the PeopleSoft deal falls through, or by another company, such as IBM ( IBM), seeking to defend itself against the beefed-up Oracle if the buyout succeeds. Some analysts discounted that, saying Siebel is more likely to buy someone else as it struggles to survive, than to be bought.
The multiple theories highlight the rapid change in the enterprise software market. As recently as April, many software companies were in the doldrums, marooned by the stagnant winds of IT spending. And warnings of missed quarters dominated the financial news for a week. But more recently, software stocks have rallied substantially, even without a solid indication that the end of the slowdown is in sight. Smaller software companies, such as Mercator Software ( MCTR), Vitria Technology ( VITRD), SeeBeyond Technology ( SBYN) and Iona ( IONA) also could be for sale. "These companies have been a target for some time, but no one had the appetite so far," said Erick Brethenoux, vice president and software analyst at Lazard. Mercator, he said, could well be the first to go, while Vitria would be a close second. Staff Writer Bill Snyder contributed to this report