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BEA Basks in the Praise

Analysts like its work in service-oriented architecture products.
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A flurry of positive sell-side notes following its analysts' day is giving

BEA Systems


a solid bump. In recent trading Wednesday, shares were up 52 cents, or 4.2%, to $12.94, on heavier-than-average volume.

Analysts noted that BEA's new AquaLogic platform has gained market acceptance and is likely to continue driving the company's recovery into the back half of the year. What's more, it appears that the company has tapped into an important trend in the software market: the adoption of service-oriented architecture, or SOA.

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SOA enables developers to build software applications from modular components and deliver them over the Internet. BEA's software is the glue that holds them together and allows the components to work with existing information systems.

"BEA Systems is bolstering its sales force around service-oriented architectures, focusing on product development with many releases planned for the fall, and building its VAR channel to capture the increased interest in SOA in the marketplace," wrote analyst Robert Stimson of WR Hambrecht. "We have a higher level of confidence regarding BEA Systems' ability to maintain the current business momentum over the next few quarters, which should lead to further revenue growth and better-than-expected margin expansion," he said. (Simpson's company does not have an investment-banking relationship with BEA.)

Goldman Sachs analyst Sarah Friar raised her revenue estimate by a few points to account for the recent $87 million acquisition of privately held Fuego, which is likely to boost BEA's efforts in SOA.

Friar also pointed to AquaLogic as a revenue driver. However, heavy option-related expenses are a cost to shareholders, she wrote, and make the company somewhat more expensive than its peers. (Goldman Sachs has an investment-banking relationship with BEA Systems.)

After languishing for several years, the software maker's stock started to recover in 2005 and has appreciated by about 33% since the beginning of the year. BEA continues to beef up, and it plans to add about 75 new sales reps and about 100 new engineers, including consultants, in fiscal 2007.