Buyout Buzz Boosts BEA Systems - TheStreet

Buyout Buzz Boosts BEA Systems

A Credit Suisse analyst sees the software maker in play.
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Spurred by weeks of buyout rumors, shares of

BEA Systems

(BEAS)

caught a bid Tuesday after a sell-side analyst upgraded the software maker.

Credit Suisse analyst Jason Maynard wrote that he believes the San Jose, Calif. company is in play and that shares could fetch between $15 and $18. A strategic buyer has the potential to pay $1 to $3 per share more than a private equity acquirer would, he added.

BEA was recently trading up 42 cents, or 3.1%, to $13.87. It has risen steadily since May 1, when it closed at $11.43, as talk of a possible sale to software makers

Hewlett-Packard

(HPQ) - Get Report

or

Oracle

(ORCL) - Get Report

circulated.

"Our sense is that this process is working its way through a chain of financial oriented private equity buyers" but that it could ultimately lead to a strategic acquisition, he wrote.

Maynard wrote that a buyout could come in the next three to six months, with the most likely candidate being Oracle, "not the often-mentioned H-P."

Melissa Grady, an analyst with Technology Business Research, says she doesn't agree that the company is on the verge of a buyout. Noting that such rumors have circulated for years, Grady attributed the talk to the usual "surge right before the earnings release."

BEA Systems is likely to make its next financial disclosures in August, although the company indicated in June filings that it would not make a full 10-Q report for the quarter ending in July. The company is due to restate its 2006 quarterly and annual reports, after a review of its options dating practices found irregularities.

In February, auditors estimated that pretax stock option charges would be between $340 million and $390 million. BEA faces possible delisting by the

Nasdaq

for failure to keep up with its reporting requirements. The financial reporting limbo may be adding to the speculation that the company will sell its way out of its difficulties.

"I wouldn't rule out an acquisition," Grady says, but she expects BEA to stick with its strategy of transitioning from its WebLogic software to the AquaLogic line of services-oriented architecture, or SOA, products. Sales in the WebLogic line are declining as AquaLogic takes sales from it. SOA is still in an early adoption phase, Grady warns, but AquaLogic could show 40% growth in the coming year.

The leadership of BEA "believes in their technology" but might be getting pressure from its board to look for buyers, Grady says. "But I chalk it up to speculation."

However, Maynard wrote, "While management may still be hesitant about selling the business, it's our opinion that they are rapidly losing the ability to influence that decision."