The reaction to BEA's rejection of a $17 a share takeover offer from Oracle is brutal.
Of course, billionaire Carl Icahn has issues. But analysts aren't too thrilled either. Either BEA knows something the rest of us don't or is delusional.
A sampling of comments:
Credit Suisse analyst Jason Maynard, in a research note titled 'Hope isn't a strategy,' wrote:
BEA's shares could easily trade back to the $12-$14 level absent activist pressure and Oracle's bid. While BEA has reduced expenses, it still hasn't offered a sustainable strategy and demonstrated consistent execution to warrant a standalone share price above $17 let alone $21. We think the $17 per share proposal is more than reasonable, and certainly worth the time and effort of BEA's management team to begin earnest negotiations.
We are disappointed that BEA is taking such an obstinate stance given the apparent lack of other bidders and the fair valuation at $17 per share, or roughly 7.5x EV/maintenance revenue. It’s important to note that Oracle has paid between 7x-8x for the strategic deals of PeopleSoft, Siebel, and Hyperion. At $21 per share, BEA is asking for a price that is over 9x maintenance revenue and implies a strategic value that seems only to exist in the walls of BEA's headquarters. The fact that Oracle can afford to pay more is fallacious logic. We doubt another bidder is going to step forward with a materially better offer.
John Reilly Walsh, an analyst at Citigroup, wrote:
We think the $17 offer from Oracle was fair as it was: 1) above BEA's five-year high; 2) a 36% premium to BEA's 200-day moving average before the announcement; and 3) at 3.8x EV/rev above the average of software deals we've tracked over the last five years. We see the $21 price point set by BEA as significantly raising the risk for an acquirer to have the deal is economically attractive.
SunTrust Robinson Humphrey analyst Terry Tillman:
BEA's Board of Directors has likely given Alfred Chuang, the company's CEO, yet another chance to try and right the ship operationally, under the auspices of the company's latest grand technology play, Project Genesis. Project Genesis is described as a new application-tier platform that is meant to converge its service-oriented architecture (SOA) technologies, business process management (BPM), Web 2.0 technologies and other tools and allow for both business and IT users to quickly assemble new application functionality. We believe investor fatigue with BEA and its inability to drive sustained license growth is notable and few want to hear of BEA espousing yet its latest and greatest platform technologies that will disrupt enterprise computing.
What's notable here is the general consensus that BEA can't stay independent. Welcome to the new software market. If you fail to execute you're going to be a part of a larger company--if you're lucky.