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Oracle To Buy Hyperion for $3.3 Billion

Business software maker Oracle Corp. will buy Hyperion Solutions Corp. for $3.3 billion in cash, renewing a shopping spree aimed at toppling rival SAP AG.

The deal announced Thursday will give Oracle an arsenal of Hyperion products that are used by more than half of SAP's customers. Hyperion's tools, known as "business intelligence" software, help chief financial officers and other top corporate executives track their company's performance.

Redwood Shores-based Oracle will pay $52 per share for Santa Clara-based Hyperion. The price represents a 21 percent premium above the most recent closing price of Hyperion's stock, which has traded between $26.65 and $45.18 during the past year.

Hyperion shares surged $8.71, or 20.3 percent, to $51.55 in Thursday morning trading on the Nasdaq Stock Market, where Oracle shares gained 41 cents, or 2.5 percent, to $16.84.

Oracle's acquisition could trigger a scramble for other leading business intelligence software makers such as France-based Business Objects SA and Canada-based Cognos Inc., said AMR Research analyst Bruce Richardson. He thinks Business Objects would be a logical takeover candidate for SAP and Cognos may elicit a bid from IBM Corp.

"This is just the first blow in the (business intelligence) market," Richardson said.

For now, investors appear more concerned about how Oracle's takeover of Hyperion might harm the other business intelligence software makers. Business Objects shares dropped $1.58, or 4.4 percent, to $34.52 in Thursday trading on the Nasdaq, where Cognos shares fell 64 cents, or 1.7 percent, to $37.47.

The Hyperion acquisition extends an aggressive expansion that Oracle Chief Executive Larry Ellison launched to upgrade his company's business applications software, the computer coding that automates a wide range of administrative tasks.

Oracle is dominant in database software, but growth in that market has been tapering off in recent years _ a factor that convinced Ellison that Oracle needed to seize a bigger piece of the business applications market.

Germany-based SAP has long been the leader in the business applications field, but Oracle has been narrowing the gap by snapping up an array of other software makers, most notably PeopleSoft Inc. and Siebel Systems Inc. Oracle has spent more than $20 billion on 30 acquisitions during the past three years.

"Oracle is determined to drive more consolidation...and make things a bit more uncomfortable for their rival SAP," said Mayiz Habbal, a managing director for Celent, a consulting firm.

Despite Oracle's expansion, SAP remains the business applications leader. Meanwhile, Oracle's market value during the past three years has climbed by roughly the same amount of money that the company has spent on its acquisitions.

The Hyperion deal represents yet another shot across SAP's bow. "Thousands of SAP customers close their books with the Hyperion product," Oracle President Charles Phillips said during a Thursday conference call with analysts. "We are achieving a critical mass in SAP accounts."

About 55 percent of SAP's customers run Hyperion software, estimated AMR Research. "Larry has got to love that," Richardson said.

To help boost profits, Oracle has typically laid off some workers after its recent deals have been completed. Oracle executives didn't discuss potential job cuts in Thursday's analyst call about the Hyperion acquisition, which is expected to close by the end of April.

Although Oracle expects most of the gains from the Hyperion deal to be driven by increased sales, "there are going to be some very significant (cost) efficiencies," Chief Financial Officer Safra Catz said during Thursday's conference call.

Hyperion has about 2,700 employees while Oracle has more than 56,000 workers.

Oracle expects Hyperion to increase its earnings by at least penny per share in its fiscal year ending in May 2008 and another 4 cents per share in the following year, Catz said.

Hyperion earned $63 million on revenue of $765 million in its last fiscal year. Oracle is expected to earn about $5 billion on revenue of nearly $18 billion in its fiscal year ending in May. Oracle is scheduled to release the results of its most recent quarter on March 20.