The deal announced Thursday will give Oracle an arsenal of Hyperion products that are widely used by 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.
Santa Clara-based Hyperion represents the largest prey to be devoured by Oracle since it gobbled up Siebel Systems Inc. for $6.1 billion a little over a year ago.
Redwood Shores-based Oracle will pay $52 per share for 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 $8.73, or 20.4 percent, to close at $51.57 on the Nasdaq Stock Market, where Oracle shares gained 34 cents, or 2.1 percent, to finish at $16.77.
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.
The deal could even prod Hewlett-Packard Co. to wade into the fray with a bid to buy one of the top makers of business intelligence software maker, said Forrester Research analyst Ray Wang. "There is going to be a cascading effect in the marketplace," he predicted.
In a statement Thursday, SAP said it remains focused on organic growth while acknowledging it's on the look out for "smart, well-placed acquisitions to round out our product capabilities on behalf of customers."
Business Objects intends to remain independent as it tries to woo away Hyperion customers rattled by the news of the Oracle takeover, said Keith Gile, a senior adviser for Business Objects. "We see no reason to go down the same path as Hyperion," Giles said. "We see this deal as a net positive for us."
Cognos echoed that sentiment, calling Hyperion's a "tremendous opportunity" in a statement.
Investors' reaction was mixed. Business Objects shares dropped 98 cents, or 2.7 percent, to close at $35.12 on the Nasdaq, where Cognos shares rose 95 cents, or 2.5 percent, to end the day at $39.06.
The other major business intelligence software maker, Cary, N.C.-based SAS, is privately held.
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 makes most of its money from its market-leading position 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. 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.
SAP said it remained unconcerned by Oracle's expansion, predicting it will only confuse Oracle customers and drive more sales its way. "The Hyperion deal is one more way that Oracle attempts to hide the fact that applications is not its core business, whereas applications has been, and will continue to be, SAP's core business," SAP said in its statement.
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 Hyperion's customers run SAP 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.