Some comments on the PSFT / ORCL / JDEC and potential SAP and SEBL saga. The top 5 Enterprise Application Software (which is software that generally runs things such as Manufacturing, Financials, Human Resources, and Customer Relationship Management) companies based on quarterly Application Software License Revenue only are as follows:
1) SAP - $350M
2) ORCL - $250M
3) SEBL - $120M
4) PSFT - $90M
5) JDEC - $44M
The only company here that is different is ORCL because they sell databases as well as applications. All the rest only sell applications. This is why many always question whether or not ORCL's application license revenue is accurate. Are they lumping any database revenue in there or giving the database away for free in order to get the application license?
ITWO used to be up there but I believe they have faded very very fast in the past couple of years. By the way, that is the fate I predict for SEBL because they are another "one trick pony." They only have CRM whereas all the others have many different integrated product lines.
If ORCL buys PSFT it will not be a big conversion to the ORCL database because I believe about 80% of PSFT customers already run on the ORCL database. Same with SAP and SEBL - they all support the ORCL database and most of their customers are on it. However they all don't like supporting the ORCL database because ORCL is making such a heavy move into apps (understandable as the database business has become extremely competitive). In fact SAP just announce a partnership with an opensource database provider called MySQL but the jury is out as to whether it can provide the industrial strength necessary to power enterprise business applications requiring sub-second response times in many cases.
As far as other PSFT suitors, there could be MSFT, IBM, HP or some other behemoth technology company but it's not that simple as there are major integration challenges.
The 2 wildcards are SAP and SEBL. SAP is VERY ACTIVELY trying to capitalize on this uncertainty by proactively targeting PSFT customers with a special "kill PSFT" program that I am sure is complete with extra incentives for the SAP sales force. SAP has traditionally had a "not invented here" mentality like you mention in another post and has not done these type of enormous acquisitions in the past. The two cultures would be tough to integrate and the geographic differences of Germany and California would pose many problems. However, SAP has been the most consistent performer in the bunch and will most likely benefit from any of these outcomes as they appear to be the safest choice. SEBL is desperate to get sold as they know full well their days are numbered.
Once the frenzy dies down (which probably won't be for a long time) we still have the problem of a shrinking application software market so I still see all these companies having a very tough time growing their license revenues so it makes the stock picking piece of this equation more difficult.
For what it's worth, PSFT's products have always had a much higher reputation for quality than Oracle's which is one reason I wouldn't be surprised to see ORCL want some of that code.
For now, I think PSFT long may be the safest bet because of the Oracle determination to WIN this deal and probably continue to prop up the price and knock out a big competitor (even though I think the overall market is about to go down hard).
However, without the acquisition target, PSFT is probably a $10 stock on it's own merits.
AI
