If Oracle renews its bid for rival BEA Systems, it would come in at a price below its initial offer of US$17 a share, the company told analysts Wednesday.
Larry Ellison, Oracle's chief executive, said the initial US$6.7 billion, or US$17 a share, offer for BEA now overpriced.
"If we made another offer, the price would be lower," Ellison said during a Webcast of the analyst meeting. "They have done enough things now...and we'll have to see all the data...that clearly, the US$17 price seems too high now."
Two weeks ago, BEA's board approved a change in control severance plan that covers all full time employees and part time employees who work 20 hours or more per week, according to a Wednesday filing with the US Securities and Exchange Commission.
The plan, which calls for a lump sum payment of three months to one year of severance for employees who are terminated within a year after a merger, could drive up the costs for a potential acquirer.
Oracle had withdrawn its buyout offer late last month, after BEA rejected it, citing a desire for a US$21 buyout offer from Oracle or any third party to start negotiations.
"If their goal was to stay independent, they are doing a good job," Ellison said during the analyst meeting. "We were the only buyer then, and I think what they will succeed in doing is going from one buyer to none."
Shares of BEA fell three percent, to US$16.87, in early morning trading, after having closed at US$17.40 on Wednesday, prior to Ellison's analyst meeting.
Ellison also noted that Oracle's middleware business is growing rapidly on its own.
"Our middleware business is growing so fast right now, forget BEA ... we're closing in on IBM very fast," Ellison said.
A BEA acquisition would help Oracle achieve its scale faster, rather than taking the slower process of trying to woo over BEA's customers to its middleware.
"The reasons we wanted BEA had nothing to do with [its] technology. It had everything to do with scaling up," Ellison said.
He added that by gaining economies of scale, Oracle could "make a lot of money," and a buyout of BEA at US$17 a share would greatly add to its earnings.
While BEA holds out for a higher price, it has yet to be seen whether Carl Icahn, BEA's largest shareholder, holds a similar view on the company's valuation estimate.
Two weeks ago, BEA shared its nonpublic financial information with Icahn in an effort to convince him that Oracle's offer of US$17 undervalued the company. Icahn, who initially demanded that BEA accept the highest bid it receives and filed a lawsuit to force a BEA shareholder meeting, has remained quiet since reviewing the financials.
Some market observers question whether Icahn's silence is an indicator that he likes what he sees in BEA's financials and is also willing to hold out for a price north of US$17 a share. BEA, meanwhile, is scheduled to release its quarterly results Thursday, after the markets close.
