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Will Larry Ellison Buy BEA Systems?

Robert W. Baird & Co. downgraded BEA Systems' stock from "outperform" to "neutral"

BEA Systems said this week that "a difficult selling environment, especially in the Americas, took a bite out of the company's expected revenue. Also, several large deals slipped out of the quarter."

BEA said revenue for the quarter ended April 30 will be between $342 million and $347 million. Analysts surveyed by Thomson Financial had expected quarterly revenue of $348 million.

In addition, "sales of licenses" is expected to be $111 million, well short of the $132 million BEA had forecast in the middle of the quarter.

BEA to report its quarter on May 16. But the company said on Tuesday that it will not be able to make the "complete financial information" available at that point.

Robert W. Baird & Co. analyst Steven Ashley yesterday morning downgraded his rating on BEA Systems stock to "neutral" from "outperform." Ashley said the lowered expectation for license revenue, calling even the original guidance of $132 million "conservative."

Ashley said BEA' warning will likely increase speculation that Oracle may attempt to acquire the company. However, he said that "we do not expect BEA's board of directors to entertain offers while performance is poor and the stock is undervalued."

According to “It is blaming the reorganization and sales force realignment, but the likely issue is that Oracle is taking more of the middleware market share away or that other competitors are winning. The company also competes against HP, Mercury Interactive, SAP, TIBCO, and IBM. You can now interpret that is more into the space than in prior years. BEA Systems has been a "rumored and speculated" takeover name literally back into the 1990's and valuations were always in the way. The balance sheet and income statements are both somewhat guesswork because BEA has been delinquent in filings over stock options and much of the current numbers are best 'guestimates.' If the balance sheet is still close to $900 million in tangible book value, we can at least take a stab at "valuations."

According to Computer Business Review "This news will unfortunately for BEA fan the flames of recent concerns that it is rapidly losing out to Oracle, whose CEO Larry Ellison claimed recently that his firm has now overtaken BEA's middleware business with its own Oracle Fusion Middleware line. Ellison said, "We are growing...more than ten times faster than BEA." However the number of occasions on which Oracle is actually displacing BEA from existing accounts or beating BEA in competitive tender situations - as opposed to selling Fusion Middleware to vast numbers of existing Oracle customers, which it unquestionably is - is a matter of considerable debate."

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