Through a $5.8 billion deal, Oracle acquired Siebel Inc. in 2005 to become the undisputed leader in customer relationship management software. Oracle wanted to beat its archrival SAP in business applications and gain Siebel's 4,000 customers and 3.4 million CRM users. Siebel was struggling financially and saw a future with Oracle where its CRM capabilities could be better integrated into Oracle's wide product suite. The acquisition also allowed Oracle to enter the subscription-based CRM services market to compete with Salesforce.com. After completing the acquisition, Oracle laid off a portion of Siebel's employees while retaining key product developers and sales staff.

1. Siebel’s
Acquisition
by Oracle
Key Findings
Nirav Khandhedia, 12030242017

2. Siebel’s Acquisition by Oracle
Oracle, world’s leading Software maker, has followed organic and inorganic growth strategy in
much balanced way and has been successful in reaping sweets fruits of both.
On September 12, 2005 Oracle, the acquirer of Sun
Inc. and swallower of PeopleSoft declared that it will
acquire its rival Siebel Systems in a friendly deal worth
$5.8 billion, marking the second major competitor the
Oracle has followed Organic and
inorganic growth strategies; it has
been successful in most of them
company has targeted since mid-2004. The mega-deal
was intended as a "major beachhead" against archrival SAP, which is the world's largest businessapplications seller.
Siebel specializes in Customer Relationship Management (CRM) software. Oracle said the Siebel
acquisition will add 4,000 customers and 3.4 million CRM users.
Larry Ellison, CEO - Oracle, said the deal was in part
Oracle wanted to be world leader in
Business Applications and beat its
archrival SAP. Oracle had its own
CRM and People Soft too, but Siebel
was major rival in this area.
fuelled by requests from partners and customers, such
as General Electric, that wanted to hold a single
company accountable for their applications and also
ease the integration process.
Oracle struck the deal with offer of $10.66 for each
share of Siebel stock, a nearly 17 percent premium over the company's $9.13 closing price Friday.
The acquisition comes less than a year after Oracle managed to culminate a hostile takeover of rival
PeopleSoft Corp. for $10.3 billion after a contentious battle that dragged on for nearly 18 months.
With good acquisition process laid down, Oracle was able to completely integrate PeopleSoft in
January. In April, the company purchased retail software maker Retek for just under $500 million. In
early July, Oracle bought pricing specialist ProfitLogic for an undisclosed sum. And in August, Oracle
took a $650 million stake in Indian banking software maker I-flex Solutions.
Siebel
had
been
struggling
financially in recent
years,
as
it
has
become clear that
customers
Siebel was suffering from financial crisis as customers were being
more inclined towards integrated solutions rather than just a
specialized application. Additionally, talks on possible acquisition by
Oracle had halted decisions of many customers
are
switching to companies that can offer a soup-to-nuts integrated suite, rather than a specialized
application, said Tom Siebel, founder and chairman of Siebel and a former Oracle executive under
Siebel Acquisition by Oracle – VAM – Ex MBA – 2012-15 – Symbiosis Centre for Information Technology
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3. Siebel’s Acquisition by Oracle
Ellison. "The shift in market dynamics has occurred over the last three to four to five years," Siebel
said. "A couple years ago, customers wanted best of breed in a couple of categories, but now
customers and partners are indicating they are really looking for a suite of applications to control
their costs going forward."
Oracle CEO Larry Ellison claimed in a
Siebel could see a future with Oracle, wherein CRM
and BI of Siebel will be well integrated with wide
product suite of Oracle and hence was ready to be
acquired
statement that his company "is now
the undisputed leader in customer
relationship management software.
Oracle’s focus on modern, standardsbased applications and middleware is
moving us into a leadership position in applications and on-demand services. Siebel accelerates that
move."
William Wall, a spokesman for SAP AG, said the acquisition won't cause SAP to change its strategy,
but rather thinks it could benefit from the
confusion the acquisition will cause both inside
Oracle and in the marketplace. "We always
anticipated that in order for Oracle to try to catch
Through $5.8 billion deal, Oracle acquired
Siebel Inc. and also the 4,000 customers and
3.4 Million CRM Users.
up with SAP they would take this step." Mr. Wall
said. "We have the benefit of several years and we intend to leverage that."
Another company affected by the deal is Salesforce.com, whose chief executive, Marc Benioff, was
a longtime protégé of Mr. Ellison. Salesforce has grown considerably by providing customer relations
management software through a subscription service rather than a discreet product, a strategy that
many large customers have come to prefer. Siebel has in recent years begun moving toward a similar
model, and analysts say Oracle is clearly
trying to move in that direction with this
With Siebel acquisition, Oracle became world
class leader in CRM and also entered into
Subscription based CRM Services market to
beat SalesForce.
Siebel got its life back under hoods of
Oracle.
merger.
Nearly 99 percent of Siebel stock holders
voted in favour of a merger with Oracle.
Siebel has about 5,000 employees located in
the
company's
San
Mateo,
Calif.,
headquarters and throughout the world. While Mr. Ellison said the company will retain Siebel's
specialized sales force, an unspecified number of Siebel employees will likely be laid off as soon as
Siebel Acquisition by Oracle – VAM – Ex MBA – 2012-15 – Symbiosis Centre for Information Technology
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4. Siebel’s Acquisition by Oracle
the deal is completed. Oracle laid off nearly half of PeopleSoft's 11,000 employees shortly after that
4
merger was complete.
Mr. Ellison has ensured Mr. Siebel would stay on with Oracle for a few years without giving details
about what his role would be.
When Oracle said, Siebel will be the “centrepiece”, analysts and customers had experienced a sense
of worry. "They need to have some serious discussions and work out what will be the strategic
product going forward. If you follow the logic that Siebel CRM is the 'centerpiece' of Oracle CRM
going forward, that means Oracle and PeopleSoft CRM take a back seat. That means the data model,
relative to Oracle CRM, takes a back seat and
Having completed acquisition, Oracle laid
off considerable portion of Siebel PreMerger employee base retaining key
product developers and sales team.
the Customer Data Hub takes a back seat." said
John Radcliffe, research vice president with
Stamford,
Conn.
-
based
Gartner
Inc.
Consequently, customers about to embark on a
Customer Data Hub project held off their
decisions on any implementations until they had a clearer signal from Oracle or Siebel on the future
of the product.
Post acquisition, Oracle had to decide on which data hub to tie together the PeopleSoft, J.D.
Edwards, Siebel and Oracle applications within Fusion Middleware. Additionally, data quality and
data integration tools, like extract transform and load technology, being vital to successful CRM
projects, and Oracle had to make some choices about partnerships and development. Siebel has
been an [OEM] partner of Informatica, but Oracle has a competitive tool in Oracle Warehouse
Builder. Oracle needs to determine whether it will partner with Informatica or go internal. In terms
of functionality, Informatica is broader and deeper, though Oracle is making good strides with
Warehouse Builder.
With Siebel acquisition, "The new race Oracle and SAP are engaged in is about who can bring to
market faster 'business services' for both the midmarket and large enterprises -- i.e., application
components/services based on the 'open' service-oriented architecture," Zornes wrote in an alert
issued after Oracle broke the news of the acquisition. "At the end of the day, the upcoming vendor
battle is about who owns the customer record, given that everyone is moving to SOA and Web
services/components based on open source."
Oracle continued product support for Siebel's CRM technology for a number of years. Oracle
declared that it will use the company as a "centerpiece" in those efforts.
Siebel Acquisition by Oracle – VAM – Ex MBA – 2012-15 – Symbiosis Centre for Information Technology

5. Siebel’s Acquisition by Oracle
During the third quarter of fiscal 2006, Oracle Management initiated plans to restructure certain
operations of pre-merger Siebel Systems, Inc. to eliminate redundant costs resulting from the
acquisition of Siebel and improve efficiencies in operations. The total estimated restructuring costs
associated with exiting activities of Siebel were $577 million.
Oracle’s Siebel acquisition was thus beneficial for both the giants. Oracle could achieve its long seen
dream of being number one in CRM industry. It could thus improve its stand among Business
Application Makers. This has been a direct threat to SAP. With Siebel, Oracle has also been able to
enter into Subscription based CRM Services market and ruled out the threat from SalesForce.
Siebel Acquisition by Oracle – VAM – Ex MBA – 2012-15 – Symbiosis Centre for Information Technology
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