BEA Systems Inc. said Monday it has agreed to buy portal software maker Plumtree Software Inc. for around US$200 million in cash. The deal finally removes from the market a struggling company analysts long expected to be bought by a larger vendor, and adds to BEA's portfolio a new line of collaboration software.

San Jose, California-based BEA will pay $5.50 in cash per share for Plumtree, an 18 percent premium over Plumtree's (ticker symbol: PLUM) Friday closing price of $4.67 on the Nasdaq exchange. Ahead of the acquisition announcement, Plumtree closed up 4 percent on Monday, at $4.86. Pending regulatory and shareholder approvals, the companies expect the deal to close within the next few months.

BEA already has its own portal software, WebLogic Portal. Asked during a conference call with analysts about the product overlap, BEA executives said they see their software and Plumtree Portal serving two different audiences, such as developers and business users, respectively. BEA plans to continue developing and selling both sets of software.

"We'll have two separate portal product lines for as long as we can see," BEA Chief Technology Officer Mark Carges said.

Plumtree has a staff of around 400, most of whom BEA plans to retain, according to BEA Chairman and Chief Executive Officer Alfred Chuang. Plumtree's San Francisco headquarters is just one block away from BEA's San Francisco office, he noted.

Ten-year-old Plumtree claims 21 million users worldwide from 700 organizations, including Starbucks Corp., the U.S. Navy and Ford Motor Co. Half of Plumtree's customers are already also using BEA software, BEA executives estimated. BEA says it has 1,400 customers for its WebLogic Portal.

IDC ranked BEA second and Plumtree fifth in its 2004 ranking of portal vendors by revenue. By IDC's calculation, BEA held a 13.8 percent share of the market, to leader IBM Corp.'s 24.8 percent. Plumtree held 7 percent, nearly tied with Oracle Corp. and behind SAP AG.

Buffeted by the challenging enterprise software market, Plumtree has struggled for growth and profitability. It posted a loss in four of its last five fiscal years. In 2004, it had a loss of $9.6 million on revenue of $84.1 million. It recently disclosed an internal investigation that will likely lead to a hefty rebate to one major customer, the U.S. General Services Administration (GSA). In Feb. 2005, Plumtree found out that some sales to GSA likely violated a "price reductions" clause in GSA's contract; in its just-ended second quarter, Plumtree set aside a $1.5 million reserve to cover its estimated potential damage payment.

With portals increasingly viewed as components of a broader applications suite rather than as stand-alone purchases, Plumtree has been seen for years as a likely acquisition candidate. Meanwhile, BEA is under pressure to buy or be bought. The company, best known for its application server and other infrastructure software, competes frequently against deeper-pocketed giants such as Oracle and IBM. Before Oracle bought PeopleSoft, BEA was one of the companies on its shopping list of potential acquisition targets.

Mindful of the pressures on BEA to find a buyer or fashion a more distinct presence for itself, Chuang took care to position the Plumtree buy as a sign of BEA's vitality.

"This further enhances BEA's scale in the enterprise," he said. "If you take any single point away from this conference call, I would like it to be: BEA is on the move."

» posted by abennett

IDG News Service

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