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Oracle to buy CRM juggernaut Siebel

Oracle will become the world's largest provider of customer relationship management software once it completes this $5.85 billion deal.

Oracle Corp. announced today that it will acquire CRM top dog Siebel Systems Inc. for approximately $5.85 billion, further bolstering its enterprise software business.

Oracle had already been a strong player in enterprise CRM, but acquiring Siebel adds 4,000 new customers and 3.4 million CRM users to its portfolio.

"In a single step, Oracle becomes the No. 1 CRM applications company in the world," said Oracle CEO Larry Ellison, during a conference call with financial analysts Monday morning.

The buyout should also fortify Oracle in its battle against SAP AG, the world's leading provider of business applications. Oracle already significantly added to its software arsenal when it completed its hard-fought takeover of PeopleSoft Inc. in January.

During the conference call, Oracle president Charles Phillips called the millions of customers Oracle will inherit in the Siebel deal, another major advantage over SAP.

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Siebel Systems is a pioneer in the CRM industry. Founded by Tom Siebel in 1993, the San Mateo, Calif.-based company staked out a leadership position in the market. Lately, however, it has struggled. This summer, it reported second quarter losses of $50 million or 10 cents a share.

Tom Siebel called the acquisition a natural business combination that was driven by the customer bases and business partners of both companies.

CRM applications capture and streamline all customer interactions so users can better understand, service and anticipate their customers' needs. According to Framingham, Mass.-based IDC, of all major segments of the enterprise applications business, CRM is the largest and fastest growing -- estimated to be worth more than $8 billion in 2004 and expected to grow to $10 billion by 2009.

During the conference call, Ellison said the acquisition would not delay Project Fusion, the superset of standards-based applications that Oracle is working on in the wake of its PeopleSoft takeover. Ellison promised to support Siebel software for "some time to come" and incorporate it into Project Fusion.

"Siebel is the categorical leader [in CRM] and understands it better than anyone else on the planet," Ellison said. "This action makes building Fusion products easier not harder."

Ellison also pledged to continue development of Siebel's hosted product Siebel OnDemand, citing it as one of Siebel's most successful product lines.

This morning's announcement shocked Ann Miller, manager of IS operations support for Sarcom Inc., an IT services and application provider. The Lewis Center, Ohio-based company recently rolled out 125 seats of Siebel OnDemand. Sarcom switched to Siebel's hosted software from a legacy system to track sales and marketing activities largely because of Siebel's strong market presence.

"It's a total surprise," Miller said. "But I don't have any concerns about the product."

Oracle chief technology officer Greg Mattei said Siebel shareholders will receive $10.66 per share in cash or Oracle stock for each Siebel share held. However, no more than 30% of Siebel's common shares may be exchanged for Oracle stock.

Ellison pledged that customers will be able to ask Oracle executives any questions concerning the merger during next week's OpenWorld event in San Francisco.

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