Oracle CEO Larry Ellison continued his effort to implement his software industry strategy when he announced the acquisition of Siebel Systems Inc. for $5.85 billion in stock and cash on September 13, 2005. The global software industry includes hundreds of firms. During the first nine months of 2005, Oracle had closed seven acquisitions, including its recently completed $10.6 billion hostile takeover of PeopleSoft. In each case, Oracle realized substantial cost savings by terminating duplicate employees and related overhead expenses. The Siebel acquisition accelerates the drive by Oracle to overtake SAP as the world's largest maker of business applications software, which automates a wide range of administrative tasks. The consolidation strategy seeks to add the existing business of a competitor, while broadening the customer base for Oracle's existing product offering.

Siebel, founded by Ellison's one-time protg turned bitter rival, Tom Siebel, gained prominence in Silicon Valley in the late 1990s as a leader in customer relationship management (CRM) software. CRM software helps firms track sales, customer service, and marketing functions. Siebel's dominance of this market has since eroded amidst complaints that the software was complicated and expensive to install. Moreover, Siebel ignored customer requests to deliver the software via the Internet. Also, aggressive rivals, like SAP and online upstart Salesforce.com have cut into Siebel's business in recent years with simpler offerings. Siebel's annual revenue had plunged from about $2.1 billion in 2001 to $1.3 billion in 2004.

In the past, Mr. Ellison attempted to hasten Siebel's demise, declaring in 2003 that Siebel would vanish and putting pressure on the smaller company by revealing he had held takeover talks with the firm's CEO, Thomas Siebel. Ellison's public announcement of these talks heightened the personal enmity between the two CEOs, making Siebel an unwilling seller.

Oracle's intensifying focus on business applications software largel

Questions

1. How would you characterize the Oracle business strategy (i.e., cost leadership, differentiation, niche, or some combination of all three)? Explain your answer.

2. 2`What other benefits for Oracle, and for the remaining competitors such as SAP, do you see from further industry consolidation? Be specific.5`

3. Conduct an external and internal analysis of Oracle. Briefly describe those factors that influenced the development of Oracles business strategy. Be specific. 5`

4. In what way do you think the Oracle strategy was targeting key competitors? Be specific.2`