Government Exhibit P0035
Board Presentation
on M&A Opportunities
April 14, 2003
Enterprise Software Market Share Analysis
| |
TECHNOLOGY |
APPLICATIONS |
| |
Database |
App
Servers |
Business
Intell/Data
Warehouse |
Dev
Tools |
Application Integration |
Systems
Mgmt |
Storage
Mgmt |
Network &
Service
Mgmt |
Content
Mgmt |
ERP
Apps |
SCM
Apps |
CRM
Apps |
| 2001 Market Size |
$12.8 |
$2.2 |
$6.5 |
$2.2 |
$4.4 |
$7.1 |
$6.2 |
$3.0 |
$2.8 |
$23.3 |
$8.5 |
$6.4 |
| Top Players & Market Shares |
Oracle
43% |
BEA
25% |
Oracle
18% |
IBM(l)
15% |
IBM
17% |
IBM
14% |
EMC
28% |
IBM
10% |
Adobe
10% |
SAP
17% |
i2
8% |
Siebel
25% |
| |
IBM
31% |
IBM
23% |
IBM
18% |
Microsoft
8% |
Oracle
8% |
CA
14% |
Veritas
17% |
NETA
8% |
FileNet
9% |
Oracle
7% |
SAP
7% |
Oracle
6% |
| |
Microsoft
9% |
Oracle
12% |
Microsoft
10% |
Compuware
7% |
Tibco
6% |
BMC (2)
8% |
CA
9% |
Agilent
8% |
Vignette
6% |
PeopleSoft
6% |
Oracle
3% |
SAP
4% |
| |
Sybase
4% |
Sun
8% |
SAS Inst. 9% |
CA
4% |
BEA
6% |
Peregrine
7% |
IBM
8% |
Cisco
6% |
DCTM
5% |
JD Edwards
3% |
PeopleSoft
2% |
PeopleSoft
4% |
| |
NCR
2% |
Macromedia
5% |
Cognos
4% |
HP
3% |
WEBM
5% |
HP
6% |
HP
5% |
HP
6% |
Interwoven
5% |
Microsoft
2% |
Manugistics
2% |
Amdocs
4% |
| |
Fujitsu
2% |
Sybase
3% |
BOBJ
3% |
Macromedia
3% |
Sybase
4% |
Microsoft
3% |
Legato
4% |
Lucent
6% |
IBM
5% |
Corner
2% |
Siebel
2% |
Trilogy
3% |
| |
SAS Inst.
2% |
Borland
3% |
NCR
3% |
Oracle
2% |
Vitria
3% |
Novell
2% |
NTAP
3% |
Micromuse
4% |
SER Sys.
5% |
McKesson
2% |
Microsoft
1% |
Vignette
2% |
| |
Others
9% |
Others
22% |
Others
34% |
Others
58% |
Others
51% |
Others
46% |
Others
26% |
Others
52% |
Others
55% |
Others
63% |
Others
76% |
Others
53% |
Source: IDC.
- IBM amount includes Rational percentage share of 7%.
- BMC acquired a portion of Peregrine (Remedy) last year (or $350mm,
but isn't factored into the table.
Enterprise Software Competitive Profile
| Key: |
No Presence  |
Not Significa  |
Player  |
Competitiv  |
($ in billions)
Note: Competitive profile Information for each company estimated by
Oracle.
(1) Source: IDC.
Software Comps - Technology
(in millions, except per share data)
| Company |
Stock
Price
(4/4/03) |
%of
52-Week
High |
Fully-Diluted
Equity
Value |
Net
Debt
(Cash) |
Enterprise
Value |
Enterprise Value/
Revenue Multiple
|
P/E Ratio
|
| LTM |
CY03 |
CY04 |
LTM |
CY03 |
CY04 |
| Oracle Corp. |
$11.38 |
85% |
$61,712.9 |
($5,948.8) |
$55,764.2 |
5.9x |
5.9x |
5.4x |
27.8x |
25.9x |
23.7x |
| IBM |
$80.32 |
77% |
$141,142.3 |
$20,042.0 |
$161,184.3 |
2.0x |
1.8x |
n/a |
20.3x |
18.6x |
16.4x |
| Microsoft |
25.22 |
84% |
277,777.9 |
(43,424.0) |
234,353.9 |
7.6x |
7.1x |
6.6x |
25.9x |
25.1x |
21.6x |
Technology Software Competitors
*** Includes selection of major software
infrastructure applications companies; not all are shown |
| Adobe Systems |
$32.05 |
74% |
$7,685.0 |
($652.7) |
$7,032.3 |
5.9x |
5.7x |
5.4x |
32.7x |
32.1 x |
27.9x |
| BEA Systems |
10.56 |
73% |
4,481.2 |
(708.3) |
3,772.9 |
4.0x |
3.9x |
3.6x |
37.7x |
34.1x |
27.1x |
| BMC Software |
15.36 |
77% |
3,657.0 |
(899.5) |
2,757.5 |
2.2x |
1.8x |
n/a |
35.7x |
26.5x |
n/a |
| Borland Software |
9.01 |
61% |
669.2 |
(296.2) |
373.1 |
1.5x |
1.0x |
0.7x |
28.2x |
21.5x |
14.5x |
| Business Objects |
18.29 |
41% |
1,189.3 |
(277.8) |
911.5 |
2.0x |
1.8x |
1.6x |
29.0x |
24.4x |
20.3x |
| Cognos |
25.06 |
91% |
2,305.4 |
(242.3) |
2,063.1 |
3.7x |
3.1x |
2.7x |
30.9x |
27.8x |
24.1x |
| Computer Associates |
13.95 |
63% |
8,072.4 |
2,129.0 |
10,201.4 |
3.3x |
3.1x |
n/a |
nmf |
51.7x |
n/a |
| Documentum |
13.95 |
55% |
716.3 |
(128.1) |
588.2 |
2.6x |
2.0x |
1.8x |
99.6x |
39.9x |
25.4x |
| Embarcadero Tech |
6.60 |
46% |
186.5 |
(43.8) |
142.7 |
2.9x |
2.8x |
2.4x |
33.0x |
23.6x |
18.9x |
| FileNet |
10.55 |
59% |
383.8 |
(185.2) |
198.6 |
0.6x |
0.5x |
0.5x |
45.9x |
31.0x |
18.2x |
| Hyperion Solutions |
26.56 |
81% |
976.3 |
(302.2) |
674.1 |
1.3x |
1.3x |
n/a |
35.4x |
28.9x |
n/a |
| Legato Systems |
5.72 |
63% |
669.7 |
(59.5) |
610.2 |
2.3x |
1.9x |
1.7x |
nmf |
nmf |
44.0x |
| Mercury Interactive |
31.13 |
78% |
2,764.7 |
(348.2) |
2,416.5 |
6.0x |
5.1x |
n/a |
43.2x |
33.8x |
28.0x |
| Novell Corp. |
2.42 |
59% |
891.2 |
(708.2) |
183.0 |
0.2x |
n/a |
n/a |
34.6x |
14.2x |
n/a |
| Quest Software |
9.55 |
62% |
899.0 |
(207.5) |
691.4 |
2.7x |
2.4x |
2.1x |
43.4x |
30.8x |
22.7x |
| Red Hat |
5.64 |
78% |
1,004.9 |
(292.3) |
712.5 |
7.8x |
6.3x |
n/a |
nmf |
nmf |
47.0x |
| Sybase |
12.27 |
69% |
1,199.0 |
(382.2) |
816.9 |
1.0x |
1.0x |
1.0x |
11.9x |
12.3x |
10.7x |
| TIBCO Software |
4.34 |
36% |
957.6 |
(652.6) |
305.0 |
1.2x |
1.2x |
1.2x |
54.3x |
72.3x |
39.5x |
| Veritas Software |
18.91 |
42% |
7,993.1 |
(1,781.1) |
6,212.0 |
4.1x |
4.0x |
3.6x |
31.0x |
30.5x |
27.0x |
| WebMethods |
8.72 |
47% |
463.9 |
(195.4) |
268.5 |
1.4x |
1.3x |
n/a |
nmf
|
nmf |
39.6x |
| |
Average Median |
63%
63% |
|
|
|
2.8x
2.5x |
2.6x
2.0x |
2.2x
1.8x |
39.2x
35.0x |
31.5x
30.5x |
27.2x
26.2x |
Software Comps - Enterprise Apps
(in millions, except per share data)
| Company |
Stock
Price
(4/4/03) |
%of
52-Week
High |
Fully-Diluted
Equity
Value |
Net
Debt
(Cash) |
Enterprise
Value |
Enterprise Value/
Revenue Multiple |
P/E Ratio |
| LTM |
CY03 |
CY04 |
LTM |
CY03 |
CY04 |
| Oracle Corp. |
$11.38 |
85% |
561,712.9 |
($5,948.8) |
555,764.2 |
5.9x |
5.9x |
5.4x |
27.8x |
25.9x |
23.7x |
| IBM |
$80.32 |
77% |
$141,142.3 |
520,042.0 |
5161,184.3 |
2.0x |
1.8x |
n/a |
20.3x |
18.6x |
16.4x |
| Microsoft |
25.22 |
84% |
277,777.9 |
(43,424.0) |
234,353.9 |
7.6x |
7.1x |
6.6x |
25.9x |
25.1x |
21.6x |
Enterprise Applications Software
Competitors
*** Includes selection of major software enterprise applications
companies; not all are shown |
| Agile Software |
$6.66 |
55% |
$328.1 |
($261.8) |
$66.3 |
1.0x |
0.9x |
n/a |
nmf |
nmf |
nmf |
| Ariba |
3.27 |
1% |
895.3 |
(226.4) |
669.0 |
2.8x |
2.5x |
n/a |
40.9x |
36.3x |
n/a |
| Aspen Technology |
2.50 |
11% |
95.9 |
58.3 |
154.1 |
0.5x |
0.5x |
n/a |
nmf |
10.0x |
n/a |
| Cerner |
18.15 |
32% |
650.7 |
(6.3) |
657.0 |
0.9x |
0.8x |
0.7x |
13.0x |
18.2x |
9.9x |
| Datastream Systems |
6.75 |
72% |
137.4 |
(34.7) |
102.7 |
1.1x |
1.1x |
1.0x |
75.0x |
30.7x |
19.9x |
| FreeMarkets |
5.37 |
23% |
239.7 |
(132.2) |
107.5 |
0.6x |
0.7x |
n/a |
20.7x |
nmf |
20.7x |
| JDA Software |
8.96 |
25% |
256.4 |
(101.9) |
154.6 |
0.7x |
0.9x |
0.8x |
16.3x |
37.3x |
19.5x |
| J.D. Edwards |
11.60 |
65% |
1,403.5 |
(353.4) |
1,050.1 |
1.2x |
1.2x |
1.1x |
35.2x |
32.2x |
25.8x |
| Lawson Software |
4.82 |
40% |
540.4 |
(248.0) |
292.5 |
0.8x |
0.9x |
0.8x |
96.4 x |
nmf |
53.6x |
| Manhattan Associates |
19.54 |
49% |
614.5 |
(121.5) |
493.0 |
2.8x |
2.4x |
2.1x |
23.0x |
19.0x |
15.8x |
| Manugistics |
2.38 |
10% |
166.8 |
117.1 |
283.9 |
1.0x |
1.1x |
1.1x |
nmf |
nmf |
nmf |
| Mapics |
6.43 |
78% |
120.2 |
(11.4) |
108.7 |
0.9x |
n/a |
n/a |
13.4x |
n/a |
n/a |
| MRO Software |
7.13 |
47% |
174.1 |
(71.0) |
103.1 |
0.6x |
0.6x |
0.5x |
37.5x |
35.7x |
19.3x |
| PeopleSoft |
14.85 |
39% |
4,729.7 |
(1,907.5) |
2,822.2 |
1.4x |
1.5x |
1.4x |
24.8x |
23.6x |
20.6x |
| QAD Inc. |
4.74 |
95% |
174.6 |
(40.1) |
134.5 |
0.7x |
0.6x |
n/a |
nmf |
23.7x |
n/a |
| Retek |
5.65 |
20% |
301.1 |
(85.4) |
215.7 |
1.1x |
1.3x |
1.2x |
nmf |
nmf |
56.5x |
| SAP |
19.80 |
51% |
24,963.6 |
(770.6) |
24,193.0 |
3.1x |
3.0x |
2.7x |
25.4x |
21.8x |
18.9x |
| SCT Corp. |
6.80 |
43% |
228.6 |
23.6 |
205.0 |
0.8x |
0.8x |
n/a |
15.5x |
13.6x |
n/a |
|
Siebel Systems
|
7.74 |
23% |
4,040.8 |
(1,854.6) |
2,186.2 |
1.3x |
1.4x |
1.4x |
31.0x |
31.0x |
22.8x |
| Vastera |
4.09 |
27% |
169.6 |
(53.7) |
115.8 |
1.5x |
1.4x |
n/a |
nmf |
68.2x |
29.2x |
| |
Average
Median |
40%
40% |
|
|
|
1.2x
1.0x |
1.2x
1.1x |
1.2x
1.1x |
33.4x
25.1 x |
28.6x
27.2x |
25.6x
20.6x |
Overview of Potential Targets
(in millions, except per share data)
|
Company
|
Price
(4/4/03) |
% of
52-Week
High |
Equity
Value |
Cash |
Debt |
Enterprise
Value |
EV / Revenue |
P/E Ratio |
Oracle FY 2004 Impact (1) |
| LTM |
CY03 |
CY04 |
LTM |
CY03 |
CY04 |
Revenue
Contribution |
Accretion/
(Dilution) |
Pre-tax B/E
Synergies |
| Oracle Corp. |
$11.38 |
85% |
$61,712.9 |
$6,263.8 |
$315.1 |
$55.764.2 |
5.9x |
5.9x |
5.4x |
27.8x |
25.9x |
23.7s |
|
|
|
| Technology Acquisition Targets |
| BEA Systems |
$10.56 |
73% |
$4,481.2 |
$1,207.5 |
$559.2 |
$3.772.9 |
4.0x |
3.9x |
3.6x |
37.7x |
34.1x |
27.1x |
9.3% |
(5.3%) |
$186.3 |
| Sybase |
12.27 |
69% |
1,199.0 |
387.2 |
5.0 |
816.9 |
1.0x |
1.0x |
1.0x |
11.9x |
12.3x |
10.7x |
7.7% |
1.6% |
(57.1) |
| Documentum |
13.95 |
55% |
716.3 |
253.1 |
125.0 |
588.2 |
2.6x |
2.0x |
1.8x |
99.6x |
39.9x |
25.4x |
3.2% |
(0.8%) |
28.5 |
| Business Objects |
18.29 |
41% |
1,189.3 |
289.3 |
11.4 |
911.5 |
2.0x |
1.8x |
1.6x |
29.0x |
24.4x |
20.3x |
5.2% |
(0.3%) |
12.2 |
| Applications Acquisition Targets |
| J.D. Edwards |
$11.60 |
65% |
$1,403.5 |
$353.4 |
$0.0 |
$1,050.1 |
1.2x |
1.2x |
1.1x |
35.2x |
32.2x |
25.8x |
8.8% |
(1.1%) |
$40.4 |
| PeopleSoft |
14.85 |
39% |
4,729.7 |
1,907.5 |
0.0 |
2,822.2 |
1.4x |
1.5x |
1.4x |
24.8x |
23.6x |
20.6x |
16.8% |
(1.5%) |
54.5 |
| Lawson Software |
4.82 |
40% |
540.4 |
249.2 |
1.2 |
292.5 |
0.8x |
0.9x |
0.8x |
96.4x |
nmf |
53.6x |
3.4% |
(0.9%) |
31.5 |
| Cerner |
18.15 |
32% |
650.7 |
142.5 |
148.8 |
657.0 |
0.9x |
0.8x |
0.7x |
13.0x |
18.2x |
9.9x |
8.7% |
1.5% |
(51.8) |
| SCT Corp. |
6.80 |
43% |
228.6 |
57.3 |
33.8 |
205.0 |
0.8x |
0.8x |
n/a |
15.5x |
13.6x |
n/a |
2.5% |
0.1% |
(3.3) |
| |
Average
Median |
51%
43% |
|
|
|
|
1.6x
1.2x |
1.5x
1.2x |
1.5x
1.2x |
40.3x
29.0x |
24.8x
24.0x |
24.2x
23.0x |
7.3%
7.7% |
(0.8%)
(0.8%) |
$26.8
$28.5 |
(in millions, except employee data)
| |
|
Revenue |
Revenue Growth |
Licenses as %
of Revs |
Gross Margin |
EBIT Margin |
| Company |
Employees |
LTM |
CY03 |
CY04 |
CY02 |
CY03 |
CY04 |
LTM |
CY03 |
CY04 |
LTM |
CY03 |
CY04 |
LTM |
CY03 |
CY04 |
| Oracle Corp. |
40.389 |
$9,417 |
$9,497 |
$10,257 |
(12%) |
1% |
8% |
35% |
33% |
n/a |
75% |
75% |
n/a |
36% |
35% |
n/a |
| Technology Acquisition Targets |
| BEA Systems |
3,063 |
$934.1 |
S979.1 |
$1,044.0 |
(4%) |
5% |
7% |
55% |
52% |
53% |
79% |
79% |
79% |
17% |
19% |
21% |
| Sybase |
4,031 |
829.9 |
788.9 |
822.2 |
(10%) |
(5%) |
4% |
39% |
39% |
40% |
73% |
73% |
74% |
16% |
16% |
19% |
| Documentum |
1,155 |
226.9 |
297.5 |
333.5 |
22% |
31% |
12% |
52% |
55% |
57% |
73% |
75% |
77% |
3% |
9% |
10% |
| Business Objects |
2,162 |
454.8 |
495.0 |
570.0 |
9% |
9% |
15% |
54% |
50% |
51% |
84% |
84% |
84% |
12% |
14% |
15% |
| Applications Acquisition Targets |
| JD Edwards |
4.938 |
$905.7 |
$911.9 |
$952.0 |
1% |
1% |
4% |
25% |
26% |
27% |
60% |
59% |
59% |
6% |
7% |
8% |
| PeopleSoft |
8,293 |
1,948.9 |
1,897.0 |
2,020.8 |
(8%) |
(3%) |
7% |
27% |
22% |
23% |
63% |
61% |
61% |
13% |
14% |
15% |
| Lawson Software |
1,697 |
360.6 |
318.7 |
351.1 |
3% |
(21%) |
10% |
24% |
18% |
20% |
55% |
54% |
55% |
(1%) |
(0%) |
4% |
| Cerner |
4,791 |
751.9 |
852.0 |
999.0 |
39% |
13% |
17% |
44% |
42% |
43% |
78% |
76% |
78% |
12% |
8% |
12% |
| SCT Corp. |
1,600 |
245.1 |
271.5 |
n/a |
27% |
11% |
n/a |
17% |
n/a |
n/a |
38% |
n/a |
n/a |
9% |
n/a |
n/a |
| |
|
|
|
Average
Median |
9%
3% |
5%
5% |
10%
8% |
38%
39% |
18%
40% |
39%
41% |
67%
73% |
70%
74% |
71%
75% |
10%
12% |
11%
11% |
13%
13% |
Note: Projections provided by First Call for EPS estimates and Individual
research analysts for revenue estimates.
(1) Assumes cash acquisition at 40% premium to current price and no
changes to target's stand-alone finacials; based on LTM numbers for
SCTC due to lack of analyst coverage.
BEA Systems
BEA Systems - Company Overview
|
Description of Business
|
|
Ticker:
|
Public (Nasdaq: BEAS) |
| Headquarters: |
San Jose, CA |
| Employees: |
3,063 |
| Customers: |
13,500 |
| Management. |
Alfred Chuang (CEO) - BEAS Co-Founder, Sun Charles III (EVP
of Sales) - IBM
Olivier Helleboid (President of Products) - Rainfinity, HP |
| Products |
Java-based BEA WebLogic Platform components:
WebLogic Server - application server
WebLogic
Workshop - app development framework
WebLogic Integration
- integration tools
WebLogic Portal - unified
access
WebLogic JRockit - server-centric JVM
Liquid Data - enterprise information integration
|
| Business Mod Attributes: |
Sold primarily through direct channels, but
more than 40% of revenue influenced by indirect channels
Strongest verticals: government/transport/utilities,
financial services, telecom, service industries, high tech
Tuxedo product still ~15% of license revenue |
|
LTM REVENUE COMPONENTS
|
LTM REVENUE BY GEOGRAPHY
|
D
|
|
Financial Summary
|
| (in millions, except per share
data) |
Market Trading & Other Stats
|
| Price (04/04/03) |
$10.56
|
Fiscal Year End |
Jan. |
| LTM Hi/Low |
$14.45/$4.59 |
Long-Term EPS Growth |
20% |
| Equity Value |
$4,481.2
|
Cash |
$1,267.5 |
| Enterprise Value |
$3,772.9 |
Total Debt |
|
$559.2 |
| Financial Summary |
CY'01 |
CY'02 |
CY'03 |
CY'04 |
|
| Revenue |
$975.9 |
$934.1 |
$979.1 |
$1,044.0 |
| Growth Rate |
19% |
(4%) |
5% |
7% |
| License as % of Rev |
61% |
55% |
52% |
53% |
| Support as % of Rev |
24% |
33% |
35% |
35% |
| Gross Margin |
79% |
79% |
79% |
79% |
| Pro Forma EBIT Mrgn |
18% |
17% |
19% |
21% |
| Valuation Multiples |
|
CY'02 |
CY'03 |
CY'04 |
|
| EV / Revenue |
|
4.0x |
3.9x |
3.6x |
| P/E Ratio |
|
37.7x |
34.1x |
27.1x |
|
LTM Stock Price Performance
|
D
|
BEA Systems - Acquisition Rationale
|
Potential Upside
|
|
Potential Drawbacks
|
- Improve Oracle's competitive positioning in the middleware space
* Guarantees Oracle a spot in every RFP
* Leading alternative to IBM / MSFT
platform
- Consolidate customers that run Oracle database, yet purchased
BEA over last several years
* Customers get more integrated offering
- Increase developer mindshare Access strong
management talent
- Logical move that could be well received by the financial
community
|
|
- May cause significant sales disruption for both companies
- Entrenched management team unlikely to welcome acquisition offer
- Face significant personnel reductions and restructuring charges
- One of the more expensive acquisition alternatives available
* Requires significant synergies for EPS accretion
|
BEA Systems - Combination Analysis
|
- Assumes no adjustments to target entity's
and-alone financial model
|
Oracle Multiples for Comparison: |
|
|
| LTM Revenue |
5.9x |
LTM P/E |
27.8x |
| CY'03 Revenue |
5.9x |
CY'03 P/E |
25.9x |
| CY'04 Revenue |
5.4x |
CY'04 P/E |
23.7x |
(in millions, except per share data)
|
BEAS Purchase Price / Purchase Premium
|
| |
$10.56 |
$11.62 |
$12.67 |
$13.73 |
$14.78 |
$15.84 |
$16.90 |
$17.95 |
$19.01 |
$20.06 |
$21.12 |
| |
0% |
10% |
20% |
30% |
40% |
50% |
60% |
70% |
80% |
90% |
100% |
|
| Market Value |
$4,481.2 |
$4,942.3 |
$5,414.4 |
$5,887.4 |
$6,360.4 |
$6,833.4 |
$7,306.5 |
$7,779.5 |
$8,252.5 |
$8,726.9 |
$9,206.4 |
| Enterprise Value |
$3,772.9 |
$4,234.0 |
$4,706.1 |
$5,179.1 |
$5,652.1 |
$6,125.2 |
$6,598.2 |
$7,071.2 |
$7,544.2 |
$8,018.6 |
$8,498.1 |
| Stand-Alone Financials: |
| LTM Revenue |
$934.1 |
LTM EBIT
Margin |
17.4% |
LTM EPS |
$0 28 |
| CY'03 Revenue |
$979.1 |
CY'03 EBIT Margin |
18.8% |
CY'03 EPS |
$0.31 |
| CY'04 Revenue |
$1,044.0 |
CY'04 EBIT Margin |
20.6% |
CY'04 EPS |
$0.39 |
|
| Multiples: |
| LTM Revenue |
4.0x |
4.5x |
5.0x |
5.5x |
6.1x |
6.6x |
7.1x |
7.6x |
8.1x |
8.6x |
9.1x |
| CY'03 Revenue |
3.9x |
4.3x |
4.8x |
5.3x |
5.8x |
6.3x |
6.7x |
7.2x |
7.7x |
8.2x |
8.7x |
| CY'04 Revenue |
3.6x |
4.1x |
4 5x |
5.0x |
5.4x |
5.9x |
6.3x |
6.8x |
7.2x |
7.7x |
8.1x |
| LTM P/E |
37.7x |
41.5x |
45.3x |
49.0x |
52.8x |
56.6x |
60.3x |
64.1x |
67.9x |
71.7x |
75.4x |
| CY'03 P/E |
34.1x |
37.5x |
40.9x |
44.3x |
47.7x |
51.1x |
54.5x |
57.9x |
61.3x |
64.7x |
68.1x |
| CY'04 P/E |
27.1x |
29.8x |
32.5x |
35.2x |
37.9x |
40.6x |
43.3x |
46.0x |
48.7x |
51.4x |
54.2x |
| ORACLE IMPACT (1) |
| Cash Acquisition: |
| FY'04 EPS Accretion / (Dilution) |
(1.6%) |
(2.5%) |
(3.4%) |
(4.3%) |
(5.3%) |
(6.2%) |
(7.1%) |
(8.1%) |
(9.0%) |
(9.9%) |
(10.9%) |
| B/E Required Pretax Synergies |
$56.8 |
$88.1 |
$119.9 |
$153.1 |
$186.3 |
$219.6 |
$252.8 |
$286.1 |
$319.3 |
$352.5 |
$386.8 |
| Required EBIT Margin |
25.1% |
28.3% |
31.5% |
34.9% |
38.2% |
41.6% |
44.9% |
48.3% |
51.6% |
55.0% |
58.5% |
| Stock Acquisition: |
| FY'04 EPS Accretion / (Dilution) |
(5.8%) |
(7.0%) |
(8.2%) |
(9.4%) |
(10.6%) |
(11.9%) |
(13.0%) |
(14.2%) |
(15.4%) |
(16.5%) |
(17.6%) |
| B/E Required Pretax Synergies |
$219.7 |
$267.7 |
$316.7 |
$367.1 |
$417.6 |
$468.0 |
$518.4 |
$568.9 |
$619.3 |
$669.7 |
$721.4 |
| Required EBIT Margin |
41.6% |
46.4% |
51.4% |
56.5% |
61.6% |
66.7% |
71.7% |
76.8% |
81.9% |
87.0% |
92.2% |
Note: Combination analysis adds 1.5% of transaction-based
expenses and 10.0% of cash acquisition-related charges.
(1) Financial Impact based on Oracle fiscal year -ending May 31, 2004
Sybase
Sybase - Company Overview
|
Description of Business
|
| Ticker: |
Public (NYSE: SY) |
| Headquarters: |
Dublin, CA |
| Employees: |
3,917 |
| Customers: |
45,000 |
| Management. |
John Chen (CEO) - Unisys, Pyramid Tech, Siemens
Michael Bealmer (EVP of Sales) - Covansys, Spear Tech
Wain Beard (GM of Americas) - IBM, Oracle |
| Products |
Enterprise Solutions Division (ESD) - core RDBMS
E-Business
Division (EBD) - application integration -products, app server,
dev tools, and portal technology - Claims 200k+ developers
iAnywhere Solutions - mobile & embedded databases
Business Intell (BI) Division - data warehousing products
Financial Fusion - financial/banking vertical applications |
| Business Mod Attributes: |
Runs each division as separate P/L
Contemplating spinning
out iAnywhere as new entity
2,000 partners influenced
40% of deals in last year
Government is 20-25% of revenue |
| LTM REVENUE BY DIVISION |
LTM REVENUE COMPONENTS |
D
|
|
Financial Summary
|
| (in millions, except per share
data) |
Market Trading & Other Stats
|
| Price (04/04/03) |
$12.27
|
Fiscal Year End |
Dec. |
| LTM Hi/Low |
$17.72/$9.15 |
Long-term EPS Growth |
15% |
| Equity Value |
$1,199.0
|
Cash |
$387.2 |
| Enterprise Value |
$816.9 |
Total Debt |
|
$5.0 |
| Financial Summary |
CY'01 |
CY'02 |
CY'03 |
CY'04 |
|
| Revenue |
$926.7 |
$829.9 |
$788.9 |
$822.2 |
| Growth Rate |
(4%) |
(10%) |
(5%) |
4% |
| License as % of Rev |
42% |
39% |
39% |
40% |
| Support as % of Rev |
n/a |
n/a |
n/a |
n/a |
| Gross Margin |
71% |
73% |
73% |
74% |
| Pro Forma EBIT Mrgn |
13% |
16% |
16% |
19% |
| Valuation Multiples |
|
CY'02 |
CY'03 |
CY'04 |
|
| EV / Revenue |
|
1.0x |
1.0x |
1.0x |
| P/E Ratio |
|
11.9x |
12.3x |
10.7x |
|
LTM Stock Price Performance
|
D
|
Sybase - Acquisition Rationale
|
Potential Upside
|
|
Potential Drawbacks
|
- Last viable RDBMS vendor for consolidation, with 45,000 customers
on active maintenance
* 96% renewal rate
* Applications served are business critical
- Market share leader (73%) in mobile database offerings
- Provides additional talent in APAC where SY has shown strong
growth
- Attractive operating margins already built as stand-alone business
- Accretive transaction even when there are substantial negative
revenue synergies
|
|
- Substantial % of SY customers will naturally replace with
Oracle over time w/out need to acquire the company
* However, acquisition may ensure more choose Oracle due to
account influence
- Incompatible database technologies where more customers may
migrate to SQL Server than Oracle
- Does not provide growth prospects outside of the mobile
database products
- Combination of different divisions that have little in common
- Preannounced lower-than-expected results for Q1 (ending 3/31/03)
as deals across all product lines slipped
- Significant personnel reductions and restructuring charges
required
|
Sybase - Combination Analysis
|
- Assumes no adjustments to target entity's
stand-alone financial model
|
Oracle Multiples for Comparison: |
|
|
| LTM Revenue |
5.9x |
LTM P/E |
27.8x |
| CY'03 Revenue |
5.9x |
CY'03 P/E |
25.9x |
| CY'04 Revenue |
5.4x |
CY'04 P/E |
23.7x |
(in millions except per share data)
|
SY Purchase Price / Purchase Premium
|
| |
$12.27 |
$13.50 |
$14.72 |
$15.95 |
$17.18 |
$18.41 |
$19.63 |
$20.86 |
$22.09 |
$23.31 |
$24.54 |
| |
0% |
10% |
20% |
30% |
40% |
50% |
60% |
70% |
80% |
90% |
100% |
|
| Market Value |
$1,199.0 |
$1,330.1 |
$1,464.1 |
$1,598.1 |
$1,732.1 |
$1,866.2 |
$2,000.2 |
$2,137.5
|
$2,278.7 |
$2,419.9 |
$2,561.1 |
| Enterprise Value |
$816.9 |
$948.0 |
$1,082.0 |
$1,216.0 |
$1,350.0 |
$1,484.0 |
$1,618.0 |
$1,755.3 |
$1,896.5 |
$2,037.7 |
$2,178.9 |
| Stand-alone Financials: |
| LTM Revenue |
$829.9 |
LTM EBIT
Margin |
15.5% |
LTM EPS |
$1.03 |
| CY'03 Revenue |
$788.9 |
CY'03 EBIT Margin |
16.5% |
CY'03 EPS |
$1.00 |
| CY'04 Revenue |
$822.2 |
CY'04 EBIT Margin |
19.1% |
CY'04 EPS |
$1.15 |
|
| Multiples: |
| LTM Revenue |
1.0x |
1.1x |
1.3x |
1.5x |
1.6x |
1.8x |
1.9x |
2.1x |
2.3x |
2.5x |
2.6x |
| CY'03 Revenue |
1.0x |
1.2x |
1.4x |
1.5x |
1.7x |
1.9x |
2.1x |
2.2x |
2.4x |
2.6x |
2.8x |
| CY'04 Revenue |
1.0x |
1.2x |
1.3x |
1.5x |
1.6x |
1.8x |
2.0x |
2.1x |
2.3x |
2.5x |
2.7x |
| LTM P/E |
11.9x |
13.1x |
14.3x |
15.5x |
16.7x |
17.9x |
19.1x |
20.3x |
21.4x |
22.6x |
23.8x |
| CY'03 P/E |
12.3x |
13.5x |
14.7x |
16.0x |
17.2x |
18.4x |
19.6x |
20.9x |
22.1x |
23.3x |
24.5x |
| CY'04 P/E |
10.7x |
11.7x |
12.8x |
13.9x |
14.9x |
16.0x |
17.1x |
18.1x |
19.2x |
20.3x |
21.3x |
| ORACLE IMPACT (1) |
| Cash Acquisition: |
| FY'04 EPS Accretion / (Dilution) |
2.7% |
2.4% |
2.2% |
1.9% |
1.6% |
1.3% |
1.1% |
0.8% |
0.5% |
0.2% |
(0.1%) |
| B/E Required Pretax Synergies |
($95.6) |
($86.3) |
($76.8) |
($67.0) |
($57.1) |
($47.3) |
($37.5) |
($26.9) |
($16.2) |
($5.5) |
$5.2 |
| Required EBIT Margin |
6.0% |
7.1 % |
8.3% |
9.5% |
10.7% |
12.0% |
13.2% |
14.5% |
15.8% |
17.2% |
18.5% |
| Stock Acquisition: |
| FY'04 EPS Accretion / (Dilution) |
1.4% |
1.0% |
0.6% |
0.2% |
(0.2%) |
(0.6%) |
(1.0%) |
(1.4%) |
(1.8%) |
(2.2%) |
(2.7%) |
| B/E Required Pretax Synergies |
($52.0) |
($38.0) |
($23.6) |
($8.9) |
$5.8 |
$20.5 |
$35.3 |
$50.8 |
$66.6 |
$82.4 |
$98.3 |
| Required EBIT Margin |
11.4% |
13.1% |
14.9% |
16.7% |
18.6% |
20.4% |
22.2% |
24.1% |
26.1% |
28.1% |
30.0% |
Note: Combination analysis adds 1.5% of transaction-based
expenses and 10.0% of cash acquisition-related charges.
(1) Financial Impact based on Oracle fiscal year-ending May 31, 2004.
Sybase - Combination ADJUSTED
Sybase - Combination Analysis
|
- Adjustments to stand-alone financials to
reflect revenue loss and expense reductions
as a combined entity
|
Oracle Multiples for Comparison: |
|
|
| LTM Revenue |
5.9x |
LTM P/E |
27.8x |
| CY'03 Revenue |
5.9x |
CY'03 P/E |
25.9x |
| CY'04 Revenue |
5.4x |
CY'04 P/E |
23.7x |
(in millions except per share data)
|
SY Purchase Price / Purchase Premium
|
| |
$12.27 |
$13.50 |
$14.72 |
$15.95 |
$17.18 |
$18.41 |
$19.63 |
$20.86 |
$22.09 |
$23.31 |
$24.54 |
| |
0% |
10% |
20% |
30% |
40% |
50% |
60% |
70% |
80% |
90% |
100% |
|
| Market Value |
$1,199.0 |
$1,330.1 |
$1,464.1 |
$1,598.1 |
$1,732.1 |
$1,866.2 |
$2,000.2 |
$2,137.5 |
$2,278.7 |
$2,419.9 |
$2,561.1 |
| Enterprise Value |
$816.9 |
$948.0 |
$1,082.0 |
$1,216.0 |
$1,350.0 |
$1,484.0 |
$1,618.0 |
$1,755.3 |
$1,896.5 |
$2,037.7 |
$2,178.9 |
|
Adjusted SY Financials for Oracle FY'04:
- Assumes 70% loss of license revenue (and
associated cost of license); reflects lack of new sales going
forward
- Assumes 40% loss of services revenue (and
associated 65% reduction in cost of services); reflects lack
of prof services revenue tag-along to licenses
- Assumes 60% reduction in operating expenses;
reflects cost synergies from consolidating operations and reducing
headcount
| |
Stand-alone |
Adj. |
Pro Forma |
| FY04 Revenue |
$805.6 |
($417.3) |
$388.3 |
| Expenses: |
|
|
|
| FY'04 Cost of Revenue |
$214.5 |
($141.2) |
$73.3 |
| FY'04 Op Expenses |
$447.4 |
($268.4) |
$179.0 |
| FY04 Pro Forma EBIT |
$143.7 |
|
$136.0 |
| EBIT Margin |
17.8% |
|
35.0% |
|
| ORACLE IMPACT (1) |
| Cash Acquisition: |
| FY'04 EPS Accretion / (Dilution) |
2.4% |
2.1% |
1.9% |
1.6% |
1.4% |
1.1% |
0.9% |
0.7% |
0.4% |
0.2% |
(0.1%) |
| B/E Required Pretax Synergies |
($84.3) |
($75.6) |
($66.9) |
($58.2) |
($49.4) |
($40.7) |
($32.0) |
($23.3) |
($14.5) |
($5.8) |
$2.9 |
| Required EBIT Margin |
13.3% |
15.6% |
17.8% |
20.1% |
22.3% |
24.5% |
26.8% |
29.0% |
31.3% |
33.5% |
35.8% |
| Stock Acquisition: |
| FY'04 EPS Accretion / (Dilution) |
1.1% |
0.8% |
0.4% |
0.0% |
(0.4%) |
(0.7%) |
(1.1%) |
(1.5%) |
(1.8%) |
(2.2%) |
(2.6%) |
| B/E Required Pretax Synergies |
($40.8) |
($27.2) |
($13.6) |
($0.1) |
$13.5 |
$27.1 |
$40.7 |
$54.3 |
$67.9 |
$81.5. |
$95.1 |
| Required EBIT Margin |
24.5% |
28.0% |
31.5% |
35.0% |
38.5% |
42.0% |
45.5% |
49.0% |
52.5% . |
56.0% |
59.5% |
Note: Combination analysis adds 1.5% of transaction-based
expenses and 10.0% of cash acquisition-related charges.
(1) Financial Impact based on Oracle fiscal year-ending May 31, 2004.
Documentum
Documentum - Company Overview
|
Description of Business
|
| Ticker: |
Public (Nasdaq: DCTM) |
| Headquarters: |
Pleasanton, CA |
| Employees: |
1.155(135 sales reps) |
| Customers: |
2,441 |
| Management. |
Dave DeWalt (CEO) - Oracle, Seque, Eventus, Quest
Jeffrey Beir (EVP of WW Products) - eRoom, IBM, Lotus
Michael DeCesare (EVP of Field Ops) - Oracle, Asera |
| Products |
Enterprise Content Management
Document management - documents, spreadsheets,. contracts,
drawings
Web content management - HTML, SGML, WML, XML
Digital asset management - images, sounds, videos, presentations
Fixed content management - reports, records, scanning,
imaging, final form storage
Collaboration content management
- projects, discussions, desktop sharing, online meetings
|
| Business Model Attributes: |
Direct - 75%; indirect - 13%; government - 12%
Maintenance
is 30% of revenue; 85%+ renewal rate
New customers
are 25-35% as % of revenue
ASP on deals - $275-350k |
|
LTM REVENUE BY DIVISION
|
LTM REVENUE COMPONENTS
|
D
|
|
Financial Summary
|
| (in millions, except per share
data) |
Market Trading & Other Stats
|
| Price (04/04/03) |
$13.95
|
Fiscal Year End |
Dec. |
| LTM Hi/Low |
$25.40/$8.67 |
Long-term EPS Growth |
25% |
| Equity Value |
$716.3
|
Cash |
$253.1 |
| Enterprise Value |
$588.2 |
Total Debt |
|
$125.0 |
| Financial Summary |
CY'01 |
CY'02 |
CY'03 |
CY'04 |
|
| Revenue |
$185.7 |
$226.9 |
$297.5 |
$333.5 |
| Growth Rate |
(6%) |
(22%) |
(31%) |
12% |
| License as % of Rev |
47% |
52% |
55% |
57% |
| Support as % of Rev |
n/a |
n/a |
n/a |
n/a |
| Gross Margin |
70% |
73% |
75% |
77% |
| Pro Forma EBIT Mrgn |
(17%) |
3% |
9% |
10% |
| Valuation Multiples |
|
CY'02 |
CY'03 |
CY'04 |
|
| EV / Revenue |
|
2.6x |
2.0x |
1.8x |
| P/E Ratio |
|
99.6x |
39.9x |
25.4x |
|
LTM Stock Price Performance
|
D
|
Documentum - Acquisition Rationale
|
Potential Upside
|
|
Potential Drawbacks
|
- Consistent with Oracle's message of centralized data administration
and security
- Gain acknowledged leader in enterprise content management
(ECM), which is currently a very fragmented market
- Access the largest dedicated, knowledgeable sales
force within ECM
- Focus on regulated industries and government fits strategically
with Oracle
- Product set built to leverage the Oracle technology stack
- Compete effectively against IBM
- Accretive transaction with relatively minor operating synergies
|
|
- Released major rev of product (Documentum 5) in 9/02 in which
ongoing stability is still uncertain
- Lacks key references in certain verticals where competition
is stronger
- Overlap with Oracle technologies (iFS, iMeeting) Headcount
also to be rationalized
- Has made several acquisitions that it is still digesting
(integration risk) and are boosting revenue growth (valuation
risk)
* eRoom for $100mm in 12/02 - built on MSFT technologies
* TrueArc for $3.6mm in 11 /02
* Boxcar for $1.3mm in 1/02
|
Documentum - Combination Analysis
|
|
Oracle Multiples for Comparison: |
|
|
| LTM Revenue |
5.9x |
LTM P/E |
27.8x |
| CY'03 Revenue |
5.9x |
CY'03 P/E |
25.9x |
| CY'04 Revenue |
5.4x |
CY'04 P/E |
23.7x |
(in millions except per share data)
|
DCTM Purchase Price / Purchase Premium
|
| |
$13.95 |
$15.35 |
$16.74 |
$18.14 |
$19.53 |
$20.93 |
$22.32 |
$23.72 |
$25.11 |
$26.51 |
$27.90 |
| |
0% |
10% |
20% |
30% |
40% |
50% |
60% |
70% |
80% |
90% |
100% |
|
| Market Value |
$716.3 |
$794.7 |
$874.9 |
$956.8 |
$1,040.3 |
$1,123.8 |
$1,210.1 |
$1,296.5 |
$1,382.9 |
$1,469.3 |
$1,556.9 |
| Enterprise Value |
$588.2 |
S666.7 |
$746.8 |
$828.7 |
$912.2 |
$995.7 |
$1,082.0 |
$1,168.4 |
$1,254.8 |
$1,341.2 |
$1,428.8 |
| Stand-alone Financials: |
| LTM Revenue |
$226.9 |
LTM EBIT
Margin |
3.2% |
LTM EPS |
$0.14 |
| CY'03 Revenue |
$297.5 |
CY'03 EBIT Margin |
8.8% |
CY'03 EPS |
$0.35 |
| CY'04 Revenue |
$333.5 |
CY'04 EBIT Margin |
10.2% |
CY'04 EPS |
$0.55 |
|
| Multiples: |
| LTM Revenue |
2.6x |
2.9x |
3.3x |
3.7x |
4.0x |
4.4x |
4.8x |
5.1x |
5.5x |
5.9x |
6.3x |
| CY'03 Revenue |
2.0x |
2,2x |
2.5x |
2.8x |
3.1x |
3.3x |
3.6x |
3.9x |
4.2x |
4.5x |
4.8x |
| CY'04 Revenue |
1.8x |
2.0x |
2.2x |
2.5x |
2.7x |
3.0x |
3.2x |
3.5x |
3.8x |
4.0x |
4.3x |
| LTM P/E |
99.6x |
109.6x |
119.6x |
129.5x |
139.5x |
149.5x |
159.4x |
169.4x |
179.4x |
189.3x |
199.3x |
| CY'03 P/E |
39.9x |
43.8x |
47.8x |
51.8x |
55.8x |
59.8x |
63.8x |
67.8x |
71.7x |
75.7x |
79.7x |
| CY'04 P/E |
25.4x |
27.9x |
30.4x |
33.0x |
35.5x |
38.0X |
40.6X |
43.1x |
45.7x |
48.2x |
50.7x |
| ORACLE IMPACT (1) |
| Cash Acquisition: |
| FY'04 EPS Accretion / (Dilution) |
(0.1%) |
(0.3%) |
(0.5%) |
(0.6%) |
(0.8%) |
(1.0%) |
(1.2%) |
(1.4%) |
(1.5%) |
(1.7%) |
(1.9%) |
| B/E Required Pretax Synergies |
$4.9 |
$10.5 |
$16.2 |
$22.2 |
$28.5 |
$34.8 |
$41.4 |
$48.1 |
$54.7 |
$61.4 |
$68.3 |
| Required EBIT Margin |
11.1% |
12.8% |
14.6% |
16.5% |
18.5% |
20.5% |
22.6% |
24.6% |
26.7% |
28.8% |
31.0% |
| Stock Acquisition: |
| FY'04 EPS Accretion / (Dilution) |
(0.9%) |
(1.1%) |
(1.3%) |
(1.6%) |
(1.8%) |
(2.1%) |
(2.4%) |
(2.6%) |
(2.9%) |
(3.2%) |
(3.4%) |
| B/E Required Pretax Synergies |
$31.0 |
$39.4 |
$48.0 |
$57.0 |
$66.3 |
$75.6 |
$85.4 |
$95.2 |
$105.0 |
$114.8 |
$124.9 |
| Required EBIT Margin |
19.3% |
21.9% |
24.6% |
27.5% |
30.4% |
33.3% |
36.4% |
39.5% |
42.6% |
45.7% |
48.8% |
Note: Combination analysis adds 1.5% of transaction-based
expenses and 10.0% of cash acquisition-related charges.
(1) Financial Impact based on Oracle fiscal year-ending May 31, 2004.
Business Objects
Business Objects - Company Overview
|
Description of Business
|
| Ticker: |
Public (NASDAQ BOBJ) |
| Headquarters: |
Dual HQ: France and San Jose, CA |
| Employees: |
2,162 (323 sales reps) (34% of FTEs in France) |
| Customers: |
17,000 |
| Management. |
Bernard Liautaud (CEO) - BOBJ Founder, Oracle
John Olsen (COO) - Marimba, Cadence, KPMG
Herve Couturier (SVP of Products) - S1 Corp, IBM, Xrt |
| Products |
End-user business intelligence:
Query, reporting & analysis
- creating and running analytic reports and queries
Portal
and broadcasting - Bl information dissemination
Analytic applications:
Analytic engines for custom-developed end-user apps
Prepackaged
analytic applications
Data integration tools and packaged
solutions |
| Business Model Attributes: |
Total ASP of $40k, with 5 deals >$1mm in last quarter
New customer ASP closer to $400-600k
46% of sales attributable to indirect channels |
|
LTM REVENUE BY DIVISION
|
LTM REVENUE COMPONENTS
|
D
|
|
Financial Summary
|
| (in millions, except per share
data) |
Market Trading & Other Stats
|
| Price (04/04/03) |
$18.29 |
Fiscal Year End |
Dec |
| LTM Hi/Low |
$44.25/$8.96 |
Long-term EPS Growth |
15% |
| Equity Value |
$1,189.3 |
Cash |
$289.3 |
| Enterprise Value |
$911.5 |
Total Debt |
|
$11.4 |
| Financial Summary |
CY'01 |
CY'02 |
CY'03 |
CY'04 |
|
| Revenue |
$415.8 |
$454.8 |
$495.0 |
$570.0 |
| Growth Rate |
19% |
9% |
9% |
15% |
| License as % of Rev |
60% |
54% |
50% |
51% |
| Support as % of Rev |
n/a |
n/a |
n/a |
n/a |
| Gross Margin |
84% |
84% |
84% |
84% |
| Pro Forma EBIT Mrgn |
16% |
12% |
14% |
15% |
| Valuation Multiples |
|
CY'02 |
CY'03 |
CY'04 |
|
| EV / Revenue |
|
2.0x |
1.8x |
1.6 |
| P/E Ratio |
|
29.0x |
24.4x |
20.3 |
|
LTM Stock Price Performance
|
D
|
Business Objects - Acquisition Rationale
|
Potential Upside
|
|
Potential Drawbacks
|
- BI/analytics remains a top spending priority
* Key beachhead in apps business
- Gain additional presence and enthusiasm in the Bl / analytics
space
* #1 in end-user query & reporting tools
* #7 in
OLAP tools, but strength on desktop
- Strong partnership in place between companies that would
dovetail naturally with acquisition
- Distinct sales force that sells Bl well and can leverage
the Oracle installed base
- Quality financial results with attractive operating margins
- Accretive transaction with relatively minor operating synergies
|
|
- Despite movement of personnel to U.S. for dual HQ, still have
French offices and local stock listing
* 735 of 2,162 FTEs (34%) in France
- Preparing to launch latest rev of end-user Bl product set
(Tosca), with timing under pressure due to pending Cognos
release
* Web-based product achieves 80% of functionality
of client/server product
- Has been slower to the emerging analytical applications /
corporate performance management (CPM) market
- Could lose BOBJ customers that desire a database-agnostic
vendor
- Difficult choices in combining offerings and reducing headcount
- Still digesting acquisition of Acta (ETL vendor) for $65mm
in 7/02
|
Business Objects - Combination Analysis
|
|
Oracle Multiples for Comparison: |
|
|
| LTM Revenue |
5.9x |
LTM P/E |
27.8x |
| CY'03 Revenue |
5.9x |
CY'03 P/E |
25.9x |
| CY'04 Revenue |
5.4x |
CY'04 P/E |
23.7x |
(in millions except per share data)
|
BOBJ Purchase Price / Purchase Premium
|
| |
$18.29 |
$20.12 |
$21.95 |
$23.78 |
$25.61 |
$27.44 |
$29.26 |
$31.09 |
$32.92 |
$34.75 |
$36.58 |
| |
0% |
10% |
20% |
30% |
40% |
50% |
60% |
70% |
80% |
90% |
100% |
|
| Market Value |
$1,189.3 |
$1,311.3 |
$1,434.0 |
$1,556.9 |
$1,679.8 |
$1,802.6 |
$1,925.5 |
$2,048.4 |
$2,172.2 |
$2,296.8 |
$2,421.8 |
| Enterprise Value |
$911.5 |
$1,033.5 |
$1,156.2 |
$1,279.1 |
$1,401.9 |
$1,524.8 |
$1,647.7 |
$1,770.6 |
$1,894.4 |
$2,019.0 |
$2,143.9 |
| Stand-alone Financials: |
| LTM Revenue |
$454.8 |
LTM EBIT
Margin |
$454.8 |
LTM EPS |
$0.63 |
| CY'03 Revenue |
$495.0 |
CY'03 EBIT Margin |
$495.0 |
CY'03 EPS |
$0.75 |
| CY'04 Revenue |
$570.0 |
CY'04 EBIT Margin |
$570.0 |
CY'04 EPS |
$0.90 |
|
| Multiples: |
| LTM Revenue |
2.0x |
2.3x |
2.5x |
2.8x |
3.1x |
3.4x |
3.6x |
3.9x |
4.2x |
4.4x |
4.7x |
| CY'03 Revenue |
1.8x |
2.1x |
2.3x |
2.6x |
2.8x |
3.1x |
3.3x |
3.6x |
3.8x |
4.1x |
4.3x |
| CY'04 Revenue |
1.6x |
1.8x |
2.0x |
2.2x |
2.5x |
2.7x |
2.9x |
3.1x |
3.3x |
3.5x |
3.8x |
| LTM P/E |
29.0x |
31.9x |
34.8x |
37.7x |
40.6x |
43.5x |
46.5x |
49.4x |
52.3x |
55.2x |
58.1x |
| CY'03 P/E |
24.4x |
26.8x |
29.3x |
31.7x |
34.1x |
36.6x |
39.0x |
41.5x |
43.9x |
46.3x |
48.8x |
| CY'04 P/E |
20.3x |
22.4x |
24.4x |
26.4x |
28.5x |
30.5x |
32.5x |
34.5x |
36.6x |
38.6x |
40.6x |
| ORACLE IMPACT (1) |
| Cash Acquisition: |
| FY'04 EPS Accretion / (Dilution) |
0.6% |
0.4% |
0.1% |
(0.1%) |
(0.3%) |
(0.6%) |
(0.8%) |
(1.0%) |
(1.3%) |
(1.5%) |
(1.8%) |
| B/E Required Pretax Synergies |
($20.8) |
($12.6) |
($4.3) |
$4.0 |
$12.2 |
$20.5 |
$28.8 |
$37.1 |
$45.4 |
$53.9 |
$62.6 |
| Required EBIT Margin |
10.8% |
12.4% |
13.9% |
15.5% |
17.0% |
18.6% |
20.2% |
21.7% |
23.3% |
24.9% |
26.5% |
| Stock Acquisition: |
| FY'04 EPS Accretion / (Dilution) |
(0.6%) |
(1.0%) |
(1.3%) |
(1.7%) |
(2.0%) |
(2.4%) |
(2.7%) |
(3.0%) |
(3.4%) |
(3.7%) |
(4.1%) |
| B/E Required Pretax Synergies |
$22.5 |
$35.1 |
$47.8 |
$60.6 |
$73.3 |
$86.0 |
$98.8 |
$111.5 |
$124.4 |
$137.4 |
$150.6 |
| Required EBIT Margin |
19.0% |
21.3% |
23.7% |
26.1% |
28.5.% |
30.9% |
33.3% |
35.7% |
38.1% |
40.6% |
- 43.0% |
Note: Combination analysis adds 1.5% of transaction-based
expenses and 10.0% of cash acquisition-related charges.
(1) Financial Impact based on Oracle fiscal year-ending May 31, 2004.
JD Edwards
JD Edwards - Company Overview
|
Description of Business
|
| Ticker: |
Public (NASDAQ: JDEC) |
| Headquarters: |
Denver, CO |
| Employees: |
4,938 (1,100+ in dev, 262 sales reps) |
| Customers: |
5,650 (54% in US , 6% in Canada, 8% in Latin America, 20%
in EMEA, and 12% in APAC)
1/3 industrial, 1/3 consumer, 1/3 services
|
| Management. |
Bob Dutkowsky (CEO) -Teradyne, GenRad, EMC, IBM
Harry Debes (SVP of Sales) - GEAC, Jonas & Erickson
Mike Madden (CTO) - Digital Equipment Corp. |
| Products |
JD Edwards 5 / OneWorld - client/server / web-based ERP
2,150 of total customers
Suite includes financials, logistics,
manufacturing, SCM, APS, CRM, and state & local gov't
WorldSoftware - AS/400-based ERP product line
4,500 of total
customers
Treated as cash cow with little additional improvements
Has seen little to no migration over past 5 years
Provides indefinite support |
| Business Model Attributes: |
85% direct /15% indirect (mostly at the low-end and in
certain geographies)
80% of JDE 5 deals are Unix/Windows
80% of implementations done through SI partners |
| (in millions, except per customer
data)
Vendor
|
LTM License Revenue |
License Revenue Growth |
#of Customers |
|
| SAP |
$2,440.6 |
(11%) |
19,000 |
| Oracle (1) |
604.7 |
(21%) |
15,000 |
| PeopleSoft |
530.1 |
(18%) |
4,900 |
| JD Edwards |
229.9 |
(1%) |
6,650 |
| Lawson Software |
87.2 |
(47%) |
2,000 |
|
|
Financial Summary
|
| (in millions, except per share
data) |
Market Trading & Other Stats
|
| Price (04/04/03) |
$11.60 |
Fiscal Year End |
Oct. |
| LTM Hi/Low |
$17.77/$8.18 |
Long-term EPS Growth |
17% |
| Equity Value |
$1,403.5 |
Cash |
$353.4 |
| Enterprise Value |
$1,050.1 |
Total Debt |
|
$0.0 |
| Financial Summary |
CY'01 |
CY'02 |
CY'03 |
CY'04 |
|
| Revenue |
$894.3 |
$905.7 |
$911.9 |
$952.0 |
| Growth Rate |
(11%) |
1% |
1% |
4% |
| License as % of Rev |
30% |
25% |
26% |
27% |
| Support as % of Rev |
n/a |
n/a |
n/a |
n/a |
| Gross Margin |
57% |
60% |
59% |
59% |
| Pro Forma EBIT Mrgn |
2% |
6% |
7% |
8% |
| Valuation Multiples |
|
CY'02 |
CY'03 |
CY'04 |
|
| EV / Revenue |
|
1.2x |
1.2x |
1.1x |
| P/E Ratio |
|
35.2x |
32.2x |
25.8x |
|
LTM Stock Price Performance
|
D
|
(1) Oracle figures represent new software licenses; growth rates based
on 3 quarters only due to accounting change.
JD Edwards - Acquisition Rationale
|
Potential Upside
|
|
Potential Drawbacks
|
- Increase apps customer base to over 21,000 (versus 19,000
for SAP)
- Addition of strong mid-market presence
- Encourage more use of Oracle technology versus IBM
- Early in the upgrade cycle on JDE 5 makes migration point
to Oracle EBS attractive
- Over $250mm of annual maintenance dollars, with 70-80% gross
margins and 95% renewal rates
* Also historically underpriced
in the range of 13-16% of net license cost
|
|
- Around 4,500 of the company's 6,650 customers are AS/400-based
* Represents <15% of new license sales
* Challenge to sell outsourcing
- Running two different product sets increases support costs
- Struck a middleware deal with IBM that incorporates their
software in every deal
* Need to clarify ongoing relationship
given the AS/400 background
- Recent executive management changes will make convincing
on M&A harder
* Has expressed willingness to talk in the
past based on fiduciary duty only
- Strain current Oracle management -significant personnel
changes and restructuring required
|
JD Edwards - Combination Analysis
|
|
Oracle Multiples for Comparison: |
|
|
| LTM Revenue |
5.9x |
LTM P/E |
27.8x |
| CY'03 Revenue |
5.9x |
CY'03 P/E |
25.9x |
| CY'04 Revenue |
5.4x |
CY'04 P/E |
23.7x |
(in millions except per share data)
|
JDEC Purchase Price / Purchase Premium
|
| |
$11.60 |
$12.76 |
$13.92 |
$15.08 |
$16.24 |
$17.40 |
$18.56 |
$19.72 |
$20.88 |
$22.04 |
$23.20 |
| |
0% |
10% |
20% |
30% |
40% |
50% |
60% |
70% |
80% |
90% |
100% |
|
| Market Value |
$1,403.5 |
$1,553.3 |
$1,703.1 |
$1,852.9 |
$2,004.8 |
$2,158.6 |
$2,312.4 |
$2,466.1 |
$2,619.9 |
$2,773.6 |
$2,927.4 |
| Enterprise Value |
$1,050.1 |
$1,199.9 |
$1,349.7 |
$1,499.5 |
$1,651.4 |
$1,805.2 |
$1,959.0 |
$2,112.7 |
$2,266.5 |
$2,420.3 |
$2,574.0 |
| Stand-alone Financials: |
| LTM Revenue |
$905.7 |
LTM EBIT
Margin |
6.4% |
LTM EPS |
$0.33 |
| CY'03 Revenue |
$911.9 |
CY'03 EBIT Margin |
6.9% |
CY'03 EPS |
$0.36 |
| CY'04 Revenue |
$952.0 |
CY'04 EBIT Margin |
8.4% |
CY'04 EPS |
$0.45 |
|
| Multiples: |
| LTM Revenue |
1.2x |
1.3x |
1.5x |
1.7x |
1.8x |
2.0x |
2.2x |
2.3x |
2.5x |
2.7x |
2.8x |
| CY'03 Revenue |
1.2x |
1.3x |
1.5x |
1.6x |
1.8x |
2.0x |
2.1x |
2.3x |
2.5x |
2.7x |
2.8x |
| CY'04 Revenue |
1.1x |
1.3x |
1.4x |
1.6x |
1.7x |
1.9x |
2.1x |
2.2x |
2.4x |
2.5x |
2.7x |
| LTM P/E |
35.2x |
38.7x |
42.2x |
45.7X |
49.2x |
52.7x |
56.2x |
59.8x |
63.3x |
66.8x |
70.3x |
| CY'03 P/E |
32.2x |
35.4x |
38.7x |
41.9x |
45.1x |
48.3x |
51.6x |
54.8x |
58.0x |
61.2x |
64.4x |
| CY'04 P/E |
25.8x |
28.4x |
30.9x |
33.5x |
36.1x |
38.7x |
41.2x |
43.8x |
46.4x |
49.0x |
51.6x |
| ORACLE IMPACT (1) |
| Cash Acquisition: |
| FY'04 EPS Accretion / (Dilution) |
0.1% |
(0.2%) |
(0.5%) |
(0.8%) |
(1.1%) |
(1.5%) |
(1.8%) |
(2.1%) |
(2.4%) |
(2.7%) |
(3.0%) |
| B/E Required Pretax Synergies |
($2.1) |
$8.3 |
$19.0 |
$29.6 |
$40.4 |
$51.6 |
$62.8 |
$74.0 |
$85.3 |
$96.5 |
$107.7 |
| Required EBIT Margin |
7.1% |
8.2% |
9.4% |
10.5% |
11.7% |
12.9% |
14.1% |
15.3% |
16.5% |
17.7% |
18.9% |
| Stock Acquisition: |
| FY'04 EPS Accretion / (Dilution) |
(1.3%) |
(1.8%) |
(2.2%) |
(2.7%) |
(3.1%) |
(3.5%) |
(4.0%) |
(4.4%) |
(4.9%) |
(5.3%) |
(5.8%) |
| B/E Required Pretax Synergies |
$49.0 |
$64.8 |
$80.9 |
$97.0 |
$113.2 |
$130.1 |
$146.9 |
$163.7 |
$180.5 |
$197.3 |
$214.2 |
| Required EBIT Margin |
12.6% |
14.3% |
16.0% |
17.8% |
19.5% |
21.3% |
23.1% |
24.9% |
26.7% |
28.5% |
30.4% |
JD Edwards - Combination ADJUSTED
|
- Adjustments to stand-alone financials to
reflect revenue loss and expense reductions
as a combined entity
|
Oracle Multiples for Comparison: |
|
|
| LTM Revenue |
5.9x |
LTM P/E |
27.8x |
| CY'03 Revenue |
5.9x |
CY'03 P/E |
25.9x |
| CY'04 Revenue |
5.4x |
CY'04 P/E |
23.7x |
(in millions except per share data)
|
JDEC Purchase Price / Purchase Premium
|
| |
$11.60 |
$12.76 |
$13.92 |
$15.08 |
$16.24 |
$17.40 |
$18.56 |
$19.72 |
$20.88 |
$22.04 |
$23.20 |
| |
0% |
10% |
20% |
30% |
40% |
50% |
60% |
70% |
80% |
90% |
100% |
|
| Market Value |
$1,403.5 |
$1,553.3 |
$1,703.1 |
$1,852.9 |
$2,004.8 |
$2,158.6 |
$2,312.4 |
$2,466.1 |
$2,619.9 |
$2,773.6 |
$2,927.4 |
| Enterprise Value |
$1,050.1 |
$1,199.9 |
$1,349.7 |
$1,499.5 |
$1,651.4 |
$1,805.2 |
$1,959.0 |
$2,112.7 |
$2,266.5 |
$2,420.3 |
$2,574.0 |
|
Adjusted JDEC Financials for Oracle FY'04:
- Assumes 70% loss of license revenue (and associated
cost of license); reflects lack of new sales going forward
- Assumes 40% loss of services revenue (and
associated 65% reduction in cost of services); reflects lack
of prof services revenue tagalong to licenses
- Assumes 60% reduction in operating expenses;
reflects cost synergies from consolidating operations and reducing
headcount
| |
Stand-alone |
Adj. |
Pro Forma |
| FY04 Revenue |
$931.0 |
($446.8) |
$484.2 |
| Expenses: |
|
|
|
| FY'04 Cost of Revenue |
$385.1 |
($252.5) |
$132.6 |
| FY'04 Op Expenses |
$477.5 |
($286.5) |
$191.0 |
| FY04 Pro Forma EBIT |
$68.4 |
|
$160.6 |
| EBIT Margin |
7.3% |
|
33.2% |
|
| ORACLE IMPACT (1) |
| Cash Acquisition: |
| FY'04 EPS Accretion / (Dilution) |
2.6% |
2.3% |
2.0% |
1.7% |
1.5% |
1.2% |
0.9% |
0.6% |
0.3% |
0.1% |
(0.2%) |
| B/E Required Pretax Synergies |
($91.9) |
($81.9) |
($71.9) |
($61.8) |
($51.8) |
($41.8) |
($31.8) |
($21.8) |
($11.8) |
($1.8) |
$8.2 |
| Required EBIT Margin |
14.2% |
16.3% |
18.3% |
20.4% |
22.5% |
24.5% |
26.6% |
28.7% |
30.7% |
32.8% |
34.9% |
| Stock Acquisition: |
| FY'04 EPS Accretion / (Dilution) |
1.1% |
0.7% |
0.3% |
(0.1%) |
(0.6%) |
(1.0%) |
(1.4%) |
(1.8%) |
(2.3%) |
(2.7%) |
(3.1%) |
| B/E Required Pretax Synergies |
($41.3) |
($25.7) |
($10.1) |
$5.4 |
$21.0 |
$36.6 |
$52.2 |
$67.8 |
$83.4 |
$99.0 |
$114.6 |
| Required EBIT Margin |
24.6% |
27.8% |
31.1% |
34.3% |
37.5% |
40.7% |
44.0% |
47.2% |
50.4% |
53.6% |
56.8% |
Note: Combination analysis adds 1.5% of transaction-based
expenses and 10.0% of cash acquisition-related charges.
(1) Financial Impact based on Oracle fiscal year-ending May 31, 2004.
PeopleSoft
PeopleSoft - Company Overview
|
Description of Business
|
| Ticker: |
Public (NASDAQ: PSFT) |
| Headquarters: |
Pleasanton, CA |
| Employees: |
8.293 (42% - svcs, 29% - R&D, 19% - S&M, 10% - G&A) |
| Customers: |
4.856 (75% >$300mm, 25% $50-$300mm in size) |
| Management. |
Craig Conway (CEO) - OneTouch, TGV Software, Oracle
Phil Wilmington (EVP of Americas) - Trinet, Tesseract
Ram Gupta (EVP of Products) - Silicon Graphics, IBM |
| Products |
190 different modules in the following categories .
PeopleSoft CRM
PeopleSoft Financial Management
PeopleSoft Enterprise Service Automation
PeopleSoft Human Capital Management
PeopleSoft Supply Chain Management
PeopleSoft Enterprise Performance Mgmt - analytics
PeopleSoft App Connect - portal, integration & warehouse
PeopleSoft Student Administration - higher ed processes |
| Business Model Attributes: |
60-65% of revenue from North America
Sales force split
into HR, Financials, SCM and CRM
Indirect channels primarily
for mid-market
Best verticals have been hi-tech and fin
services |
| (in millions, except per customer
data)
Vendor
|
LTM License Revenue |
License Revenue Growth |
#of Customers |
|
| SAP |
$2,440.6 |
(11%) |
19,000 |
| Oracle (1) |
604.7 |
(21%) |
15,000 |
| PeopleSoft |
530.1 |
(18%) |
4,900 |
| J.D. Edwards |
229.9 |
(1%) |
6,650 |
| Lawson Software |
87.2 |
(47%) |
2,000 |
|
|
Financial Summary
|
| (in millions, except per share
data) |
Market Trading & Other Stats
|
| Price (04/04/03) |
$14.85 |
Fiscal Year End |
Dec. |
| LTM Hi/Low |
$37.62/$11.75 |
Long-Term EPS Growth |
15% |
| Equity Value |
$4,729.7 |
Cash |
$1,907.5 |
| Enterprise Value |
$2,822.2 |
Total Debt |
|
$0.0 |
| Financial Summary |
CY'01 |
CY'02 |
CY'03 |
CY'04 |
|
| Revenue |
$2,119.1 |
$1,948.9 |
$1,897.0 |
$2,020.8 |
| Growth Rate |
22% |
(8%) |
(3%) |
7% |
| License as % of Rev |
30% |
27% |
22% |
23% |
| Support as % of Rev |
n/a |
n/a |
n/a |
n/a |
| Gross Margin |
58% |
63% |
61% |
61% |
| Pro Forma EBIT Mrgn |
12% |
13% |
14% |
15% |
| Valuation Multiples |
|
CY'02 |
CY'03 |
CY'04 |
|
| EV / Revenue |
|
1.4X |
1.5x |
1.4x |
| P/E Ratio |
|
24.8x |
23.6x |
20.6x |
|
LTM Stock Price Performance
|
D
|
(1) Oracle figures represent new software licenses; growth rates based
on 3 quarters only due to accounting change.
PeopleSoft - Acquisition Rationale
|
Potential Upside
|
|
Potential Drawbacks
|
- Combination creates stronger ability to compete successfully
with SAP 1
* Also CRM suite could be more competitive against Siebel
- Complementary expertise - Oracle in supply chain management
/ planning and PSFT in HR, higher Ed and services
- Addition of loyal customer
base of 4,900
* Combined total of almost 20,000
- Significant
% of customers run on the Oracle database
- Location of HQ in
Bay area will make management transition smoother
|
|
- May cause significant sales disruption for both companies
- Company is in later stages of migrations to PeopleSoft 8
* Over 50% have upgraded or are in the process of upgrading
- Preannounced lower-than-expected results for Q1 (ending 3/31/03)
as license deals slipped due to macro economy
- Has used aggressive accounting historically
- Strain current Oracle management -significant personnel changes
and restructuring required
- Substantial negative revenue synergies quickly erodes operating
synergies and reduces likelihood of EPS accretion
|
PeopleSoft - Combination Analysis
|
|
Oracle Multiples for Comparison: |
|
|
| LTM Revenue |
5.9x |
LTM P/E |
27.8x |
| CY'03 Revenue |
5.9x |
CY'03 P/E |
25.9x |
| CY'04 Revenue |
5.4x |
CY'04 P/E |
23.7x |
(in millions except per share data)
|
PSFT Purchase Price / Purchase Premium
|
| |
$14.85 |
$16.34 |
$17.82 |
$19.31 |
$20.79 |
$22.28 |
$23.76 |
$25.25 |
$26.73 |
$28.22 |
$29.70 |
| |
0% |
10% |
20% |
30% |
40% |
50% |
60% |
70% |
80% |
90% |
100% |
|
| Market Value |
$4,7297
|
$5,232.0
|
$5,737,3 |
$6,257.6 |
$6,777.8 |
$7,298.1 |
$7,818.4 |
$8,367.5 |
$8,930.5 |
$9,493.5 |
$10,056.5 |
| Enterprise Value |
$2,822.2 |
$3,324.5 |
$3,829.8 |
$4,350.1 |
$4,870.3 |
$5,390.6 |
$5,910.8 |
$6,460.0 |
$7,023.0 |
$7,586.0 |
$8,149.0 |
| Stand-Alone Financials: |
| LTM Revenue |
$1,948.9 |
LTM EBIT
Margin |
13.5% |
LTM EPS |
13.5% |
| CY'03 Revenue |
$1,897.0 |
CY'03 EBIT Margin |
13.5% |
CY'03 EPS |
13.5% |
| CY'04 Revenue |
$2,020.8 |
CY'04 EBIT Margin |
14.6% |
CY'04 EPS |
14.6% |
|
| Multiples: |
| LTM Revenue |
1.4x |
1.7x |
2.0x |
2.2x |
2.5X |
2.8x |
3.0x |
3.3x |
3.6x |
3.9x |
4.2x |
| CY'03 Revenue |
1.5x |
1.8x |
2.0x |
2,3x |
2.6x |
2.8x |
3.1x |
3.4x |
3.7x |
4.0x |
4.3x |
| CY'04 Revenue |
1.4x |
1.6x |
1.9x |
2.2x |
2.4x |
2.7x |
2.9x |
3.2x |
3.5x |
3.8x |
4.0x |
| LTM P/E |
24.8x |
27.2x |
29.7x |
32.2x |
34.7x |
37.1x |
39.6X |
42.1x |
44.6x |
47.0X |
49.5X |
| CY'03 P/E |
23.6x |
25.9x |
28.3x |
30.6x |
33.0x |
35.4X |
37.7X |
40.1x |
42.4X |
44.8x |
47.1x |
| CY'04 P/E |
20.6x |
22.7x |
24.8x |
26.8x |
28.9x |
30.9x |
33.0x |
35.1x |
37.1x |
39.2x |
41.3x |
| ORACLE IMPACT (1) |
| Cash Acquisition: |
| FY'04 EPS Accretion / (Dilution) |
2.4% |
1.5% |
0.5% |
(0.5%) |
(1.5%) |
(2.6%) |
(3.6%) |
(4.7%) |
(5.9%) |
(7.1%) |
(8.2%) |
| B/E Required Pre-Tax Synergies |
($86.2) |
($52.4) |
($17.9) |
$18.3 |
$54.5 |
$90.7 |
$127.0 |
$165.8 |
$208.1 |
$250.3 |
$292.6 |
| Required EBIT Margin |
9.7% |
11.4% |
13.1% |
15.0% |
16.8% |
18.7% |
20.5% |
22.5% |
24.7% |
26.8% |
29.0% |
| Stock Acquisition: |
| FY'04 EPS Accretion / (Dilution) |
(2.2%) |
(3.6%) |
(4.9%) |
(6.3%) |
(7.6%) |
(9.0%) |
(10.3%) |
(11.6%) |
(13.1%) |
(14.5%) |
(15.9%) |
| B/E Required Pretax Synergies |
$85.7 |
$137.8 |
$190.7 |
$245.8 |
$300.9 |
$356.1 |
$411.2 |
$470.0 |
$532.7 |
$595.5 |
$658.2 |
| Required EBIT Margin |
18.4% |
21.1% |
23.8% |
26.6% |
29.4% |
32.2% |
35.0% |
38.0% |
41.2% |
44.4% |
47.6% |
Note: Combination analysis adds 1.5% of transaction-based
expenses and 10.0% of cash acquisition-related charges.
(1) Financial Impact based on Oracle fiscal year-ending May 31, 2004.
PeopleSoft - Combination ADJUSTED
|
- Adjustments to stand-alone financials to
reflect revenue loss and expense reductions
as a combined entity
|
Oracle Multiples for Comparison: |
|
|
| LTM Revenue |
5.9x |
LTM P/E |
27.8x |
| CY'03 Revenue |
5.9x |
CY'03 P/E |
25.9x |
| CY'04 Revenue |
5.4x |
CY'04 P/E |
23.7x |
(in millions except per share data)
|
PSFT Purchase Price / Purchase Premium
|
| |
$14.85 |
$16.34 |
$17.82 |
$19.31 |
$20.79 |
$22.28 |
$23.76 |
$25.25 |
$26.73 |
$28.22 |
$29.70 |
| |
0% |
10% |
20% |
30% |
40% |
50% |
60% |
70% |
80% |
90% |
100% |
|
| Market Value |
$4,729,7 |
$5,232.0 |
$5,737.3 |
$6,257.6 |
$6,777.8 |
$7,298.1 |
$7,818.4 |
$8,367.5 |
$8,930.5 |
$9,493.5 |
$10,056.5 |
| Enterprise Value |
$2,822.2 |
$3,324.5 |
$3,829.8 |
$4,350.1 |
$4,870.3 |
$5,390.6 |
$5,910.8 |
$6,460.0 |
$7,023.0 |
$7,586.0 |
$8,149.0 |
|
Adjusted PSFT Financials for Oracle FY'04:
-
Assumes 70% loss of license revenue (and
associated cost of license); reflects lack of new sales going
forward
-
Assumes 40% loss of services revenue (and
associated 65% reduction in cost of services); reflects lack
of prof services revenue tag-along to licenses
-
Assumes 60% reduction in operating expenses;
reflects cost synergies from consolidating operations and
reducing headcount
| |
Stand-alone |
Adj. |
Pro Forma |
| FY04 Revenue |
$1,961.9 |
($918.9) |
$1,043.0 |
| Expenses: |
|
|
|
| FY'04 Cost of Revenue |
$766.7 |
($500.1) |
$266.6 |
| FY'04 Op Expenses |
$919.3 |
($551.6) |
$367.7 |
| FY04 Pro Forma EBIT |
$275.9 |
|
$4088 |
| EBIT Margin |
14.1% |
|
39.2% |
|
| ORACLE IMPACT (1) |
| Cash Acquisition: |
| FY'04 EPS Accretion / (Dilution) |
6.0% |
5.1% |
4.1% |
3.2% |
2.2% |
1.3% |
0.3% |
(0.7%) |
(1.6%) |
(2.6%) |
(3.5%) |
| B/E Required Pretax Synergies |
($213.8) |
($179.9) |
($146.1) |
($112.2) |
($78.3) |
($44.5) |
($10.6) |
$23.2 |
$57.1 |
$91.0 |
$124.8 |
| Required EBIT Margin |
18.7% |
21.9% |
25.2% |
28.4% |
31.7% |
34.9% |
38.2% |
41.4% |
44.7% |
47.9% |
51.2% |
| Stock Acquisition: |
| FY'04 EPS Accretion / (Dilution) |
1.1% |
(0.3%) |
(1.6%) |
(2.9%) |
(4.3%) |
(5.6%) |
(6.8%) |
(8.1%) |
(9.3%) |
(10.5%) |
(11.7%) |
| B/E Required Pretax Synergies |
($43.0) |
$9.7 |
$62.5 |
$115.3 |
$168.1 |
$220.8 |
$273.6 |
$326.4 |
$379.2 |
$431.9 |
$484.7 |
| Required EBIT Margin |
35.1% |
40.1% |
45.2% |
50.2% |
55.3% |
60.4% |
65.4% |
70.5% |
75.5% |
80.6% |
85.7% |
Note: Combination analysis adds 1.5% of transaction-based
expenses and 10.0% of cash acquisition-related charges.
(1) Financial Impact based on Oracle fiscal year-ending May 31, 2004.
Lawson Software
Lawson Software - Company Overview
|
Description of Business
|
| Ticker: |
Public (Nasdaq: LWSN) |
| Headquarters: |
St. Paul, MN |
| Employees: |
1,697 (102 sales reps) (91% of employees in U.S.) |
| Customers: |
2,000 active out of 4,100 total
10% >$1bn, 30% = $250mm-$1bn, 70% <$250mm
50% on Unix, 25% on NT, 25% on AS/400
Over 50% running an Oracle database
|
| Management. |
Jay Coughlan (CEO) - At LWSN for last 15 years
Eric Morgan (GM of Health Care) - Global Turnkey, NCR
Dean Hager (EVP of Products) - IBM |
| Products: |
Suite includes financials, HR, procurement, SA/PSA, distribution,
and analytics/budgeting
| Financials |
HR |
Procurement |
Distribution |
CRM |
| General Ledger |
Benefits admin |
Requisition |
Order entry |
Sales (SEBL) |
| [unreadable text] accounting |
Payoff |
Payables management |
Work order |
Service (SEBL) |
| [unreadable text] ledger |
Absence mgmt |
Purchase order |
Warehouse |
Marketing (SEBL) |
| Consolidation |
Pay-to-bill |
e-Procurement |
[unreadable text] |
|
| Asset mgmt |
HR analysis |
|
Franchise mgmt |
|
| [unreadable text] |
e-Recruiting |
|
Merchandising |
|
| [unreadable text] accounting |
|
|
Stop operations |
|
| Cash & treasury management |
|
|
Replenishment |
|
|
Business Model
Attributes: |
94% of revenue from US, 4% from EMEA, 2% Canada
ASP averages ~$250k; partners influence 20% of deals
|
| (in millions, except per customer
data)
Vendor
|
LTM License Revenue |
License Revenue Growth |
# of Customers |
|
| SAP |
$2,440.6 |
(11%) |
19,000 |
| Oracle (1) |
604.7 |
(21%) |
15,000 |
| PeopleSoft |
530.1 |
(18%) |
4,900 |
| JD Edwards |
229.9 |
(1%) |
6,650 |
| Lawson Software |
87.2 |
(47%) |
2,000 |
|
|
Financial Summary
|
| (in millions, except per share
data) |
Market Trading & Other Stats
|
| Price (04/04/03) |
$4.82 |
Fiscal Year End |
May |
| LTM Hi/Low |
$11.98/$3.00 |
Long-term EPS Growth |
10% |
| Equity Value |
$540.4 |
Cash |
$249.2 |
| Enterprise Value |
$292.5 |
Total Debt |
|
$1.2 |
| Financial Summary |
CY'01 |
CY'02 |
CY'03 |
CY'04 |
|
| Revenue |
$388.0 |
$360.6 |
$318.7 |
$351.1 |
| Growth Rate |
9% |
(18%) |
(21%) |
10% |
| License as % of Rev |
36% |
24% |
18% |
20% |
| Support as % of Rev |
n/a |
n/a |
n/a |
n/a |
| Gross Margin |
60% |
55% |
54% |
55% |
| Pro Forma EBIT Mrgn |
8% |
(1%) |
(0%) |
4% |
| Valuation Multiples |
|
CY'02 |
CY'03 |
CY'04 |
|
| EV / Revenue |
|
0.8x |
0.9x |
0.8x |
| P/E Ratio |
|
96.4x |
nmf |
53.6x |
|
LTM Stock Price Performance
|
D
|
(1) Oracle figures represent new software licenses;
growth rates based on 3 quarters only due to accounting change.
Lawson Software - Acquisition Rationale
|
Potential Upside
|
|
Potential Drawbacks
|
- Focus on mid-market services sector is complementary to Oracle's
strengths
* Health care is strongest vertical (21% of customer base)
* Others include retail (12%), prof svcs (8%), fin svcs (8%)
& public sector (6%)
- Significant vertical expertise on staff
- Nearly 70% of customers haven't upgraded to latest version
of LWSN
- Company has not focused on upselling existing customers
- Opportunity to increase maintenance revenue due to underpricing
as well as chance to recapture lost customers
- Relatively few code changes required to provide customer
migration path
* Willing to leverage Oracle technologies
|
|
- Company has had worst performance of all major enterprise
apps vendors since going public
* Lack of ability to manage operations to meet expectations
- Majority concentration of ownership puts M&A decision
in hands of founders
- High concentration of 3rd party products (-15%), and provides
1st and 2nd level support on a few of them
- Cultural differences exist
- Significant personnel reductions and restructuring charges
required
- Management has in the past been stubborn on valuation requirements
|
Lawson Software - Combination Analysis
|
|
Oracle Multiples for Comparison: |
|
|
| LTM Revenue |
5.9x |
LTM P/E |
27.8x |
| CY'03 Revenue |
5.9x |
CY'03 P/E |
25.9x |
| CY'04 Revenue |
5.4x |
CY'04 P/E |
23.7x |
(in millions except per share data)
|
LWSN Purchase Price / Purchase Premium
|
| |
$4.82 |
$5.30 |
$5.78 |
$6.27 |
$6.75 |
$7.23 |
$7.71 |
$8.19 |
$8.68 |
$9.16 |
$9.64 |
| |
0% |
10% |
20% |
30% |
40% |
50% |
60% |
70% |
80% |
90% |
100% |
|
| Market Value |
$540.4 |
$600.4 |
$661.7 |
$722.9 |
$784.3 |
$845.6 |
$907.0 |
$968.4 |
$1,029.7 |
$1,091.1 |
$1,152.5 |
| Enterprise Value |
$292.5 |
$352.5 |
$413.7 |
$474.9 |
$5363 |
$597.7 |
$659.0 |
$720.4 |
$781.8 |
$843.2 |
$904.5 |
| Stand-alone Financials: |
| LTM Revenue |
$360.6 |
LTM EBIT
Margin |
(0.8%) |
LTM EPS |
$0 05 |
| CY'03 Revenue |
$318.7 |
CY'03 EBIT Margin |
(0.2%) |
CY'03 EPS |
$0 02 |
| CY'04 Revenue |
$351.1 |
CY'04 EBIT Margin |
3.5% |
CY'04 EPS |
$0 09 |
|
| Multiples: |
| LTM Revenue |
0.8x |
1.0x |
1.1x |
1.3x |
1.5x |
1.7x |
1.8x |
2.0x |
2.2x |
2.3x |
2.5x |
| CY'03 Revenue |
0.9x |
1.1x |
1.3x |
1.5x |
1.7x |
1.9x |
2.1x |
2.3x |
2.5x |
2.6x |
2.8x |
| CY'04 Revenue |
0.8x |
1.0x |
1.2x |
1.4x |
1.5x |
1.7x |
1.9x |
2.1x |
2.2x |
2.4x |
2.6x |
| LTM P/E |
96.4x |
106.0x |
115.7x |
125.3x |
135.0x |
144.6x |
154.2x |
163.9x |
173.5x |
183.2x |
192.8x |
| CY'03 P/E |
241.0x |
265.1x |
289.2x |
313.3x |
337.4x |
36 1.5x |
385.6x |
409.7x |
433.8x |
457.9x |
482.0x |
| CY'04 P/E |
53.6x |
58.9x |
64.3x |
69.6x |
75.0x |
80.3x |
85.7x |
91.0x |
96.4x |
101.8x |
107.1x |
| ORACLE IMPACT (1) |
| Cash Acquisition: |
| FY'04 EPS Accretion / (Dilution) |
(0.3%) |
(0.5%) |
(0.6%) |
(0.7%) |
(0.9%) |
(1.0%) |
(1.2%) |
(1.3%) |
(1.5%) |
(1.6%) |
(1.7%) |
| B/E Required Pretax Synergies |
$12.1 |
$16.5 |
$21.5 |
$26.5 |
$31.5 |
$36.5 |
$41.5 |
$46.5 |
$51.5 |
$56.5 |
$61.5 |
| Required EBIT Margin |
6.3% |
7.6% |
9.1% |
10.5% |
12.0% |
13.5% |
15.0% |
16.4% |
17.9% |
19.4% |
20.9% |
| Stock Acquisition: |
| FY'04 EPS Accretion / (Dilution) |
(0.9%) |
(1.1%) |
(1.3%) |
(1.5%) |
(1.7%) |
(1.9%) |
(2.1%) |
(2.3%) |
(2.5%) |
(2.7%) |
(2.9%) |
| B/E Required Pretax Synergies |
$31.8 |
$38.4 |
$45.6 |
$52.8 |
$60.0 |
$67.2 |
$74.4 |
$81.7 |
$88.9 |
$96.1 |
$103.4 |
| Required EBIT Margin |
12.1% |
14.1% |
16.2% |
18.3% |
20.4% |
22.6% |
24.7% |
26.8% |
29.0% |
31.1% |
33.3% |
Note: Combination analysis adds 1.5% of transaction-based
expenses and 10.0% of cash acquisition-related charges.
(l) Financial Impact based on Oracle fiscal year-ending May 31. 2004.
Lawson Software - Combination ADJUSTED
|
- Adjustments to stand-alone financials to
reflect revenue loss and expense reductions
as a combined entity
|
Oracle Multiples for Comparison: |
|
|
| LTM Revenue |
5.9x |
LTM P/E |
27.8x |
| CY'03 Revenue |
5.9x |
CY'03 P/E |
25.9x |
| CY'04 Revenue |
5.4x |
CY'04 P/E |
23.7x |
(in millions except per share data)
|
LWSN Purchase Price / Purchase Premium
|
| |
$4.82 |
$5.30 |
$5.78 |
$6.27 |
$6.75 |
$7.23 |
$7.71 |
$8.19 |
$8.68 |
$9.16 |
$9.64 |
| |
0% |
10% |
20% |
30% |
40% |
50% |
60% |
70% |
80% |
90% |
100% |
|
| Market Value |
$540.4 |
$600.4 |
$661,7 |
$722.9 |
$784.3 |
$845.6 |
$907.0 |
$968.4 |
$1,029.7 |
$1,0911 |
$1,152.5 |
| Enterprise Value |
$292.5 |
$352.5 |
$413.7 |
$474.9 |
$536.3 |
$597.7 |
$659.0 |
$720.4 |
$781.8 |
$843.2 |
$904.5 |
|
Adjusted PSFT Financials for Oracle FY'04:
-
Assumes 70% loss of license revenue (and
associated cost of license); reflects lack of new sales going
forward
-
Assumes 40% loss of services revenue (and
associated 65% reduction in cost of services); reflects lack
of prof services revenue tagalong to licenses
-
Assumes 60% reduction in operating expenses;
reflects cost synergies from consolidating operations and
reducing headcount
| |
Stand-alone |
Adj. |
Pro Forma |
| FY04 Revenue |
$338.5 |
($155.4) |
$183.1 |
| Expenses: |
|
|
|
| FY'04 Cost of Revenue |
$151.7 |
($99.1) |
$52.6 |
| FY'04 Op Expenses |
$177.6 |
($106.6) |
$71.0 |
| FY04 Pro Forma EBIT |
$9.2 |
|
$59.5 |
| EBIT Margin |
2.7% |
|
32.5% |
|
| ORACLE IMPACT (1) |
| Cash Acquisition: |
| FY'04 EPS Accretion / (Dilution) |
1.0% |
0.9% |
0.8% |
0.6% |
0.5% |
0.4% |
0.3% |
0.2% |
0.1% |
(0.0%) |
(0.1%) |
| B/E Required Pretax Synergies |
($34.8) |
($30.8) |
($26.8) |
($22.8) |
($18.8) |
($14.8) |
($10.8) |
($6.8) |
($2.8) |
$1.2 |
$5.2 |
| Required EBIT Margin |
13.5% |
15.7% |
17.8% |
20.0% |
22.2% |
24.4% |
26.6% |
28.8% |
30.9% |
33.1% |
35.3% |
| Stock Acquisition: |
| FY'04 EPS Accretion / (Dilution) |
0.4% |
0.2% |
0.1% |
(0.1%) |
(0.3%) |
(0.4%) |
(0.6%) |
(0.8%) |
(1.0%) |
(1.1%) |
(1.3%) |
| B/E Required Pretax Synergies |
($15.2) |
($9.0) |
($2.7) |
$3.5 |
$9.7 |
$16.0 |
$22.2 |
$28.4 |
$34.6 |
$40.9 |
$47.1 |
| Required EBIT Margin |
24.2% |
27.6% |
31.0% |
34.4% |
37.8% |
41.2% |
44.6% |
48.0% |
51.4% |
54.8% |
58.2% |
Note: Combination analysis adds 1.5% of transaction-based
expenses and 10.0% of cash acquisition-related charges.
(1) Financial Impact based on Oracle fiscal year-ending May 31, 2004.
Cerner
Cerner - Company Overview
|
Description of Business
|
| Ticker: |
Public (NASDAQ: CERN) |
| Headquarters: |
Kansas City, MO |
| Employees: |
4,791 (33% in software development) |
| Customers: |
1,500 |
| Management. |
Neal Patterson (CEO) - CERN Founder, Arthur Andersen
Trace Devanny (President) - ADAC Health, IBM
Doug Krebs (SVP of S&M) - IBM |
| Products: |
Cerner Millenium HCIS solutions:
Enterprise repositories - health care data repositories
Enterprise-wide solutions - access mgmt, care mgmt,
financials, document mgmt, health information mgmt
Clinical
- points-of-care mgmt systems (ER, acute, etc.), pharmacy
mgmt, radiology systems, lab info systems
Decision support
- data warehouse for health care
Consumer - Internet-based
health care community
Packaged solutions - physician order-entry,
revenue cycle management
Health care organizations - solutions
for specific groups
Technologies - code toolkit, app integration,
portal |
| (in millions) |
|
|
|
|
|
|
|
|
| |
Q1'01 |
Q2'01 |
Q3'01 |
Q4'01 |
Q1'02 |
Q2'02 |
Q3'02 |
Q4'02 |
|
| Bookings |
$117 |
$128 |
$131 |
$150 |
$172 |
$178 |
$183 |
$202 |
| Y-over-Y Growth |
23% |
37% |
34% |
32% |
47% |
40% |
40% |
35% |
| Backlog |
$666 |
$711 |
$749 |
$788 |
$850 |
$918 |
$956 |
$1,002 |
| Y-over-Y Growth |
24% |
26% |
27% |
26% |
28% |
29% |
28% |
27% |
| Revenue |
$121 |
$130 |
$140 |
$152 |
$175 |
$181 |
$190 |
$206 |
| Y-over-Y Growth |
39% |
39% |
34% |
27% |
45% |
39% |
36% |
36% |
|
|
Financial Summary
|
| (in millions, except per share
data) |
Market Trading & Other Stats
|
| Price (04/04/03) |
$18.15 |
Fiscal Year End |
Dec. |
| LTM Hi/Low |
$57.05/$17.44 |
Long-term EPS Growth |
30% |
| Equity Value |
$650.7 |
Cash |
$142.5 |
| Enterprise Value |
$657.0 |
Total Debt |
|
$148.8 |
| Financial Summary |
CY'01 |
CY'02 |
CY'03 |
CY'04 |
|
| Revenue |
$542.4 |
$751.9 |
$852.0 |
$999.0 |
| Growth Rate |
34% |
39% |
13% |
17% |
| License as % of Rev |
45% |
44% |
42% |
43% |
| Support as % of Rev |
n/a |
n/a |
n/a |
n/a |
| Gross Margin |
79% |
78% |
76% |
78% |
| Pro Forma EBIT Mrgn |
11% |
12% |
8% |
12% |
| Valuation Multiples |
|
CY'02 |
CY'03 |
CY'04 |
|
| EV / Revenue |
|
0.9x |
0.8x |
0.7x |
| P/E Ratio |
|
13.0x |
18.2x |
9.9x |
|
LTM Stock Price Performance
|
D
|
Cerner - Acquisition Rationale
|
Potential Upside
|
|
Potential Drawbacks
|
- Gain clear leader in health care market
* Industry-wide / government push to eliminate medical error
and reduce costs of health care delivery
- Has shown tremendous revenue growth
* 30% CAGR from 1999-2002
* Built in backlog has topped $1 billion, but shortfall announced
on 4/3/03
- Significant vertical expertise on staff
- Product set runs
on the Oracle database
- Additive to Oracle given relatively minor overlap in product
offerings
- Attractive operating margins already built as stand-alone
business
- Accretive transaction with relatively minor operating synergies
|
|
- Large bet on single vertical - health care
- Signs of health care fatigue as the company preannounced worse-than-expected
results for Q1
- Competitors argue that Cerner's systems are difficult to
integrate and leverage proprietary middleware
* Released MilleniumObjects to combat this and provide easier
external interface
- Many customers have performed significant customization
- Exposed to issues of reimbursement environment that affect
IT spending
- Sizable cultural differences
- Cerner capitalizes a large portion of development spending
* 33% in last quarter
|
Cerner - Combination Analysis
|
|
Oracle Multiples for Comparison: |
|
|
| LTM Revenue |
5.9x |
LTM P/E |
27.8x |
| CY'03 Revenue |
5.9x |
CY'03 P/E |
25.9x |
| CY'04 Revenue |
5.4x |
CY'04 P/E |
23.7x |
(in millions except per share data)
|
CERN Purchase Price / Purchase Premium
|
| |
$18.15
|
$19.97 |
$21.78 |
$23.60 |
$25.41 |
$27.23 |
$29.04 |
$30.86 |
$32.67 |
$34.49 |
$36.30 |
| |
0% |
10% |
20% |
30% |
40% |
50% |
60% |
70% |
80% |
90% |
100% |
|
| Market Value |
$650.7 |
$719.4 |
$788.1 |
$856.8 |
$925.4 |
$998.5 |
$1,071.8 |
$1,145.0 |
$1,218.3 |
$1,291.8 |
$1,364.8 |
| Enterprise Value |
$657.0 |
$725.7 |
$794.4 |
$863.1 |
$931.7 |
$1,004.8 |
$1,078.1 |
$1,151.3 |
$1,224.6 |
$1,297.9 |
$1,371.1 |
| Stand-alone Financials: |
| LTM Revenue |
$751.9 |
LTM EBIT
Margin |
12.1% |
LTM EPS |
$1.40 |
| CY'03 Revenue |
$852.0 |
CY'03 EBIT Margin |
8.1% |
CY'03 EPS |
$1.00 |
| CY'04 Revenue |
$999.0 |
CY'04 EBIT Margin |
12.2% |
CY'04 EPS |
$1.84 |
|
| Multiples: |
| LTM Revenue |
0.9x |
1.0x |
1.1x |
1.1x |
1.2x |
1.3x |
1.4x |
1.5x |
1.6x |
1.7x |
1.8x |
| CY'03 Revenue |
0.8x |
0.9x |
0.9x |
1.0x |
1.1x |
1.2x |
1.3x |
1.4x |
1.4x |
1.5x |
1.6x |
| CY'04 Revenue |
0.7x |
0.7x |
0.8x |
0.9x |
0.9x |
1.0x |
1.1x |
1.2x |
1.2x |
1.3x |
1.4x |
| LTM P/E |
13.0x |
14.3x |
15.6x |
16.9x |
18.2x |
19.4x |
20.7x |
22.0x |
23.3x |
24.6x |
25.9x |
| CY'03 P/E |
18.2x |
20.0x |
21.8x |
23.6x |
25.4x |
27.2x |
29.0x |
30.9x |
32.7x |
34.5x |
36.3x |
| CY'04 P/E |
9.9x |
10.9x |
11.8x |
12.8x |
13.8x |
14.8x |
15.8x |
16.8x |
17.8x |
18.7x |
19.7x |
| ORACLE IMPACT (1) |
| Cash Acquisition: |
| FY'04 EPS Accretion / (Dilution) |
2.0% |
1.9% |
1.7% |
1.6% |
1.5% |
1.3% |
1.2% |
1.0% |
0.9% |
0.7% |
0.6% |
| B/E Required Pretax Synergies |
($70.4) |
($65.8) |
($61.2) |
($56.6) |
($51.8) |
($46.6) |
($41.5) |
($36.3) |
($31.1) |
($26.0) |
($20.8) |
| Required EBIT Margin |
2.7% |
3.2% |
3.7% |
4.2% |
4.7% |
5.3% |
5.0% |
6.4% |
7.0% |
7.5% |
8.7% |
| Stock Acquisition: |
| FY'04 EPS Accretion / (Dilution) |
1.3% |
1.1% |
0.9% |
0.7% |
0.5% |
0.3% |
0.1% |
(0.1%) |
(0.4%) |
(0.6%) |
(0.8%) |
| B/E Required Pretax Synergies |
($46.8) |
($39.7) |
($32.6) |
($25.4) |
($18.1) |
($10.3) |
($2.5) |
$5.3 |
$13.1 |
$21.0 |
$28.8 |
| Required EBIT Margin |
5.3% |
6.0% |
6.8% |
7.6% |
8.4% |
9.2% |
10.0% |
10.9% |
11.7% |
12.6% |
13.4% |
Note: Combination analysis adds 1.5%of transaction-based
expenses and 10.0% of cash acquisition-related charges.
(1) Financial Impact based on Oracle fiscal year-ending May 31, 2004.
SCT Corporation
SCT Corp - Company Overview
|
Description of Business
|
| Ticker: |
Public (NASDAQ: SCTC) |
| Headquarters: |
Malvern, PA |
| Employees: |
1,600 (50% based in Malvern) |
| Customers: |
1,300 |
| Management. |
Mike Chamberlain (CEO) - GE, IBM, McDonnell Douglas
Bob Moul (President of Field Ops) - EDS
Roy Zatcoff (EVP of Products) - Cullinet, Computer Task |
| Products: |
Enterprise-wide e-Education solutions:
SCT Banner - administrative computing in higher Ed built
in Oracle environment
SCT PowerCampus - administrative computing
built for institutions with low enrollment in MSFT environment
SCT Matrix - for complex institutions in MSFT environ
SCT Campus Pipeline & Luminus - portal, platform,
integration, and content management technologies
SCT Plus
- administrative apps built for mainframe |
Business Model
Attributes |
105 direct sales & support staff
Sales cycle ranges
from 6 to 24 months |
|
LTM REVENUE BY DIVISION
|
LTM REVENUE COMPONENTS
|
D
|
|
Financial Summary
|
| (in millions, except per share
data) |
Market Trading & Other Stats
|
| Price (04/04/03) |
$6.80 |
Fiscal Year End |
Sep |
| LTM Hi/Low |
$15.96/$5.78 |
Long-term EPS Growth |
19% |
| Equity Value |
$228.6 |
Cash |
$57.3 |
| Enterprise Value |
$205.0 |
Total Debt |
|
$33.8 |
| Financial Summary |
CY'01 |
CY'02 |
CY'03 |
CY'04 |
|
| Revenue |
$193.2 |
$245.1 |
$271.5 |
n/a |
| Growth Rate |
(5%) |
27% |
11% |
n/a |
| License as % of Rev |
11% |
16% |
n/a |
n/a |
| Support as % of Rev |
42% |
36% |
n/a |
n/a |
| Gross Margin |
n/a |
38% |
n/a |
n/a |
| Pro Forma EBIT Mrgn |
n/a |
9% |
n/a |
n/a |
| Valuation Multiples |
|
CY'02 |
CY'03 |
CY'04 |
|
| EV / Revenue |
|
0.8x |
0.8x |
n/a |
| P/E Ratio |
|
15.5x |
13.6x |
n/a |
|
LTM Stock Price Performance
|
D
|
Note: SCTC preannounced worse-than-expected results
on 4/4/03. Updated projections have not yet been reflected in this presentation.
SCT Corp. - Acquisition Rationale
|
Potential Upside
|
|
Potential Drawbacks
|
- Gain dear leader in higher education market with principal
focus in US
* Bypass PSFTs efforts to gain credibility
- Significant vertical expertise on staff
- Oracle's global reach can help drive sales of SCT's products
worldwide
- Banner product built on Oracle database (sublicense
agreement expires 7/03)
- Built-in backlog has topped $500mm, but shortfall announced
on 4/4/03
* Has large recurring maintenance revs
- Runs an outsourced business whereby SCT personnel run client
operations
- Accretive transaction unless there are substantial negative
revenue synergies
|
|
- Currently run as low-margin services business
- Historically limited to 3,000 North American English-speaking
institutions of higher education
* Only recently started pursuing
intl mkts
- Economic problems affecting IT spending by public
schools (and privates as well)
* State handouts evaporating
and endowment values have plunged
- Company preannounced worse-than-expected results for Q2
(ending 3/31/03)
- Has made several acquisitions that it is still digesting
(integration risk) and are boosting revenue growth (valuation
risk)
* Campus Pipeline for $41.6mm in 10/02
* Applied Business
in 2/02 and USA Education in 1/02 for undisclosed amts
|
SCT Corp. - Combination Analysis
|
|
Oracle Multiples for Comparison: |
|
|
| LTM Revenue |
5.9x |
LTM P/E |
27.8x |
| CY'03 Revenue |
5.9x |
CY'03 P/E |
25.9x |
| CY'04 Revenue |
5.4x |
CY'04 P/E |
23.7x |
(in millions except per share data)
|
SCTC Purchase Price
/ Purchase Premium |
| |
$6.80
|
$7.48 |
$8.16 |
$8.84 |
$9.52 |
$10.20 |
$10.88 |
$11.56 |
$12.24 |
$12.92 |
$13.60 |
| |
0% |
10% |
20% |
30% |
40% |
50% |
60% |
70% |
80% |
90% |
100% |
|
| Market Value |
$228.6 |
$251.5 |
$274.3 |
$297.3 |
S321.5 |
$345.6 |
$369.7 |
$393.8 |
$417.9 |
$443.0 |
$468.3 |
| Enterprise Value |
$205.0 |
$227.9 |
$250.8 |
$273.8 |
$297.9 |
$322.0 |
$346.1 |
$370.2 |
$394.3 |
$419.5 |
$444.8 |
| Stand-alone Financials: |
| LTM Revenue |
$245.1 |
LTM EBIT
Margin |
9.3% |
LTM EPS |
$044 |
| CY'03 Revenue |
$271.5 |
CY'03 EBIT Margin |
n/a |
CY'03 EPS |
$0.50 |
| CY'04 Revenue |
n/a |
CY'04 EBIT Margin |
n/a |
CY'04 EPS |
n/a |
|
| Multiples: |
| LTM Revenue |
0.8x |
0.9x |
1.0x |
1.1x |
1.2x |
1.3x |
1.4x |
1.5x |
1.6x |
1.7x |
1.8x |
| CY'03 Revenue |
0.8x |
0.8x |
0.9x |
1.0x |
1.1x |
1.2x |
1.3x |
1.4x |
1.5x |
1.5X |
1.6x |
| CY'04 Revenue |
n/a |
n/a |
n/a |
n/a |
n/a |
n/a |
n/a |
n/a |
n/a |
n/a |
n/a |
| LTM P/E |
15.5x |
17.0x |
18.5x |
20.1x |
21.6x |
23.2x |
24.7x |
26.3x |
27.8x |
29.4x |
30.9x |
| CY'03 P/E |
13.6x |
15.0x |
16.3x |
17.7x |
19.0x |
20.4x . |
21.8x |
23.1X |
24.5x |
25.8x |
27.2x |
| CY'04 P/E |
n/a |
n/a |
n/a |
n/a |
n/a |
n/a |
n/a |
n/a |
n/a |
n/a |
n/a |
| ORACLE IMPACT (1) |
| Cash Acquisition: |
| FY'04 EPS Accretion / (Dilution) |
0.3% |
0.2% |
0.2% |
0.1% |
0.1% |
0.0% |
(0.0%) |
(0.1%) |
(0.1%) |
(0.1%) |
(0.2%) |
| B/E Required Pretax Synergies |
($9.9) |
($8.3) |
($6.6) |
($5.0) |
($3.3) |
($1.6) |
$0.0 |
$1.7 |
$3.4 |
$5.2 |
$7.0 |
| Required EBIT Margin |
5.2% |
5.9% |
6.5% |
7.2% |
7.9% |
8.6% |
9.3% |
10.0% |
10.7% |
11.4% |
12.1% |
| Stock Acquisition: |
| FY'04 EPS Accretion / (Dilution) |
0.1% |
(0.0%) |
(0.1%) |
(0.1%) |
(0.2%) |
(0.3%) |
(0.4%) |
(0.4%) |
(0.5%) |
(0.6%) |
(0.6%) |
| B/E Required Pretax Synergies |
($2.3) |
$0.0 |
$2.4 |
$4.8 |
$7.3 |
$9.8 |
$12.2 |
$14.7 |
$17.2 |
$19.8 |
$22.4 |
| Required EBIT Margin |
3.3% |
9.3% |
10.2% |
11.2% |
12.2% |
73.2% |
14.3% |
75.3% |
16.3% |
17.3% |
18.4% |
Note: Combination analysis adds 1.5% of transaction-based
expenses and 10.0% of cash acquisition-related charges.
(1) Financial Impact based on Oracle fiscal year-ending May 31, 2004.
Appendix
List of Model Assumptions
- Combination analysis based on financials for the fiscal year ended
May 31, 2004 (except in the case of SCTC where LTM numbers were used)
- Stand-alone financials exclude non-cash compensation expenses, in-process
R&D, amortization/impairment of goodwill and intangible assets
- Projections provided by recent reports from individual analysts covering
the companies (ORCL - Morgan Stanley (MS); BEAS - MS; BOBJ - Weisel
Partners; DCTM - MS; SY - Weisel Partners; CERN - Weisel Partners; JDEC
- MS; LWSN -Piper Jaffray; PSFT - MS; SCTC -Think Equity)
- Adds transaction fees and expenses of 1.5% of purchase price and cash
acquisition-related charges of 10.0% of purchase price
- Interest rate on foregone cash balances estimated at 2.25%
- Adjustments
to combined financials:
- Amortization of intangibles based on 20% of net goodwill (purchase
price > book value) over a 5-year period
- Amortization of option compensation based on in-the-money values
amortized over remaining life of options
- Does not include adjustments to deferred revenue balance for
support/maintenance revenue
- Combined pro forma pretax income results are taxed at Oracle's stand-alone
cash tax rate
- Stock acquisition model assumes no material increase to
Oracle's ongoing stock buyback program
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