2007: Oracle acquires Agile in $495 million bid to become PLM leader

In hindsight, this acquisition was just one of many; Oracle assimilated Agile and moved on. Here’s what it looked like in 2007, from the archives of Engineering Automation Report, acquired in 2010 by Jon Peddie Research.

By Randall S. Newton

Engineering Automation Report, June 2007–Oracle (NASDAQ: ORCL) will pay approximately $495 million for Agile Software Corporation, the company announced in May. The all-cash deal offers $8.10 per share for all shares of Agile.

The announcement comes less than one month after rival SAP invested in 3D Publishing software developer Right Hemisphere. In a little over one month, the three largest players in PLM have shifted from Dassault Systemes, UGS, and PTC to Siemens (having closed its acquisition of UGS), SAP, and Oracle.

In a prepared statement announcing the acquisition, Oracle President Charles Phillips called PLM “one of the fastest growing application segments.” He said the addition of Agile to Oracle?s long list of acquisitions “will serve as the foundation of our PLM offering, will further Oracle?s strategy of delivering industry-specific enterprise applications and allows us to offer yet another strategic application to SAP customers.” That jab toward SAP is evidence of the bitter rivalry between the two software giants, which will now spill over into manufacturing as they seek to gain PLM market share.

In commenting on the acquisition, Oracle said that “PLM is evolving into an enterprise-wide discipline that spans multiple product design systems and interacts with a wide range of enterprise applications to manage the complete product lifecycle from concept and design, to production, sales and service. The combination of Agile and Oracle will create an integrated, enterprise-wide PLM solution. Additionally, Oracle?s commitment to open-standards based integration will enable users of other enterprise applications to utilize Agile?s best-in-class capabilities.”

Agile has more than 1,250 PLM customers and over 10,000 visualization customers due to its acquisition of Cimmetry Systems in 2005. It has proven to be popular in high-tech and medical manufacturing environments, two areas where the leading CAD-based PLM solutions are not entrenched. Customers of Agile include 3Com, Acer, Bayer, Bell Sports, Broadcom, CooperVision, Dell, Flextronics, GE Medical Systems, Harris Corporation, Herbalife, Johnson Diversey, Johnson & Johnson, Lockheed Martin, Micron, Philips, QUALCOMM, Sharp, Shell, Siemens, Tyco Healthcare, WL Gore and ZF.

Financial Woes in Recent Past

The acquisition comes at an interesting time for Agile. In the past 18 months it has endured a costly stock options back-dating investigation that caused the company to miss more than one quarterly reporting deadline. It hired a new CEO, acquired Cimmetry, and introduced a major new version of its enterprise PLM product.

This week Agile reported preliminary results for the fourth quarter of fiscal 2007, which ended April 30. Agile expects to report a net loss of approximately $2.3 million, based on total revenues in the range of $37.0 million to $38.0 million. This represents an approximate revenue increase of 12% year-over and approximately 13% higher than in Q2 fiscal 2007. License revenues are expected to be in the range of $14.0 million to $15.0 million and service revenues in the range of $22.0 million to $23.0 million. Agile expects full-year fiscal 2007 revenues to be in the range of $133.7 million to $134.7 million, or approximately $2.0 million higher than fiscal 2006.

EA Report comments

Last month, in launching financial coverage of Geometric Software Solutions, we commented: “We particularly like the company?s plan to develop PLM-ERP interoperability solutions. This is a market that will see a lot of action in the near future, as SAP and Oracle extend their tentacles toward design and engineering.”

This comment brings up the point that PLM manages the idea creation process, which uses a data environment—3D modeling and related metadata—that is largely foreign to ERP. SAP signaled recently that it needs a better way to manage 3D data with its investment in Right Hemisphere. We think that Agile?s Cimmetry division is the crown jewel in this purchase, with its market-leading abilities in graphic data viewing and management. Despite what Agile, Arena Solutions, and Aras Software have said about PLM, we believe that CAD and PLM should go hand-in-hand. There is a reason the CAD-centric PLM vendors have been the market leaders. Engineering data must be expressed in geometric terms.

It will be interesting to see how Oracle will integrate not only Cimmetry?s offerings, but the multiple PLM data environments that form the current Agile product line. Oracle is ruthless about gutting what it sees as unnecessary products and divisions from its acquisitions. If Oracle is foolish enough to jettison Cimmetry as extra baggage, it will signal that it is looking at PLM through ERP-colored glasses and will never take market share away from Siemens (UGS PLM) and Dassault. If, on the other hand, Oracle shows that it “gets” the CAD-PLM link, the company will be a formidable challenger.