Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Activist Shareholder Stalks Sybase

The past few weeks have brought us a merger-and-acquisition free-for-all in the enterprise-software space. SAP (NYSE: SAP  ) agreed to pay $6.8 billion for Business Objects (Nasdaq: BOBJ  ) , while Oracle (Nasdaq: ORCL  ) made a brash offer of $6.7 billion for BEA Systems (Nasdaq: BEAS  ) . Mow hedge fund Sandell Asset Management has reported a 6% stake in Sybase (NYSE: SY  ) and is pushing the company for a sale.

Sybase's storied history stretches back to the mid-1980s. Yet despite its strong database technology, Oracle ultimately prevailed as a market leader. Since then, Sybase has tried to move into other categories, such as mobile enterprise-software products, to mixed results.

So why is Sandell interested in the company? Like other mature enterprise-software companies, Sybase has a stable customer base that generates prodigious cash flows from operating activities -- to the tune of $123 million for the first half of 2007.

The company also has about $657 million in liquid assets. But Sandell thinks it would be best to use that cash for a $500 million stock buyback, rather than make "dilutive acquisitions." Another recommendation is to have an IPO or a spinoff of the Mobility unit.

Sandell might just be making noise, too. In fact, I think Sandell would prefer that Sybase sell to a strategic party. Based on its analysis, Sandell thinks a transaction could fetch $30 to $39 per share. And in light of its cash flows, product offerings, and customer base, Sybase would indeed be an attractive target.

Still, it looks as though Sybase wants to remain independent; it's apparently trying to find ways to rev up growth on its own. Last year, the company spent $425 million buying Mobile 365, and management has hinted in several recent earnings calls that that it wants to do some other major deals.

So if Sandell wants a sale, it might need to get aggressive and launch a proxy fight. Going that route can be effective, but it also takes time. If a transaction for Sybase does happen, it might have to wait until next year.

For more Foolishness:

Read/Post Comments (0) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 538492, ~/Articles/ArticleHandler.aspx, 10/24/2016 4:46:56 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 2 days ago Sponsored by:
DOW 18,145.71 -16.64 -0.09%
S&P 500 2,141.16 -0.18 -0.01%
NASD 5,257.40 15.57 0.30%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

7/29/2010 4:04 PM
SY.DL $64.98 Down +0.00 +0.00%
Sybase, Inc. CAPS Rating: **
ORCL $37.93 Down -0.16 -0.42%
Oracle CAPS Rating: ****
SAP $88.82 Up +1.54 +1.76%
SAP AG (ADR) CAPS Rating: ****