Since the 1970s, financier and multi-billionaire Carl Icahn has feasted on struggling companies. While he has previously focused on mature companies like Time Warner
BEA got its start in 1995 (the name is an acronym for the names of its co-founders: Bill Coleman, Ed Scott, and Alfred Chuang). Within a few years, BEA became a leader in a hot market: middleware software. This technology helps companies deliver sophisticated applications for use in applications like e-commerce.
The problem is that BEA has had troubles finding a second act. True, the company has invested in new technologies like Service-Oriented Architecture (SOA) software, but the results have been mixed.
For example, in the latest fiscal second quarter, BEA posted a 9.4% drop in license revenue to $123.1 million. This came after a 13% decline in Q1.
So why is Icahn interested? Keep in mind that BEA is a cash cow. BEA had Q2 operating cash of $61.4 million and $1.1 billion in the bank.
What is more, BEA has a customer base of heavyweights like Verizon
So according to Icahn's 13D filing, he wants BEA to sell out to a strategic buyer. He writes, "Consolidation in the technology industry is leading to increased competition that may place independent software vendors at a competitive disadvantage."
I agree. But in light of BEA's $5.1 billion market cap, there are not many suitors. The few that are interested include rivals like Oracle
Icahn is not afraid of challenges, and the investment in BEA is no exception. But corporate activism is typically a slow process and far from foolproof. In other words, BEA may continue to meander for some time.
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