Database and ERP vendor Oracle Corporation will acquire CRM vendor Siebel Systems for approximately US$5.85 billion, in an amicable merger designed to narrow the gap between Oracle and number one ERP player SAP.

"In a single step, Oracle becomes the number one CRM applications company in the world," said CEO Larry Ellison. "Siebel's 4,000 applications customers and 3,400,000 CRM users strengthen our number one position in applications in North America and move us closer to the number one position in applications globally."

"Today is a great day for Siebel Systems' customers, partners, shareholders, and employees," said Thomas M. Siebel, chairman of Siebel Systems. "The combination of Siebel applications with the development capacity of Oracle to enhance our CRM product set assures our customers continuing success. This is a very beneficial business combination that will allow us to be even more effective in delivering high quality, leading edge solutions into the hands of satisfied customers."

According to Oracle management, the decision to acquire Siebel was prompted by feedback from clients.

"This is a customer driven event. Our joint customers have consistently recommended this transaction to both companies for over a year," said Oracle President Charles Phillips. "We will embrace Siebel's best-in-class CRM products and make the features of those products the centerpiece of our Project Fusion CRM."

The financial implications of the merger will be of immediate benefit to Oracle, according to the company, one of which is likely to involve staff cuts at Siebel.

"We expect this transaction to be accretive to Oracle's earnings on a non-GAAP basis in its first full year (FY07)," said Oracle President and CFO Greg Maffei. "Longer term, Siebel will contribute to Oracle's stated goal of 20 percent annual earnings growth. Given the size of our existing R&D investment, scale of our global support infrastructure, and similarity of our back office requirements, we will recognize substantial efficiencies from combining our two businesses."

A significant majority of Siebel's implementations run on the Oracle database.

The Board of Directors of Siebel Systems has voted in favor of the transaction, and Tom Siebel has agreed to vote his shares in favor of the acquisition. Siebel stockholders will convene in a special meeting to vote on the acquisition. Oracle stockholder approval is not required. While the transaction and the timing are subject to regulatory approvals, the deal is expected to close in early 2006.