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Contributors: Douglas McIntyre Jon C. Ogg

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Wednesday, August 16, 2006

BEA Systems Status

BEA Systems is a name that wa son the BAIT SHOP and was removed before because of target prices and valuations being hit and surpassed.

This morning the stock is up 2.4% after $12.25 pre-market because of an upgrade out of Prudential. Prudential raised the stock from Neutral to Outperform, but the target merely went from $14.00 per share up to a whopping $15.00. It notes that a takeout value could put it as high as $19.00, although any acquirer that pays $19.00 should be shot for not executing on this much earlier if they think they should all of a sudden pay $19.00 now that other software companies have been acquired. This has been a "potential takeout name" since the late 1990's when it was rumored that Sun Micro (SUNW) would acquire it, and then numerous times since 2000 when it was rumored that IBM (IBM) and others wanted to Buy it.

Anything in this consolidating environment is possible, so we don't want to rule out anything. A company should be paying attention to prices and we feel that translates to investors as well. This doesn't mean that the shareholders have all been recycled, but the bulk of the newer holders over the last 18 to 24 months now owns this at lower prices and a buyer would have been able to squeeze in here at much lower prices without having to reward investors who bought the stock at $11.00, $12.00, $13.00, and so on. They surely could have forgotten about having to reward the old holders who owned it from 2000 who owned this at roughly $100.00, but now the average share price in the last 3 months is well over $12.00.

As a reminder BEAS reports earnings after the close.

Jon C. Ogg
August 16, 2006

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