Week in review: Merger and Microsoft mania

The week started off with a bang on "Merger Monday" when software maker Oracle announced it will acquire rival Siebel Systems, and then, within hours, auction site eBay revealed plans to buy Net telephone provider Skype.

All the while, developers were gathering in Los Angeles to hear the latest from Redmond at Microsoft's annual Professional Developers Conference.

Oracle will acquire rival Siebel in a deal worth $5.8 billion, the second major competitor the company has targeted since mid-2004.

Oracle executives said the megadeal is intended as a "major beachhead" against archrival SAP, which is the world's largest business-applications seller.

Siebel specializes in customer relationship management software. Oracle said the Siebel acquisition will add 4,000 customers and 3.4 million CRM users.

Oracle Chief Executive Larry Ellison said the deal was in part fueled by requests from partners and customers, such as General Electric, who wanted to hold a single company accountable for their applications and also ease the integration process.

"For once I agree with the businesses: Get these nosey SOBs off my back."
--Jo Makee

CNET News.com readers responded to the news with some concern about the loss of competition in the marketplace. There's still SAP, one reader pointed out, "although with Oracle taking PeopleSoft and now Siebel, it makes a pretty mean deal for anyone else in this sector."

eBay plans to buy Skype in a $2.6 billion deal aimed at boosting the auction site's sales volumes and supplying seamless voice communications to its consumers.

The move, expected to be complete by the end of the fourth quarter, marks the biggest acquisition in eBay's 10-year history. In another big-time merger, eBay acquired online payments company PayPal in 2002 for about $1.5 billion. It more recently picked up Shopping.com for $620 million in cash.

News.com readers questioned eBay's rationale and plans to integrate voice communications by allowing sellers to talk. Ivan Yagolnikov wondered if that would be inconvenient for "PowerSellers" like him who like more efficient means of communicating, such as template e-mails and auto-feedback.

"At least, they could've done what one analyst suggested in the article--license Skype and try it out. If you recall, PayPal was working with eBay long before it was bought out," he said. But "Keith J." wondered if there might be ulterior motives for the acquisition: "At its core, Skype is a peer-to-peer network...Skype's founders created Kazaa. They may be kicking around other ideas that they don't have funding to develop right now. We've seen companies like Microsoft buy other companies for the underlying technology."

While tech companies tended to ink smaller deals after the dot-com bust, they're spending big now. The eBay and Oracle deals added to the roughly 3,000 tech mergers announced in the first nine months this year, according to Thomson Financial. While the number of deals is down in comparison to the same period last year, the total value of all deals this year, excluding assumption of debt, is $109.9 billion--a 50 percent jump over the first nine months of last year.

"We're seeing larger and larger deals come through," said Richard Peterson, a market strategist for Thomson Financial. "The average deal size is over $35 million this year for tech companies big and small, and that's more than double the $17 million in 2002."

Redmond rally
Back at the PDC, Microsoft Chairman Bill Gates sat down with CNET News.com and said his company intends to expand its hosted software offerings by blurring the lines between the company's server products and online Web properties. The software giant will expand its "software as a service" line, particularly for businesses, he said. The idea is that customers can choose to either purchase server software, such as mail or portal applications, from Microsoft or get it delivered as a service over the Internet.

Gates also reflected on software innovation and on the extent to which he