Shares of Oracle Corp. (NASDAQ: ORCL) are trading slightly lower today as traders prepare for the company's third quarter earnings release. The company is scheduled to report its recent quarterly numbers today after the market closes.

When the company announces its earnings, analysts are expecting to see earnings excluding items of 30 cents on sales of $5.4 billion, up from 25 cents a share and $4.41 billion in revenue reported in the same period a year ago.

Despite the weak market conditions and economic slowdown, Oracle has so far been able to beat or at least match analysts' expectations when it has reported earnings. For the current quarter, the company also expects strong earnings results. This might be due to the company's recent acquisitions whose maintenance revenue help offset weak earnings coming from its customers affected by the tumbling economy.

MOST NOTEWORTHY: Novartis, AIG, Diageo, and BEA Systems were today's noteworthy downgrades:

• HSBC downgraded Novartis (NYSE: NVS) to Underweight from Neutral, as they believe the company's mid-single digit pharma sales growth is not sustainable.
  
• AIG (NYSE: AIG) was downgraded to Market Perform from Outperform by Keefe Bruyette due to their concerns about the company's deteriorating profit trends.
  
• Diageo (NYSE: DEO) was lowered to Neutral from Buy by Goldman Sachs to reflect a lack of near-term catalysts.
  
• Deutsche Bank downgraded BEA Systems (NASDAQ: BEAS) to Hold from Buy, as they believe it is likely that the acquisition will close in April.

OTHER DOWNGRADES:

• Live Nation (NYSE: LYV) was dropped to Hold from Buy by Morgan Joseph.
• Jackson Hewitt (NYSE: JTX) was dropped to Neutral from Buy at FTN Midwest.
• Roth Capital downgraded Collagenex (NASDAQ: CGPI) to Hold from Buy.
• Credit Suisse lowered MFA Mortgage (NYSE: MFA) to Neutral from Outperform.

BEA Systems (NASDAQ: BEAS), Oracle (NASDAQ: ORCL) announced it will acquire all outstanding shares of BEAS for $19.75 in cash, an $8.5 billion deal.

BEAS board of directors unanimously approved the transaction.

BEAS option volume was heavy with 54,526 contracts trading on January 15, 2007. BEAS January straddle was priced at $1.10. BEAS February option implied volatility of 55 is above its 26-week average of 40 according to Track Data, suggesting larger price movement.

Options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com

I have been following BEA Systems (NASDAQ: BEAS) since the mid 1990s. What was once a cutting-edge, leading applications infrastructure play has turned into a me-too, has-been company. The worst part of it all, BEA thinks -- it actually thinks -- it is good! It's an arrogant company led by an arrogant management team.

I visited BEA three times from early 2000 to late 2004, and guess what? BEA was for sale and looking for a suitor even then. Management gives the illusion of wanting to go it alone, and yet several managers made it clear to me and my clients at the time that they would "listen to anyone" -- you know, the old fiduciary responsibility line.

Oracle (NASDAQ: ORCL) has been rumored since 2002 to be buying BEA Systems. I think the rumors were promoted by none other than BEA itself. In the meantime, Oracle was attempting to "research and develop" a competing product set versus BEA, but with Oracle being Oracle, it was not to be. Oracle has adopted a more productive strategy of acquiring companies, especially beaten-down ones, rather than developing its own in-house applications. At the end of the day, Oracle is a master of the database world and a C player in the apps world.

Oracle (NASDAQ: ORCL) had threatened to walk away from its $17 offer for BEA Systems (NASDAQ: BEAS) and it did. The larger company had set a 5 PM deadline yesterday for a response. "BEA shareholders should not assume that Oracle will renew its $17 per share offer in the future," Oracle said in a statement picked up by Reuters.

Adding to the pressure, BEA shareholder Carl Icahn has threatened a proxy fight if the company is not auctioned off. The company has lost most of its alternatives because no other firm would match the Oracle offer.

It appears that BEA gambled and lost. It must have believed that Oracle would raise it bid to lock in a deal for the company. The BEA board issued a statement saying that the company was worth $21. But no one seemed to buy that. The stock had not traded above $17 for about four years.

BEA is now left with few if any alternatives. Icahn may be able to force a sale of the company, but the only buyer would appear to be Oracle. In the meantime BEA shares are likely to take a sharp fall.

Douglas A. McIntyre is an editor at 247wallst.com.

BEA Systems (NASDAQ: BEAS) was able to get Goldman Sachs (NYSE: GS) to suggest that the company is worth $21 a share. The stock has not traded that high in over four years. But Oracle (NASDAQ: ORCL) has made a bid of $17, and the BEAS board wants to see if it can get more.

The plan does not appear to be working out. Oracle said that it would not pay extra money for the smaller company and will simply take its case to shareholders.

Reuters writes that "Oracle said BEA's price represented an 80 percent premium to its shares before activist shareholders started pushing for a sale of the company, and nearly 11 times BEA's revenue from software maintenance services in the last 12 months." If the BEAS shareholders do not push its board to take the offer, Oracle has threatened to move on.

BEA Systems has a problem. The number it has picked for valuing the company is arbitrary. The company's stock price before the Oracle offer does not support it. Shares changed hands in the $13 to $14 range. And no other company has come along to even match Oracle's $17 offer.

The BEAS board may be dooming a buyout and that would probably send shares back to their pre-offer lows. That kind of behavior often brings shareholder lawsuits and trouble that the company's management does not need.

BEA Systems ought to wise up and take the money on the table.

Douglas A. McIntyre is an editor at 247wallst.com.

Main market news here: Microsoft's upbeat earnings should boost techs

Vonage Holdings (NYSE: VG) shares climbed in after-hours trading on news the internet phone company has agreed to settle its lawsuit with Verizon Communications (NYSE: VZ). Vonage will pay as much as $120 million to end the patents-infringement case.

In its pursuit of BEA Systems (NASDAQ: BEAS), Oracle Corp. (NASDAQ: ORCL) has rejected as "impossibly high" a $21-per-share counteroffer from BEA's board of directors. Oracle is firmly standing by its original $17 bid, saying the offer will expire Sunday evening.

The Wall Street Journal is reporting that Macy's (NYSE: M) will be the exclusive department store retailer of Tommy Hilfiger sportswear beginning next fall. Tommy Hilfiger is held by Apax Partners.

Oracle (NASDAQ: ORCL) has given BEA Systems (NASDAQ: BEAS) until Sunday to accept its buy-out offer. Oracle has offered $17 a share. Before the buy-out rumors started to move the stock up, it traded around $14.

According to Reuters, "BEA responded by saying it had no intention of coming to the negotiating table unless Oracle raised its bid." That is despite the fact that Carl Icahn has taken a piece of the company and wants a sale.

BEA has almost certainly hoped for a second bidder, but that phantom buyer has not emerged.

While the board of the company plays a game of chicken with Oracle, the common shareholder may be left holding the bag. It has a sure thing at $17; the rest is hot air. With Goldman as its bank, BEA has almost certainly contacted all other potential buyers.

The BEA board should do the right thing -- sell the company and get the common shareholder a good return. Board members should make money on their own options and go home and sleep well tonight knowing that there will not be class action suits from people who know they did not take the bird in the hand.

Douglas A. McIntyre is an editor at 247wallst.com.

It's as if M&A is in overdrive for the software space. SAP AG (ADR) (NYSE: SAP) agreed to pay $6.7 billion for Business Objects S.A. (ADR) (Nasdaq: BOBJ). And, of course, today Oracle Corporation (Nasdaq: ORCL) announced a $6.6 bid for BEA Systems, Inc. (Nasdaq: BEAS).

What's going on here? Well, I had a chance to interview an expert on the topic: David O'Connell, who is a senior analyst at Nucleus Research.

Q: What's your take on the recent activity?

A: "What's driving this is that SAP and Oracle both want to be the biggest kid on the block. They each want to be the only vendor that companies turn to when they buy software. Oracle buys Hyperion, so SAP buys Business Objects. Oracle may buy BEA, so maybe SAP will buy a vendor with a strong integration or SOA offering. It's always hard to tell who's winning. The good news is that end users can be the winners if they say to their account representative, 'hey, I'm buying almost all my software from you, so prices have to come down, and deployments have to be flawless, or I'll ruin your holiday by taking all that business to your rival.'"

Q: Why now?

A: "Because SAP and Oracle both need new customers. The market for selling major applications, especially ERP, to the largest companies is pretty saturated. So SAP and Oracle need new ways to grow revenues. They are starting to go head to head with one another in the market for smaller companies, where Microsoft (Nasdaq: MSFT) dominates. Smaller companies have smaller IT staffs and less time to dedicate to IT. So SAP and Oracle want to court these customers with full product suites, the benefit of one stop shopping, and the alleged benefit of integration among their acquired applications. Buying new products and customers through acquisition is another way to grow revenues.

"Oracle's bid for BEA is a great integration play. Oracle has bought a lot of solutions over the years, so it is putting a lot of development and money into Fusion, which gives customers ways to create integration among their various Oracle applications. BEA basically helps companies integrate their various applications. So BEA is a logical way for Oracle to create integration among its acquired products, and for Oracle customers to create integration among their Oracle solutions. I don't see who else would come to the table. Business Objects will be a huge integration challenge for SAP, so I don't think the timing would be right there. Buying BEA would be duplicative for HP (NYSE: HPQ) and CA (NYSE: CA), who already have lots of integration capabilities in their offerings."

Also, if you want to check out other recent M&A deals, click here.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements.

On Monday, Jim Cramer suggested to quickly buy BEA Systems before it gets a bid. Today, Oracle Corp. (NASDAQ: ORCL) indeed said it has proposed to buy business software maker BEA Systems Inc. (NASDAQ: BEAS) for more than $6.66 billion or $17 a share, a 25% premium over Thursday's close. Yet, BEA shares are up over 32% to $18+, suggesting shareholders expect an even higher bid to come.

SAP (NYSE: SAP) acquired Business Objects (NASDAQ: BOBJ) on Monday. Following the deal, many pundits, including Cramer, called the market of business intelligence hot. So the question now is how hot? Will BEA Systems see a proposal from SAP as it wants to give an answer to its rival's growth and thwart its plans for more? Maybe from International Business Machines Corp. (NYSE: IBM) as it might try to halt Oracle's advance into an area it is now dominant in, the middleware programs that connect server computers? Will Oracle simply increase its own proposal despite Oracle President Charles Phillips saying his company has made a "serious proposal including a substantial premium for BEA."

Despite BEA sales declining, now trailing IBM's, no doubt Oracle could use BEA's footprint in the middleware software biz, not to mention access to more customers. Perhaps it could lure some of those BEA customers that are now using SAP. BEA would also bring support fees. These are all good reasons for Oracle, which has grown remarkably well by growth (PeopleSoft notwithstanding).

No doubt, the signs were there. First, Carl Icahn had announced recently his stake in BEA Systems reached 13.22%. Of course, the line BEA executives have often used, "BEA is not for sale," is pretty much meaningless now with Icahn in the picture. Icahn has been pushing to have BEA sold. Then, SAP acquired Business Objects and pundits started calling for consolidation in the business with BEA being on the short list. If you had listened to Cramer on Monday, you could have sold your BEAS shares 32% higher today. Not bad for a week.

Oracle Corp. (NASDAQ: ORCL) stock is relatively flat after announcing a $6.7 billion offer to buy BEA Systems (NASDAQ: BEAS). Activist shareholder Carl Icahn has been pressuring BEAS to put itself up for sale, though company officials have said recently that they have no plans to sell. However, investors have driven the share price of BEAS up 32% since the announcement, almost a dollar above ORCL's $17 per share offer price, suggesting expectations of a potential rival bid. CNBC's Jim Cramer predicted earlier this week that SAP AG (NYSE: SAP) would make a bid for BEAS to boost its strength against ORCL. If a rival bid appears, Oracle could end up overpaying for BEAS. If you think this stock won't be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on ORCL.

ORCL stock has been strong over the past few months, hitting a one-year high of $23.00 yesterday. This morning, ORCL opened at $22.40. So far today the stock has hit a low of $22.11 and a high of $22.58. As of 11:05, ORCL is trading at $22.48, up 0.02 (0.1%). The chart for ORCL looks bullish and steady, while S&P gives the stock a very positive 5 STARS (out of 5) strong buy rating.

For a bearish hedged play on this stock, I would consider a December bear-call credit spread above the $25 range. A bear-call credit spread is an options position that combines the purchase and sale of call options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 5.3% return in 10 weeks as long as ORCL is below $25 at December expiration. Oracle would have to rise by more than 11% before we would start to lose money. Learn more about this type of trade here.

ORCL has not been above $25 since 2001 and has shown some resistance around $23 recently. This trade could be risky if the company's earnings (due out in mid-December) are a positive surprise, but even if that happens, this position could be protected by the resistance the stock formed when it topped around $23.

Brent Archer is an options analyst and writer at Investors Observer.

Sybase(NYSE;SY), a global enterprise software company with June 2007 total quarterly revenue of $1 billion, is recently up 42 cents to $24.88. SY has a market cap of $17.6 billion. SY is expected to announce EPS on 10/25. According to Dow Jones, Sandell Asset Management, an owner of 6% of SY, wants SY to repurchase shares or look at selling the company. SAP AG (NYSE:SAP), recently announced a $6.8 billion takeover of Business Objects (NASDAQ:BOBJ) and Oracle (NASDAQ:ORCL) proposed taking over BEA Systems (NASDA:-BEAS), a supplier of service oriented architecture (SOA) and middle-ware software. SY November option implied volatility of 29 is above its 26-week average of 26 according to Track Data, suggesting slightly larger risk.

Openwave Systems(NASDAQ:OPWV), a provider of software solutions for the communications and media industry, is recently down 7 cents to $4.93. OPWV will announce EPS on 10/25. Barron's reported on 5/27/07 SY might be interested in OPWV. OPWV over all option implied volatility of 65 is near its 26-week average according to Track Data, suggesting non-directional risk.

Daily options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.

General Electric (NYSE: GE) reported in line third EPS of 50 cents.

• GE reported revenues of $42.5 billion, up 12%, organic revenue growth was 8%, global revenue growth was 15%.
  
• GE CEO Jeffrey Immelt said: "Our outlook for the remainder of the year is strong."
  
• GE overall option implied volatility of 22 is above its 26-week average of 20 according to Track Data, suggesting slightly larger risk.

BEA Systems (NASDAQ: BEAS), a leading supplier of service-oriented architecture (SOA) and middle-ware software, received a proposal from Oracle (NASDAQ: ORCL) to be acquired for $17 a share in cash.

• BEAS is recently trading up $3.41 to $17.03 in pre-open trading.
  
• Dow Jones reported Carl Icahn had a 13.22% stake in BEAS.
  
• BEAS has been frequently mentioned as an M&A target over the last four years.
  
• BEAS overall option implied volatility of 41 is near its 26-week average of 39 according to Track Data, suggesting non-directional risk.

Daily options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.

MOST NOTEWORTHY: REITs, Business Objects, Allstate Corp and P&C Insurance were today's noteworthy downgrades:

• Deutsche Bank downgraded REITs AvalonBay (NYSE: AVB), Boston Properties (NYSE: BXP), Health Care REIT (NYSE: HCN), Kimco (NYSE: KIM) and Public Storage (NYSE: PSA) to Hold from Buy on valuation following the recent share appreciation.
  
• Business Objects (NASDAQ: BOBJ) was downgraded to Neutral from Outperform at Baird following its acquisition by SAP AG (NYSE: SAP).
  
• Wachovia downgraded Allstate Corporation (NYSE: ALL) to Market Perform from Outperform and P&C Insurance (NYSE: PGR) citing deteriorating fundamentals in personal lines.

OTHER DOWNGRADES:

• UBS downgraded BEA Systems (NASDAQ: BEAS) to Neutral from Buy.
  
• JP Morgan downgraded Merrill Lynch (NYSE: MER) to Neutral from Outperform.
  
• Sealy Corporation (NYSE: ZZ) was downgraded to Neutral from Buy at Banc of America.
  
• Friedman Billings downgraded technology stocks, lowering ASE Test Limited (NASDAQ: ASTSF), ASML Holding (NASDAQ: ASML), KLA-Tencor (NASDAQ: KLAC) and Rudolph Technologies (NASDAQ: RTEC) to Market Perform from Outperform.

TheStreet.com's Jim Cramer shows you what one company's deal means to its competitor.

Buy BEA Systems (NASDAQ: BEAS) (Cramer's Take). That's my takeaway from SAP's (NYSE: SAP) (Cramer's Take) strange purchase of Business Objects (NASDAQ: BOBJ) (Cramer's Take). Why BEAS? Because the Business Objects acquisition by SAP shows a level of desperation that makes me feel that all that matters is that another wave of consolidation is about to take place.

Business Objects is effectively an American company, despite its location in France. Almost two-thirds of its revenue comes from here. SAP can pour on the strong euro and make things happen here that no domestic company can.

So why BEAS? Because BEAS is a direct competitor to Oracle (NASDAQ: ORCL) (Cramer's Take), which is the worldwide nemesis to SAP. If you go listen to the Oracle conference call where they make fun of BEAS, you have to be thinking that if SAP combined the strong -- and I think wildly overvalued - euro with BEA Systems, the Oracle competition won't look as steep as it does now.

BEAS, of course, says it is not for sale. It is still one more company that is stupidly ignoring the buildup of stock by Carl Icahn. My prediction: This ridiculous acquisition of the just-now blowing up Business Objects, a company that was getting its butt kicked, presages another buy from SAP of BEAS, regardless of the sinking in price of SAP's stock, something they knew would happen and did the deal anyway.

BEAS is cheap, with lots of cash and a burgeoning business in China. Business Objects was a much tougher sell.

BEAS is next, in my opinion, and the fact that it hasn't gone higher yet with Icahn's buying is the real opportunity.

RELATED LINKS:

• Jim Cramer's Best Blogs
• Value Stock-Picking, Week 1: How to Find Top Dividend Plays

Jim Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. At the time of publication, Cramer had no positions in the stocks mentioned.