Barely three months after its acquisition of PeopleSoft, and Oracle, true to its consolidation theories, has put an offer on the table for retail software specialist Retek Inc, outbidding rival SAP, which also wants to buy the company. Counteroffers are expected.

Oracle is offering $9 a share, $525 million cash. Retek just accepted SAP's offer of $8.50, or $496 million, a 42% premium, and will have to pay a $15 million termination fee if it jilts SAP for Oracle. That shouldn't be too hard. It's got a $100 million in the bank.

Anyway, Wall Street seems to think a deliciously happy Retek will be knocked down for plus or minus $10.50.

Anticipating a bidding war, investors pushed Retek's shares to $10.65 on Wednesday, then down again to $10.50 Thursday. SAP is waiting to hear from Retek.

Oracle already owns about 10% of Retek. It bought up 5.5 million shares in the days leading up to its tender offer after Retek and SAP announced a definitive merger agreement on February 28. What style.

"Our offer is superior to that of SAP and a better value for Retek's shareholders," Oracle CEO Larry Ellison wrote in a letter to the Retek board.

In a conference call Tuesday, Ellison said Oracle's bid was aimed at defending its applications business in North America where it says it has 23,000 customers and claims to be the largest supplier. Oracle president Chuck Phillips said the idea was to surround SAP with vertical acquisitions.

"The combination of Oracle and Retek would certainly put us in a position to exploit a market that is under-penetrated....It's a large market and an available market," Ellison said. "So, we think it's strategically important for us to pursue this acquisition."

Denying Retek to SAP is one thing, but Oracle doubtless sees IBM, SAP's new best friend, lurking behind that. Microsoft doesn't have a dog in this fight.

Retek's product line complements to Oracle's; its product suite is built on Oracle Forms and Oracle Java development tools. Unlike PeopleSoft, there are no overlapping products, Ellison told analysts, and little customer overlap either. A clear case of Oracle fleshing out its applications portfolio.

Oracle promised to continue developing all of Retek's products.

It sent investors a slideshow of its Retek plans, which focused on Oracle retaining Retek's sales, development and support near-term and including Retek in Project Fusion, Oracle's future amalgamation plan for PeopleSoft wares. Oracle said both it and Retek shared a Java vision. 

Phillips said Oracle had been in discussion with Retek since last September and that an integration plan was already in place. Since Oracle has little acquisition experience and already has PeopleSoft on its plate, people naturally wonder whether it'll get indigestion.

No pussyfooter he, Ellison said the Retek deal wouldn't impact Oracle's ability to do a larger transaction in the next 12 months.

Retek is considered a "more normal" acquisition for Oracle than the aberrant $10.3 billion PeopleSoft.

Ellison said SAP beat Oracle to a bid because Oracle was distracted by the PeopleSoft deal.

Oracle expects the increasing complexity of retail and the improving quality of off-the-shelf software to lead to more purchasing by retail players than their usual custom development.

Oracle and Retek share some customers including marquee accounts like Nordstrom's, Best Buy, Armani, GAP, Tesco and JC Penney.

Oracle says it can see several opportunities from a Retek acquisition: cross-selling Retek apps to Oracle customers, upselling Retek's applications into its own installed base, and cross-selling Oracle apps to Retek customers. It also wants to turn its technology and services group loose on Retek's base.

According to Ellison, Oracle is familiar with Retek's business and management. The two companies have been partners since Retek was started in 1986. He claimed that 80% of Retek's customers used Oracle products.

"Unlike SAP," he told the Retek board, "we share a vision of the future with applications built in the Java programming language and based on industry standards."

Oracle plans to pay for Retek by writing a check. It said the offer wasn't subject to any financing conditions.

In response, an enigmatic SAP claimed that since it offered superior interoperability with both Java and .NET through its NetWeaver platform, it's "in a better position to offer Retek and SAP customers a swift and painless path to the integration of these and other third-party applications."

The stodgy German also said that integration at the application level rather than at the database would be a competitive advantage in the retail market.

The fragmented retail market is estimated to be worth $10 billion a year and is behind in spending on the latest techno-widgetry.

SAP mumbled something about supporting a wider range of databases than Oracle, saying it was "committed to openness to all databases in the market, not locking customers out of choices."

If Oracle succeeds in its bid, as the smart money's betting, Retek's products will become part of the Oracle E-business suite.

Minneapolis-based Retek provides an integrated retail application suite. The 525-man concern had revenues of $174.2 million and earned $8.2 million, or 15 cents a share, in 2004. It has some 200 customers.

Retek is considered the leader in the retail. Its application suite includes products for merchandise operations management, store and multi-channel retailing, supply chain planning and optimization, supply chain execution, merchandise planning and optimization, and demand planning. The programs can be deployed individually, or as part of an integrated end-to-end offering.

The company expects its revenues this quarter to be around $41 million-$44 million and its software license and maintenance revenues to be around $23 million-$25 million. It's projecting non-GAAP operational income of four cents to five cents a share. Piper Jeffray isn't so certain Oracle can grow license revenue faster than Retek has done standalone.