16 June--Oracle vs PeopleSoft: what a difference a year makes. (CRM News Review).

One aspect of the Oracle/PeopleSoft/JD Edwards fandango that has not been explored so far is why PeopleSoft Inc's Craig Conway approached Oracle Corp last year, particularly now that it is clear that the antitrust issue is forming a major part of the anti-Oracle campaign.

In a filing to the Securities and Equities Commission on June 12, PeopleSoft acknowledged that on or about June 5, 2002, Craig Conway contacted Larry Ellison to determine whether Oracle would be interested in selling its enterprise applications business to PeopleSoft. On June 6, representatives met from both parties but were unable to agree on the terms of any potential sale and shortly thereafter Conway and Ellison had a brief telephone conversation in which they concluded they could not agree on mutually acceptable terms to such a transaction.

In the various public announcements made to date, Conway has made little reference to this PeopleSoft-initiated move, leaving Ellison free to make the most of it, gleefully claiming that the only difference between then and now is that last year Conway envisaged running the combined companies.

According to both parties, discussions ceased because they could not agree on a structure. There has been no mention of antitrust issues in the context of last year's discussion, yet it is emerging as one of the strands of PeopleSoft's case against Oracle's unwelcome bid, with Conway stating the proposal will spark a lengthy antitrust review and is unlikely to succeed in the end.

So what has changed? One factor is that Oracle has effectively declared that the PeopleSoft suite will be consigned to the scrap heap, sentiments that will undoubtedly cause antitrust lawyers' ears to twitch because it does indicate a reduction in customer choice. Yet, there is a body of opinion that suggests the proposed purchase may not be blocked.

Market share estimates vary, but even combined it is expected that Oracle and PeopleSoft would only have around 23% of the ERP market, which palls when compared to the 50% plus that SAP AG commands, with the remainder shared between a large number of players including Siebel, JD Edwards and a multitude of tier 2 and 3 vendors. At the same time, Microsoft Corp has started its bid for a share of the business applications market, which will potentially bring another strong player into the game. It could be argued that an Oracle/PeopleSoft combo might actually improve the competitive landscape as together they could be mightier than when apart and therefore better positioned to challenge SAP.

Antitrust lawyers' primary concern is whether a move will result in higher prices, restrict customer choice or put barriers in the way of new entrants in which case there may not be a problem, although Conway is right to warn that a long investigation is likely to ensue. Stockholders have an eye to their investments and what it will do to their bottom line, so decisions will be made on the basis of financial reward and Oracle is banking on the appeal of a confirmed cash amount against a variable stock price. The two groups most affected by the events--the PeopleSoft customers and PeopleSoft employees--are the ones with the most to lose and the least influence.