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13 June--war of words as PeopleSoft spurns Oracle bid. (CRM News Review).

It was all action on the enterprise software M&A battlefield, with PeopleSoft Inc and JD Edwards & Co delivering Oracle Corp a double whammy--rejecting its hostile takeover bid and filing a $1.7bn lawsuit.

PeopleSoft's board scorned Oracle's $5.1bn offer, recommending shareholders do not sell. Hours later, JD Edwards sued Oracle, claiming the "sole aim" of the bid is to disrupt the JDE-PeopleSoft merger.

In rejecting Oracle's tender offer, PeopleSoft's board cited the possibility of antitrust scrutiny blocking the deal, and the "substantial threat" the move represents to stockholder value, given Oracle's intent to discontinue PeopleSoft's products.

PeopleSoft said the Oracle offer raises antitrust issues in the US and Europe that it believes would cause lengthy delays while the regulatory approval process ran its course, and that ultimately the move would be unlikely to be approved.

"We believe that Oracle's proposed acquisition of PeopleSoft would stifle competition and limit customer choice," PeopleSoft CEO Craig Conway said in a statement.

"PeopleSoft remains steadfastly focused on providing our customers with superior products and services, and we will not let Oracle's tactics interfere with our business," Conway added.

"I find that very curious," Oracle CEO Larry Ellison said in a conference call later that day. "A year ago, Mr Conway approached me with the idea of combining Oracle's application business with PeopleSoft's application business, and Mr Conway then identified himself as the right person to run that combined business."

"What's changed?" Ellison asked, answering: "In his proposal, Mr Conway would be running the combined business. In our proposal, Mr Conway would not be running the combined business."

In a statement, PeopleSoft said that the $16 per share/$5.1bn offer dramatically undervalues the company. At the start of trading on Thursday, PeopleSoft shares opened at $17.65. Oracle shares were valued at $13.38.

"Oracle's offer seeks to enrich Oracle at the expense of PeopleSoft's stockholders, customers and employees," said Conway

Seeking to capitalize on the unavoidable confusion the battle has created, while limiting the damage to their own sales, the CEOs of both companies were in full spin-doctor mode in separate conference calls.

Conway sought to discredit the perception that Oracle's move could cause droves of concerned PeopleSoft customers to leave for the relatively stable arms of SAP AG or elsewhere. Customers have been "overwhelming supportive" he said.

"A constant reaction from customers since last Friday has been surprise, in some cases indignation," he said. "It has energized not only customers but also the selling organization in our own company."

"The real beneficiary this week will be IBM, the only significant competitor to Oracle in the database industry," Conway said. "The level of concern, frustration and outrage is so high I think IBM has the opportunity to convert Oracle customers to IBM customers."

It was an attempt to deflect concerns raised earlier by Wall Street analysts, who flagged concerns about the future of the PeopleSoft product line. Ellison, responding directly to Conway's claims of customer support, said they were "on the face of it, not true".

Merrill Lynch analyst Jason Maynard said in a research note: "We believe there are some savvy customers out there that will be opportunistic in this period of uncertainty to gain better deals on additional software purchases, or in renegotiating maintenance contracts."

According to Ellison's comments during Oracle's conference call, Merrill Lynch has already practiced what it has preached, by deciding to "turn off" its PeopleSoft software and deploying Oracle's instead.

Given that the antitrust issue will form a major part of the anti-acquisition strategy, it is a virtual certainty that JD Edwards would not be allowed to join the pack, if by any chance the Oracle/PeopleSoft merger were to be approved.

JD Edwards president, chairman and CEO Bob Dutkowsky has said that the company has alternative strategies, but reiterated that it is committed to the PeopleSoft deal.

Although it is clear that Oracle is not interested in JD Edwards, it is a curious decision. Even with PeopleSoft, Oracle would not have a credible mid-market strategy and product line, despite the existence of its SMB initiatives. Yet all the market momentum is expected to be in the unpenetrated mid-market rather than the saturated high-end market.

All eyes will now turn to Oracle to see if it increases its bid for company. If it does, it will indicate that it is serious about the offer.
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Publication:MarketWatch: CRM
Date:Jun 24, 2003
Previous Article:11 June--PeopleSoft reins in Oracle legal threat, SAP makes move. (CRM News Review).
Next Article:13 June--JD Edwards sues Oracle for $1.7bn. (CRM News Review).

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