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24 June--PeopleSoft awaits 'white knight' bidder. (CRM News Review).

The battle for enterprise software vendor PeopleSoft Inc has taken another unexpected twist, as the enterprise applications provider announced it would entertain bids from rival companies in an effort to block a hostile takeover from bigger rival Oracle Corp.

Continuing the war of words between the two companies, PeopleSoft said it is seeking a 'white knight' to rescue itself from the jaws of Larry Ellison's hungry Oracle dragon, saying, in a regulatory filing late Friday, that its board has cleared a path for talks with other interested bidders. The filing read, "Future circumstances might make it advisable or necessary for the company to engage in discussions or negotiations with third parties regarding extraordinary transactions such as a sale or a merger".

PeopleSoft's stock bumped up 28 cents to $17.70 during early morning trading, though it still remained 9% below Oracle's offer of $19.50.

The move raises interesting possibilities about other possible suitors that might make a move for PeopleSoft. An initial survey of the market suggests that few companies would be willing, or able, to match or beat Oracle's bid, especially given the current uncertainty in the tech sector and the continued downturn in software spending. Any serious bidder would realistically need to fork out at least $500m more than Oracle to appeal to PeopleSoft shareholders, bringing the price tag near to the $7bn mark. Nevertheless, there are several candidates that could potentially pull together an offer: IBM Corp, Microsoft Corp, SAP AG and Siebel Systems Inc. All these companies develop software, and all, bar Siebel, are bigger than Pleasanton-California-based PeopleSoft.

IBM, with its impressive market cap of $147bn and $5.6bn in cash, could easily outbid Oracle. But its CEO, Sam Palmisano, has also been reported as saying that IBM's strategy would not be to compete with its 30 or so application software partners, which help to drive forward sales of IBM's hardware and IT consulting businesses.

Microsoft hold a similarly strong cash position, with $46.2bn in hand, and an even better $282bn market cap. The company has already made one mega-acquisition--accounting software maker Great Plains Software Inc in a stock-swap worth $1.1bn--way back in December 2000. But should the Redmond giant make a move, it will no doubt raise obvious anti-trust concerns; something that Microsoft would surely not relish given its continued run-ins with the US Department of Justice over the past five years. Moreover, Microsoft's current strategy continues to be focused on the small-to-medium sized enterprise (SME) market, which PeopleSoft does not play in that well.

SAP has a market value of $38.9bn, and has already said it would gain from any Oracle-PeopleSoft merger. But the German software company may in fact have a vested interest in PeopleSoft as a way to strengthen its lead in the enterprise applications software market - despite SAP CEO, Henning Kagerman's comments last week that he would not "buy" market share, but would grow by taking it from the competition. "The strong get stronger, as we say," Kagerman said.

Finally San Mateo, California-based Siebel Systems entering the fray is also a possibility, and would undoubtedly propel the CRM giant into the $30bn market for ERP software. Siebel's financial clout is much weaker however, with a market cap of $5.1bn and $2.2bn of cash and investments in the bank, which is almost on a par with PeopleSoft's position (a $5.5bn cap and $2bn of cash in the bank). Also the merging of the two business cultures could prove to be sticky--particularly given Siebel's aggressiveness. It's common knowledge in the industry that the two sets of management teams have an intense dislike for one another.

PeopleSoft had rebuked Oracle's sweetened offer of $6.3bn last week, having earlier sued Oracle to stop any takeover advances on anti-trust grounds, saying it grossly undervalues the company, and that any combined entity would face significant delays in passing through regulatory issues. The US Department of Justice also said it would be closely reviewing the anti-trust issues raised by the proposed merger. PeopleSoft is also pushing forward with a friendlier $1.75bn bid to buy Denver, Colorado-based ERP vendor JD Edwards & Co.
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Publication:MarketWatch: CRM
Date:Jun 24, 2003
Previous Article:24 June--Oracle moves to placate PeopleSoft customers. (CRM News Review).
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