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Oracle must still hurdle PeopleSoft board, EC

A federal judge may have denied the DOJ's attempt to block Oracle's hostile takeover of PeopleSoft, but the software giant won't have a clear road to acquisition, observers said. Still standing in the way are the PeopleSoft board of directors and the European Commission.

The latest round may have gone to Oracle Corp., but there is more fighting to come.

A federal court decision issued yesterday favoring Oracle over the U.S. Justice Department, removed one hurdle from the ambitious and controversial path Oracle is taking on its way to acquire its rival, PeopleSoft, Inc. But there are more obstacles ahead, including a possible appeal by the DOJ.

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Read SearchSAP.com's breaking coverage of the Oracle-DOJ ruling:

Judge rules in favor of Oracle in takeover case

Peoplesoft users will need reassurance, but damage may be done

More problematic for Oracle, though, is PeopleSoft's board of directors, which has rejected every proposal Oracle has placed on the table since June 2003.

"Oracle probably will emerge from the legal phase relatively unscathed," said Hillard Sterling, a Chicago-based attorney specializing in technology for the firm Freeborn & Peters. "But they have many more mountains to climb. Those business battles may make this courtroom victory look relatively benign -- and possibly meaningless."

PeopleSoft has said that the latest offer, $21 per share, undervalues the company. After the judge's ruling, Oracle extended the deadline that PeopleSoft shareholders have to tender their stock until Sept. 24.

The ruling bolstered stock prices for both companies. PeopleSoft shares surged 11% in early trading on Friday; Oracle rose nearly 4%. Competitors also fared well, with SAP gaining more than 3% and Siebel rising 6%.

Now European antitrust regulators must issue a verdict to Oracle.

"Investors have to look at the European Commission as a wild card," said Robert Becker, a senior equity analyst at Argus Research Co. "There could be political considerations." Some analysts theorized that SAP having a large market share in Europe would influence the EC to favor Oracle.

SAP, which stated its opposition to the DOJ's antitrust case during the trial, has attempted to position itself as the "safe choice" as the Oracle-PeopleSoft saga has dragged on. Yesterday Bill Wohl, SAP spokesman, repeated that stance.

Oracle probably will emerge from the legal phase relatively unscathed. ... Those business battles may make this courtroom victory look relatively benign -- and possibly meaningless.
Hillard Sterling
AttorneyFreeborn & Peters

"From the SAP perspective, we are operating in an environment just like we have for 14 months," Wohl said.

"It gives us another opportunity to point out that we are the only company completely focused on what customers need to be successful in their business. We are the only ones not distracted by acquisitions, mergers, court battles and investigations."

SAP, Microsoft and Lawson Software were among the companies U.S. District Court Judge Vaughn Walker highlighted in his 164-page ruling. Walker ruled that a "post-merger Oracle" would have enough competition to prevent any U.S. antitrust law from being violated.

Customer relationship management software vendor Siebel Systems Inc. released a statement yesterday, saying "Regardless of the final outcome of Oracle's proposed PeopleSoft acquisition, Siebel Systems remains highly focused on delivering customer facing solutions that provide demonstrable business value for its customers."

Oracle's aggressive attempt at acquiring PeopleSoft takeover has hurt its public image, according to some polls, and some analysts say it has also hurt PeopleSoft's business.

"Sometimes PeopleSoft is not even getting to the table with a deal because customers are fearful of a takeover," said Yvonne Genovese, research director at Stamford, Conn.-based Gartner Inc.

"It has stopped some sales cycles before PeopleSoft has had a chance to get them started," Genovese said.

In June 2003, PeopleSoft filed suit against Oracle, arguing that was not honest with PeopleSoft customers about Oracle's ability to support PeopleSoft customers. Meanwhile, Oracle is slated to go back to court this month to argue that PeopleSoft should have to revoke the so-called poison pill provision. The poison pill refers to PeopleSoft's efforts to block the hostile takeover by promising customers huge refunds -- up to five times the cost of some licenses -- if the company is bought.

Walker's decision, though, cleared the largest legal hurdle from Oracle's path, Sterling said.

''The government's attorneys never put forth a coherent theory of market definition," Sterling said. "Without a clearly defined market, an antitrust challenge falls by its own weight."

Walker stayed the ruling for 10 days to provide the DOJ time to appeal.

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