PeopleSoft Plans J.D. Edwards Buy

Pending shareholder and SEC approval, the acquisition is expected to close late in the third quarter or early in the fourth quarter, company officials said during a morning press conference. J.D. Edwards, which specializes in manufacturing and assets distribution-oriented software for the midmarket, will become a wholly owned subsidiary of PeopleSoft, whose services-oriented applications suite ranges from its flagship human resources software to CRM. Combined, the two companies will have approximately $2.8 billion in annual revenue, 13,000 employees and more than 11,000 customers in 150 countries.

"This merger could not be more compelling," says Craig Conway, president and CEO of Pleasanton, Calif.-based PeopleSoft. "It brings together two companies whose strengths are complementary. We are leader in larger enterprise software and J.D. Edwards is a leader in mid-market and [with customers] on the AS/400."

The acquisition is being touted as giving PeopleSoft better entry into the midmarket space, where it has been focusing sales efforts since last year in the wake of the overall slowdown in enterprise IT spending. Denver-based J.D. Edwards has a customer base firmly ensconced in the mid-market. Additionally, the company, like PeopleSoft, is a strategic partner to IBM, with a large AS/400 following for its applications as well as an arrangement in which it bundles its software on the WebSphere platform.

All told, the combination of PeopleSoft and J.D. Edwards instantly bolsters the company against the likes of rivals SAP, Oracle and Siebel, not to mention Microsoft, which has been plowing ahead into the applications space itself, according to one industry analyst.

"This is going to wake everybody up," says Ted Kempf, industry analyst with Gartner. "It's a major move that really speaks to the broader issue of market consolidation."

Kempf says partners of both companies should benefit from the hefty combination of support and resources, as well as the corporate emphasis on selling to the mid-market. "It's an underserved area," he says, one that PeopleSoft can target more aggressively through J.D. Edwards sales teams, partners and existing customer base.

On Monday, Conway and J.D. Edwards president and CEO Robert Dutkowsky provided scant details on how the two product lines will be reconciled, promising to shed more light at a forthcoming analysts briefing later this year. However, Conway emphasized the "synergies" between the two sets of application -- which address distinctly different industries -- concluding that he expected to find few redundancies. The organizations themselves will be combined, with the respective sales forces sticking to their areas of domain expertise while also exploiting vertical knowledge gained in the course of the deal, he says.

"J.D. Edwards is highly respected for manufacturing distribution applications in the midmarket and we will translate that up to the larger enterprises," he says. "Conversely, [PeopleSoft] is a leader in HR apps, and J.D. Edwards can co-opt that expertise into the midmarket line."