Oracle Deadline On PeopleSoft Looms, Most Expect Battle Will Rage On

Oracle-PeopleSoft saga

But the fireworks continued right up to the brink. On Thursday, PeopleSoft chairman and CEO Dave Duffield charged in a letter to Oracle CEO Larry Ellison that Oracle reps have misrepresented his sale of PeopleSoft shares and threatened legal action if the talk does not stop. And, Oracle chairman Jeff Henley fired off a missive to PeopleSoft shareholders telling them to make their stand now or forever hold their peace.

Oracle has said if it does not get 50 percent of the PeopleSoft shares tendered by midnight, it will drop its 17-month-old $9 billion bid. Wall Street sources said they expect Oracle will hit its target, with arbitragers holding nearly 30 percent of the shares as of Thursday. "These institutional investors want to keep the game going, maybe get the price up," said one financial source who requested anonymity.

Some of the bigger players have already spoken. As of Tuesday, Private Capital Management with a 9.3 percent stake in PeopleSoft weighed in against the offer while Capital Guardian, with 5.9 percent, threw its lot in with Oracle.

Should Oracle get enough shares, it will prevail upon a Delaware court to remove PeopleSoft's poison-pill provisions and theoretically keep pursuing its quest.

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Since it launched its highly hostile bid for its business applications rival in June, 2003, Oracle has adjusted the offer price four times, lowering it once in May to $21 per share, before making its "final" offer early this month. The tender offer has been extended 15 times in all, according to Oracle.

Despite repeated contentions by Henley and Oracle co-president Charles Phillips that Oracle will stand fast at this price, even Oracle partisans are unconvinced. "I think the PeopleSoft investors will keep the deal going but try to get the price upthey're negotiating at every move," said Ron Zapar, CEO of Re-Quest, a Chicago Oracle solution provider. "I don't know if Oracle's done. I think the price still has room."

Chris Rapp, vice president of business development for Apex IT, a Minneapolis-based PeopleSoft partner does not welcome the attention Oracle has lavished on PeopleSoft and the confusion it has caused among customers.

Citing previous experience when PeopleSoft bought Vantive in late 1999, it took more than a year for customers, the channel, and the vendor itself to sort things out, he said. Likewise, PeopleSoft's acquisition of J.D. Edwards in June, 2003, hurt PeopleSoft's earnings for three quarters. He expects that if Oracle prevails it will take at least 18 months for things to settle down --probably more since there is significant product overlap between the two companies.

He and some other observers said Oracle would be better served buying BEA to bulk up its application server business, rather than pursuing what has been a particularly vicious and personal takeover battle for PeopleSoft. Things got so heated that PeopleSoft ousted its CEO, Craig Conway, a former Oracle exec, a month ago. With or without PeopleSoft's human resources and other apps in its portfolio, Oracle will no doubt continue its apps push both with its home-grown offerings and by acquisition.

At Oracle World in two weeks, the company will, for the first time, meld its annual database and applications conference .That signifies the company's attempt to evolve from a database kingpin to a full platform company with the wherewithal to take on Microsoft and IBM.

"Oracle doesn't need to buy anything. Oracle has moved ahead fast with its applications. This transaction is more important to PeopleSoft than to Oracle," said Rich Niemiec, CEO of TUSC, an Oracle partner in Lombard, Ill.

Rapp and some others said Oracle would be better off buying BEA, another rumored target, to build up its app server business, rather than trying to digest PeopleSoft.

While Ellison has said Oracle would be buying share in a consolidating market with PeopleSoft, Rapp disagreed. "I don't' see how you can close more deals [with the combined company]. The only two to benefit here are SAP and Microsoft. SAP is the big beneficiary, but this also gives Microsoft an opportunity to jump in [to enterprise apps]—it's on the doorstep already," he noted.