Oracle Apps Push Not Bound By PeopleSoft Outcome

Oracle said it needed to get 50 percent of PeopleSoft's shares tendered by midnight last Friday to continue its $9 billion bid. Wall Street sources said that as of last Thursday, arbitrageurs held nearly 30 percent of the shares, leading many to expect Oracle would hit its number.

"These investors want to keep the game going, maybe get the price up," said one financial source who requested anonymity.

Should Oracle get the shares it needs, the next step is to get a Delaware court to remove PeopleSoft's poison-pill provisions. An overwhelming victory for Oracle in the tender offer could sway the judge to speed that ruling along.

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

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Oracle's $24-per-share offer expired last Friday. Since Oracle launched the hostile bid for its business applications rival in June 2003, the Redwood Shores, Calif.-based company has adjusted the price four times, lowering it once in May to $21 per share before making its self-proclaimed final offer early this month. The tender offer has been extended 15 times in all, according to Oracle.

One thing is certain: With or without PeopleSoft's market-leading human resources and other business applications, Oracle will continue its apps push with its own offerings as well as with acquisitions.

At Oracle World next month, the company will meld its annual database and applications conferences into one venue for the first time. That signifies the company's attempt to evolve from a database kingpin to a developer of a full software stack to go head to head with Microsoft and IBM.

Oracle is expected to beat the drum for a new version of Oracle Collaboration Suite with home-grown instant-messaging and Web conferencing capabilities based on the latest Oracle 10g foundation. That suite has been in use within Oracle for months, sources said.

Oracle partners said the company has no choice but to forge ahead with business applications regardless of the PeopleSoft outcome. "This is a market consolidation. Both Oracle and the industry are at a point of maturity where you have to grow both organically and through acquisition," said Ron Zapar, CEO of Re-Quest, a solution provider in Chicago.

Oracle CEO Larry Ellison has long said the industry is converging around a few big players, with suppliers of point products fading away.

Zapar discounts fears on the PeopleSoft side, spurred by Oracle's rough rhetoric when launching its bid, that it would nuke the PeopleSoft apps and supplant them with its own offerings.

"There is a really solid technical application base on the PeopleSoft side, and Oracle's products are far less mature," Zapar said.

Some PeopleSoft partners said an acquisition will stall the market for both companies' applications until it gets sorted out. "It took PeopleSoft 18 months to figure out how to deal with Vantive after buying it; the J.D. Edwards acquisition hurt them for three quarters," said Chris Rapp, vice president of business development at Apex IT, a PeopleSoft partner in Minneapolis. "I'd say it'll take at least 18 months for a combined PeopleSoft-Oracle [to gel]."

Especially tricky is the huge overlap in applications between the two companies. When PeopleSoft, Pleasanton, Calif., bought Vantive, it really did not have CRM, Rapp said.

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

Meanwhile, the saga continues. Oracle President Chuck Phillips traveled to New York last week to talk up the deal to Wall Street. And last Thursday, Oracle sent a letter to PeopleSoft shareholders, telling them it is time to vote with their shares or forever hold their peace. If the 188 million shares needed are not forthcoming, Oracle will withdraw its offer, CFO Jeff Henley wrote in the missive.

That very day, PeopleSoft released a letter from Chairman and CEO Dave Duffield to Ellison threatening legal action over statements Oracle reps had allegedly made about Duffield's stock sales. He charged that Oracle had intimated that Duffield's sales of PeopleSoft shares were somehow suspect. "If Oracle continues to spread distortions, I will have to consider all appropriate actions, including bringing a claim of defamation," he wrote.