Oracle-PeopleSoft bid ‘dead in the water’

15 Dec 2003

Oracle’s bid for fellow enterprise resource planning (ERP) software maker Peoplesoft faces insurmountable obstacles and is effectively “dead in the water”, a senior Peoplesoft executive has claimed.

Speaking to, Crosbie Burns, Peoplesoft vice-president and UK & Ireland managing director, said the bid faces a number of obstacles that together make it unworkable. Firstly, Peoplesoft’s results have exceeded the market’s expectations in the last two quarters, contrary to what Oracle predicted would happen. Secondly, Oracle’s tender offer price is below Peoplesoft’s current share price and only 6pc of Peoplesoft shareholders are in favour of the bid anyway.

Thirdly, the US Department of Justice and European Commission are investigating it from a competitive point of view and are unlikely to support it. Lastly, the way in which Peoplesoft is incorporated in State of Delaware means that the state laws of incorporation would have to be overturned for Oracle’s bid to be accepted – an unprecedented event, according to Burns. Finally, Oracle itself is in no shape to acquire a competitor, he argued. “If you look at Oracle in terms of its own performance, well you can see why they want to buy Peoplesoft,” he said derisively.

He argued that a successful acquisition of Peoplesoft by Oracle would be seriously damaging all round. “If Oracle is successful, it would be a hugely bad thing for the industry. If you remember what Ellison said, he said he was going to tank the product and fire all the people. So it’s not surprising that employees and customers don’t want the bid to succeed.”

Claiming that Department of Justice sees through the bid as a predatory move to remove competition from the marketplace, Crosbie argued that Peoplesoft’s acquisition of JD Edwards in September was in a very different vein. “The acquisition of JD Edwards was not about consolidation; it was about giving more choice because we’ve actually retained all the product lines.”

While he believed the Oracle bid was doomed to failure, Burns predicted more consolidation in the enterprise ERP marketplace with the elimination of many smaller niche players. He said that market increasingly resembled the pharmaceutical sector where a small number of huge players predominate.

“Operating in this business requires massive investment and it’s just not possible for a small organisation to get into that league,” he said.

The merged Peoplesoft/JD Edwards business has 11,000 employees globally and forecast revenues of $2.8bn next year.

By Brian Skelly