PeopleSoft’s unanimous ‘No’ to Oracle


11 Nov 2004

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The board of business software player PeopleSoft has “unaminously” rejected Oracle’s latest offer of US$24 a share, citing PeopleSoft’s solid growth outlook and a belief that the company is in better shape than when Oracle’s buyout campaign began.

Following consultation with Citigroup Global Markets and Goldman Sachs, PeopleSoft’s board concluded that Oracle’s offer was inadequate and substantially undervalued the company.

The company said that for the third quarter of 2004, PeopleSoft reported license revenue of US$161m and a record total revenue of US$699m, up 12pc on the previous year. As well as this the company said that in the fourth quarter license revenue will increase to US$175m and total revenues will reach US$715m.

Dave Duffield, PeopleSoft’s chairman and chief executive officer, said: “The board concluded that PeopleSoft is worth substantially more than Oracle’s latest offer. We are a vibrant, strong company with a focused, motivated management team and employee base dedicated to executing on the company’s plan. PeopleSoft will continue to deliver shareholder value by extending our current product leadership, building new products, entering new markets and continuing to deliver the very best customer service in the industry.”

George Battle, the chairman of PeopleSoft’s Transaction Committee, which evaluated Oracle’s offer, said: “We reiterated [to Oracle] that, as members of the board have testified in Delaware, we would be willing to discuss an offer made by Oracle at an appropriate price – but US$24 isn’t it. We told Oracle that its price must reflect both PeopleSoft’s intrinsic value and the fact that PeopleSoft is materially more valuable to Oracle now than it was when Oracle made its inadequate US$26 per share offer. Oracle indicated they understood our position and appreciated the call.”

Battle continued: “We absolutely believe that PeopleSoft is worth far more today than at any point since this process began. Since the beginning of the year, the company has: generated US$422m in license revenue, creating additional maintenance revenue and future upsell and cross-sell opportunities; added 418 new license customers; increased our total deferred maintenance by approximately 9pc; and generated US$248 million in incremental cash.

“Our customer base and associated maintenance revenue stream are the exact reasons that Oracle gives for wanting to acquire PeopleSoft. In addition, we believe it’s clear that Oracle wants to acquire PeopleSoft to rescue its own declining applications business,” Battle concluded.

By John Kennedy