Body blow for Oracle’s PeopleSoft bid

27 Feb 2004

Citing anti-competitive reasons, the US Justice Department has made a legal challenge to Oracle’s US$9.4bn bid for rival business software maker PeopleSoft.

The Department filed the suit yesterday in the US District Court in San Francisco and was joined in the action by the attorneys general of Hawaii, Maryland, Massachusetts, Minnesota, New York, North Dakota and Texas.

“We believe this transaction is anti-competitive – pure and simple,” said R. Hewitt Pate, assistant attorney general in charge of the Department’s Antitrust Division. “Under any traditional merger analysis this deal substantially lessens competition in an important market. Blocking this deal protects competition that benefits major businesses, as well as government agencies that depend on competition to get the best value for taxpayers’ dollars.”

Oracle reacted angrily to the move, saying that it had no basis “in fact or law”.

The legal challenge is the latest twist in the protracted nine-month struggle for control of PeopleSoft, which in the meantime has completed its own acquisition of a smaller rival, JD Edwards.

The Justice Department’s decision to intervene reflects a concern that the enterprise software market, which is worth billions of dollars in the US alone, is becoming concentrated in the hands of too few players. The US seems determined to avoid another repeat of Microsoft’s hegemony in the consumer and desktop space.

Oracle and Peoplesoft along with Germany’s SAP are all that’s left of the quintet of firms – previously termed the ‘JBOPS’ (JD Edwards, Baan, Oracle, PeopleSoft and SAP) – that until recently dominated the enterprise resource planning (ERP) market.

In a statement, the Justice Department said: “If the merger were allowed to proceed, it would eliminate competition between two of the nation’s leading providers of human resource and financial management enterprise software applications, resulting in higher prices, less innovation and fewer choices for the businesses, government agencies and other organisations that depend on this type of software.”

Oracle spokesman Jim Finn rejected this assertion and accused PeopleSoft of waging an intensive lobbying campaign to win the Department’s favour. “A combined Oracle/PeopleSoft will significantly benefit all customers and shareholders involved,” he commented.

Oracle CEO Larry Ellison vowed to pursue the bid and fight the Justice Department in the courts if necessary.

By Brian Skelly