PeopleSoft: Another Year of Living Dangerously

By Baselinemag  |  Posted 2004-09-21 Email Print this article Print

Last year, PeopleSoft said it could survive any bullets aimed its way by Oracle and its chief executive, Larry Ellison. Get the details on how the saga will go on for at least another year.

SAN FRANCISCO—When PeopleSoft customers met a year ago, chief executive officer Craig Conway appeared on stage in a flak jacket, flanked by his dog, Abbey.

The point: They could survive any bullets aimed their way by Oracle and its chief executive, Larry Ellison, in its three-month-old attempt to take over the Pleasanton, Calif., purveyor of corporate applications, whether PeopleSoft liked it or not.

Indeed, Conway felt PeopleSoft was bulletproof at the time.

"Ask me about a current event,'' he quipped to Baseline about Oracle's effort to take over PeopleSoft.

That was then. This is now.

"Have you ever had a bad dream that just wouldn't seem to end?" Conway asked customers assembled to hear his keynote at the company's annual user conference, PeopleSoft Connect, held at the Moscone Center here. "We have."

What had seemed to Conway to be a non-event changed on Sept. 9, when U.S. District Judge Vaughn Walker ruled that Oracle's bid, valued at $7.7 billion, did not create antitrust issues. "It certainly opened the door for Oracle in a way it hadn't been,'' said Judith Sweeney, research director for industry consultant AMR Research in Boston.

Now, the fight between Conway and his former boss, Ellison, could well last another year, Sweeney estimates.

"This saga is just going to go on," Conway told attendees of his keynote speech.

Among the hurdles that will keep Oracle busy and the saga going:

  • An appeal. The U.S. Department of Justice, which had argued that the merger would reduce competition in the enterprise software business, has 60 days to decide whether to mount a challenge to Walker's ruling.

  • Antitrust worries abroad. Regulators in the European Union have expressed concerns about the merger and still could try to block it on anticompetitive grounds.

  • Swallowing the poison. PeopleSoft has instituted a "shareholder rights" program designed to make an unwanted takeover prohibitively expensive. Oracle would have to get the "poison pill" removed from PeopleSoft bylaws—or swallow it.

  • Convincing shareholders. In the end, Oracle still must win the hearts, minds and votes of PeopleSoft shareholders. That fight has not begun.

    Plus, PeopleSoft announced a "strategic agreement" with IBM in which it would give away IBM's WebSphere middleware for connecting applications from multiple vendors free of charge with its own applications. The two companies said they would invest $1 billion over five years in the effort to cross-sell each other's products.

    Conway said there were "no ulterior motives" in reaching the pact. But PeopleSoft chief technology officer Rick Bergquist made it clear that it allied PeopleSoft with the chief rival to Oracle's database products, IBM, and that PeopleSoft would be referring its customers to IBM if they needed a database.

    "It's still a mess,'' said one equity analyst attending a breakfast preceding Conway's speech.

    And the reality is that Oracle will also have to overcome resistance not just from shareholders if it's going to succeed, but PeopleSoft customers as well.

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