Appeasing Shareholders

By Baselinemag  |  Posted 2004-09-21 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.

First, shareholders.

Even with the adverse court ruling, PeopleSoft stock topped $20 a share at one point, just 5 percent below Oracle's offer of $21 a share. If Oracle is to win, the offer price might have to go back up to $25 or $26, boosting the cost of the takeover by about 20 percent, the equity analyst said.

That would make it a $9.1 billion acquisition and Oracle has to decide if it's worth that much. At one point in the past 15 months, Oracle's bid topped out at $9.4 billion; it had started at $5.1 billion.

Second, customers. PeopleSoft's Connect conference has a record 15,000 attendees, partly drawn by how Conway will address what the future holds for his company. Of those, 11,500 are its customers.

No customer interviewed by Baseline welcomed an Oracle takeover.

There is "no way to gauge" what the effect would be, said Rohana Meade, director of information technology at AMF Bowling Worldwide, a $500 million-a-year supplier of bowling equipment. "None of my peers are using Oracle," and neither is Meade. That was the most diplomatic response. Customers said they fear Oracle will not serve them well if the database giant absorbs PeopleSoft.

"I don't think Oracle is very interested in the middle-market customers,'' said Susan Gerock, senior director of systems integration and support for CarrAmerica, a $570 million-a-year real estate investment trust based in Washington, D.C.

Her interactions with Oracle sales representatives has not been reassuring: "There's always an arrogance there.''

When Ellison launched his company's hostile takeover attempt, he vowed to move all PeopleSoft business software customers to its own software. In fending off Oracle, PeopleSoft cut 1,000 workers from its staff, to improve financial results and help ward off the takeover.

John Webster, PeopleSoft programs director at Dakota State University in Madison, S.D., says Ellison's "first approach obviously scared me. And first impressions are what counts."

PeopleSoft is regarded by customers like FedEx, the freight shipper, as being "customer-focused and people-focused," as its name implies. Oracle will have to prove that it has the same focus to keep PeopleSoft's customers, should it eventually take over. "If McDonald's buys Burger King, it doesn't really matter. A burger is a burger is a burger," Webster said.

"The kind of thing we do, it's anything but that. Each customer is different, each has specialized needs."

"I would be one unhappy customer'' if Oracle absorbs PeopleSoft, he added.

With all the maneuvering in courts and with moves like doubling the price of severance payments for PeopleSoft executives in the event of a takeover, the interests of the customers that justify the billions being paid can get lost in the crossfire, say existing users of PeopleSoft software.

If Oracle is the ultimate victor when the next PeopleSoft Connect is scheduled to take place a year from now, "I hope they keep the customer in mind," said Rick von Clausburg, senior systems architect at The Longaberger Co. in Newark, Ohio.


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