Oracle exec: Company will press PeopleSoft takeover bid

FRAMINGHAM (03/01/2004) - Even though Oracle Corp. faces a government lawsuit designed to to block its attempted takeover of PeopleSoft Inc., the company's president, Chuck Phillips, said Monday that companies in the past have a decent track record of circumventing Department of Justice opposition.

Phillips made those comments when he addressed a group of PeopleSoft World users this morning in San Diego. The event was sponsored by user group Quest, which PeopleSoft inherited when it acquired J.D. Edwards & Co. last summer.

Quest directors had invited Phillips, widely seen as Oracle's point man on the deal, to discuss possible outcomes if the hostile bid is successful. Officially, Quest doesn't support the merger. PeopleSoft had also been invited, but declined to attend.

Oracle has been working since June to buy out PeopleSoft for US$9.4 billion, but that effort hit its greatest hurdle to date when the DOJ last week announced it would sue Oracle to block the deal. Although a number of analysts have written off the bid as already failed, Phillips reiterated Oracle's commitment to fight the government.

"We should play to win," he said. "No one said this would be easy." Other companies have fought the DOJ and won, he said, and he claimed Oracle has a better case than some of them.

Even so, "it's hard to say how long this will take," Phillips said. "We'll be going to court over the next few months and see what happens there."

During his brief presentation, Phillips tried to rebut the government's case and contradicted a report he himself inked when he was an analyst at Morgan Stanley. In that document, Phillips said there were only "three viable suppliers" to reautomate back offices and that the back office applications market was "an oligopoly comprised of SAP, PeopleSoft and Oracle."

Phillips' own statement was included by the DOJ in its complaint against Oracle, filed in the U.S. District Court in San Francisco.

In an apparent about-face, Phillips today claimed that the government's case is focused around the enterprise market for human resources and financial applications, and he said it will be up to the DOJ to show that that market segment would comprise only Oracle and SAP AG should the deal succeed.

He argued that there would still be competitors, including the much smaller Lawson Software and Geac Computer Corp. Additionally, he said industry leader SAP has three times the market share of Oracle.

"The market for enterprise applications is highly competitive," he said.

He also told the members of the user group that they will benefit from a "high-quality, truly global" customer support program if Oracle succeeds. And he said Oracle would work with rival database vendors to help support applications such as IBM's AS/400 DB2 database, which powers the J.D. Edwards World suite.

Because he doesn't know what direction PeopleSoft plans to take with the World applications, Phillips declined to make specific predictions or promises. However, he said that the most "critical constituent was the customer" and alienating customers would be a bad way to spend $9.4 billion.

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