Oracle this week took action in an attempt to keep itself from gagging on one of the poison pills that business applications rival PeopleSoft is trying to use to block Oracle's $US7.3 billion hostile takeover bid.
Oracle asked a judge at the Delaware Chancery Court for an expedited ruling on its suit to block PeopleSoft's antitakeover provisions. In particular, Oracle pointed to a programme under which PeopleSoft has promised new or upgrading users payments of up to five times the cost of their licenses if the company is bought out within two years and support for its software is ended within four years.
Pleasanton, California-based PeopleSoft has said that the so-called customer assurance programme has already created a potential financial liability of about $800 million for an acquiring company. In this week's court filing, Oracle argued that the refund offer could make the cost of buying PeopleSoft "prohibitive" for it and any other would-be suitors.
"It helps the customer but makes any potential acquirer have a huge liability," Chuck Phillips, an executive vice president at Oracle, says. "It's making [PeopleSoft] worthless and taking control from the shareholders."
Phillips, Oracle's point man on the takeover attempt, added that a decision this month by PeopleSoft officials to expand the scope and time frames of the customer assurance programme was "a very dangerous" move legally. "They're out of step with the current environment of corporate governance," he contends.
"Contrary to Oracle's assertion, PeopleSoft's management is acting in the best interest of the shareholders," a PeopleSoft spokesman counters. He adds that the refund offer is "very positive for customers and very positive for shareholders."
PeopleSoft user John Schindler, CIO at lighting fixtures maker LD Kichler in Cleveland, voices continued disapproval of Oracle's unsolicited buyout bid. "Let's put a stake in it and call this whole thing done," says Schindler, who managed an installation of Oracle's applications at a previous employer and is a former member of the Oracle Applications Users Group's board.
But Kyle Lambert, vice president of information solutions at John I Haas, a Washington-based hops grower that uses Oracle's software, says he had never heard of a poison-pill provision like the one being employed by PeopleSoft.
"I think the tactic that PeopleSoft is taking is a desperate attempt by the CEO and the executive staff to prevent a stockholders vote on the matter," Lambert says.
Like Schindler, though, Lambert wants the companies to quickly resolve the takeover fight. "If the deal makes sense, great," he says. "If the deal does not, move on."
In addition to the ongoing court proceedings in Delaware, the two vendors are waiting for the US Department of Justice to announce whether it will oppose the deal on antitrust grounds.
Oracle officials had hoped to get an answer from the DOJ this month. But according to Phillips, DOJ officials now say that a decision might not be announced until next month or January.
Oracle requested the expedited ruling on its poison-pill suit just days after attorneys pursuing a shareholder class-action lawsuit against PeopleSoft filed a separate motion to block the company from promising refunds to its users.