Battle intensifies for PeopleSoft

The stakes in the takeover battle between PeopleSoft and Oracle rose this week, as users of both companies lined up pro or con over the merger.

Oracle, which launched a hostile takeover bid two weeks ago against rival PeopleSoft, upped its initial offer from $US5.1 billion to $US6.3 billion and filed suit against PeopleSoft, its board of directors and J.D. Edwards & Co. because of their efforts to block the transaction. Simultaneously, PeopleSoft launched what its spokesman called "a prudent response to Oracle's attempt to disrupt our business and protect our customers' investments and our market position."

That apparently includes a contractual offer to new or upgrading customers to repay twice the cost of the software license fee should PeopleSoft be acquired within a year of the purchase and if, two years after the acquisition, the buyer discontinues the PeopleSoft products or support.

Those were the terms, according to a June 9 letter issued to a potential PeopleSoft customer.

PeopleSoft declined to discuss the letter and said it doesn't discuss customer contracts.

The new Oracle bid, unlike the earlier one, actually makes the buyout offer a "viable deal," according to Barton Goldenberg, a CRM analyst at consulting firm Information Systems Marketing. However, the price still won't offset the long-term value of PeopleSoft's software portfolio, and he predicted stockholders will reject it.

Several Oracle users attending the Digital Consulting Institute's CRM user conference in Boston yesterday chimed in favorably about the new offer.

"There is a lot of talk that maybe this was just a tactic rather than a true, honest and earnest bid," said Victor Burgess, vice-president and general manager of Affina. The customer services company runs Oracle's E-Business Suite 11i CRM and application server software.

"With the raised price, it shows Oracle is in the game to win," Burgess said, adding that Oracle's latest move validates Affina's decision to purchase its software. "It has us feeling maybe we were clairvoyant," he said.

A couple of PeopleSoft users, not attending the show, applauded that company's refund offer as a way to block the takeover.

One user who had heard about the letter, but had not actually seen it, was Jim Prevo, CIO at Green Mountain Coffee Roaste who called it "a good offer."

Although he hopes PeopleSoft will prevail, the move also gives the company additional options "without extraordinary financial risk," Prevo said. "If I had any pending purchases with PeopleSoft, I'd move forward as a vote of confidence in the management team," he said.

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