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PeopleSoft Cans Court Action Vs. Oracle

By Clint Boulton     Feedback

In a continuation of turmoil in the business applications market, Oracle says PeopleSoft withdrew its plan to pursue a temporary restraining order to halt Oracle's plan to buy PeopleSoft.

Besieged by a hostile $5.1 billion takeover bid by Oracle last week, PeopleSoft late Tuesday cancelled its plan to seek a temporary restraining order to slow Oracle's advances.

Oracle said Pleasanton, Calif.'s PeopleSoft had advised it June 9 that it would file a complaint Alameda Superior Court to halt Oracle's offer to PeopleSoft shareholders on the same day. One day later, Oracle said PeopleSoft lawyers notified the company that it would not sue on this matter.

Redwood Shores, Calif.-based Oracle said it hopes the move is an olive branch of sorts.

"We are hopeful that this apparent change in course indicates that the PeopleSoft Board will be willing to meet with us to discuss our offer," said Oracle Executive Vice President Safra Catz. "We have made an all-cash, fully financed offer to the PeopleSoft shareholders. We believe that the PeopleSoft Board can best serve those shareholders by recommending acceptance of our offer."

A PeopleSoft spokeswoman told internetnews.com the company is not commenting on its legal strategy at this time.

According to analysts, the back and forth has instilled a great deal of uncertainty in the enterprise resource planning (ERP) software segment, where Oracle, PeopleSoft and J.D Edwards compete, along with market leader SAP and Siebel Systems . The companies make business applications for financial industries, asset management, supply chain management (SCM) and customer relationship management (CRM).

Some experts predict Oracle's aggressive bid, coming just five days after PeopleSoft's genial merger proposal with J.D. Edwards , would cause customers to wonder about the viability of PeopleSoft and Denver-based J.D. Edwards.

"If it goes through, Oracle's proposed acquisition of PeopleSoft will force PeopleSoft and J.D. Edwards' enterprise resource planning customers to rethink their ERP strategies," Gartner analyst Betsy Burton said in a research note this week.

David M. Alschuler, Senior Vice President e-Business and Strategy at Aberdeen Group, said it was tough to say what would happen because hostile takeovers in technology are rare.

"Oracle's offer is going to unleash many forces, regardless of its ultimate denouement. In fact, that may have been Oracle's primary objective in making the offer," Alschuler said in a research bulletin. "We believe this will quickly become a high stakes chess game involving nearly every major enterprise application vendor. Members of the investment banking community just cancelled their summer plans to laze in the Hamptons. And every customer of the companies that become involved in these transitions needs to be alert to the impact of this market consolidation on future support and enhancement of their current application portfolio."

Oracle CEO Larry Ellison hinted about the financial difficulties of both firms on a conference call last Friday, but J.D. Edwards President, CEO and Chairman Bob Dutkowsky moved to quell those notions on a conference call Monday, noting that his company has a $400 million cash balance and no debt, while PeopleSoft has a $2 billion cash balance with virtually no debt.

Still, he noted on the call that new customers might think twice before running out and picking up applications for asset management, SCM or CRM, attributing Oracle's maneuver as the cause.

This article was originally published on June 11, 2003
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