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Oracle v. PeopleSoft Trial Closes

By Michael Singer     Feedback

A Delaware judge must wade through two weeks of testimony.

All eyes are on a Delaware Chancery Court judge now that Oracle's lawsuit against PeopleSoft closed Friday.

The two-weeks' worth of testimony centered on Oracle's request that PeopleSoft remove its Customer Assurance Program (CAP). The guarantee is a refund to PeopleSoft customers should the company be acquired by a hostile takeover. The program, along with a shareholder poison pill, are about all that stands in the way of Oracle's relentless proposed takeover of PeopleSoft.

Judge Leo Strine Jr. did not say when he might make his ruling, but he did point out that Oracle should continue to negotiate with PeopleSoft.

A spokesperson for PeopleSoft would not comment on the trial beyond the testimony that company officials gave all week, but noted that PeopleSoft is still planning on continuing with its anti-takeover trial on Jan. 10.

Still, even PeopleSoft executives have noted the tide has definitely shifted against them. On Thursday, board member George "Skip" Battle suggested that the company does not currently have an outside bidder or "white squire" to step in at the last minute to make a different purchase, but that the company would certainly welcome an investor or group of investors.

PeopleSoft was dealt another blow this week when Ram Gupta, head of software development, left the company. A company spokesperson did not comment on the departure and declined to say whether the man who helped PeopleSoft broker a $1 billion licensing deal with IBM had resigned or was fired. Gupta's exit follows the surprise ouster of former CEO Craig Conway by PeopleSoft's board of directors. Founder and Chairman Dave Duffield now runs the company as chief executive.

Earlier in the trail, PeopleSoft board member Steven Goldby told the court that he was open to discussing a deal with Oracle at the "right price," but it would have to be for more than the current tender offer of $21 per share or $7.7 billion. Oracle CEO Larry Ellison and co-president Safra Catz countered later in the trial, suggesting that the price would more than likely go down and not up. PeopleSoft stock dropped 23 cents to end the day at $20.85 per share.

Mike Dominy, senior analyst of business applications and commerce at The Yankee Group, told internetnews.com that Oracle's next step is to make sure it does its homework and develops a well-thought-out acquisition plan and customer support program.

"The acquisition of PeopleSoft by Oracle should not have a negative impact on PeopleSoft customers," Dominy said. "Enterprises running PeopleSoft applications on Oracle should benefit as Oracle develops solutions that are more tightly integrated within the technology stack (application server, database and applications).

"PeopleSoft customers that currently run on IBM infrastructure should be leery," he continued. "In the short term -- for the 24-36 months following the acquisition -- Oracle must develop a maintenance and support program that ensures adequate support for PeopleSoft customers that are IBM centric. Oracle must develop offerings that allow PeopleSoft customers running on IBM to migrate to an Oracle platform. These offerings must be offerings and not a requirement.

"It is imperative that Oracle manage PeopleSoft customers running on IBM (much of the legacy JD Edwards customer base) carefully to ensure continued maintenance revenue and/or the opportunity to realize additional new license and services revenue."

Regardless of the Delaware case, Oracle's hostile takeover is still under investigation by the European Union regulators. The probe is scheduled to wrap up by November 9, but officials with the EC said the initial opinion might not be enough to stop the deal from happening.

The current $7.7 billion bid has already passed the litmus test of the U.S. Department of Justice's antitrust trial. The DoJ declined to pursue its appeal after U.S. District Court Judge Vaughn R. Walker ruled in Oracle's favor.

This article was originally published on October 16, 2004
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