Hostilities between Oracle Corporation and PeopleSoft Inc. continue to escalate over Oracle's unsolicited bid for PeopleSoft, leaving PeopleSoft's higher-education customers in the dark about what the rival software companies might do next.

After Oracle's hostile bid to acquire PeopleSoft became public earlier this month (The Chronicle, June 9), PeopleSoft filed a lawsuit in Alameda County Superior Court, in California, asking for an injunction to stop the attempted takeover.

The lawsuit, which PeopleSoft announced on Friday, followed a meeting on Thursday of PeopleSoft's Board of Directors, at which members voted unanimously to ask shareholders to shun Oracle's cash offer. Oracle has offered to buy all outstanding shares of PeopleSoft stock for $1.5-billion in cash, or $16 a share, and has not budged from that initial offering price. PeopleSoft shares closed at $16.92 on the Nasdaq stock market on Friday.

Given the current uncertainty, some higher-education consultants are advising colleges to postpone signing any new contracts with PeopleSoft until the controversy dies down. Many colleges now rely on PeopleSoft's business software for managing their financial, personnel, and student records.

Even colleges that are in the midst of negotiations might be wise "to slow that process," at least until things get sorted out between the two companies, says Michael Zastrocky, vice president for academic strategies at Gartner Inc., the market-research and information-technology consulting company.

According to a statement about the lawsuit, PeopleSoft alleges that Oracle's hostile takeover bid is "part of a scheme to freeze customer purchase decisions and to adversely affect PeopleSoft's end-of-quarter sales."

Oracle, which has defended its actions in counterstatements, says that it would charge PeopleSoft customers "no extra license fee" for switching from PeopleSoft products to comparable Oracle products if its takeover is successful.

Should the merger succeed, Oracle has also promised PeopleSoft customers that future versions of Oracle's E-Business Suite would include features from PeopleSoft's complementary business software and that Oracle products would benefit "from the contributions of the combined development organization."

Oracle's Student System software, which was designed to manage students' academic and financial records, is less mature than PeopleSoft's competing Student Administration software. But in 12 to 18 months, Oracle could catch up, Mr. Zastrocky says, especially if it buys PeopleSoft.

For Oracle, buying PeopleSoft would mean "an opportunity to acquire a lot of industry-specific knowledge," Mr. Zastrocky says. Higher education is a relatively small source of business for Oracle, he says, but it is one of PeopleSoft's largest industry sectors.