![]() |
| Office of the Chancellor / Public Affairs |
Monday, June 30, 2003
|
Contra Costa Times 6-30-03 Feds extend review of Oracle's PeopleSoft bid |
|
The Justice Department will extend its antitrust review of Oracle Corp.'s $6.3 billion hostile bid for PeopleSoft Inc., which could further complicate Oracle's efforts to take over its rival, according to several published reports. People briefed on the government's decision told the New York Times and other news outlets that the Justice Department today will request additional information on how a merger between the two business software competitors would affect customers and the marketplace. Today is the end of an initial 15-day review period for the department to decide how it wanted to handle the hotly contested deal. That request from regulators will slow down the antitrust review of the proposed merger by at least four to six weeks, if not longer, said Harvard law professor John Coates. He said such a request is customary because of the size of the proposed combination of Oracle, the second-largest business software maker with a 13 percent share of the market, and PeopleSoft, the third-largest business software maker with 10 percent of the market. German software giant SAP AG dominates business software, cornering more than a third of the market. "It shows (the Justice Department) is taking this seriously," Coates said. A spokesman for the Justice Department declined to comment. Gary Reback, the Silicon Valley lawyer advising PeopleSoft on antitrust issues, said he had not been informed of the Justice Department's decision. But he expected a vigorous review. "I think the Justice Department is going to take a very thorough look at this particular deal," said Reback. "It is an important deal not just for PeopleSoft. It's an important deal for the public sector, an important deal for large enterprises and an important deal for antitrust." The extension was anticipated because of growing opposition to the hostile takeover attempt. Connecticut already filed a lawsuit seeking to block Oracle from taking over PeopleSoft on antitrust grounds, and other states are considering similar suits. The complexity of evaluating whether the merger could lead to higher prices and stifle competition in the business software market would lead regulators to be cautious, analysts said. Moreover, extending their review could indicate that regulators are feeling public pressure not to rubberstamp the hostile takeover. "PeopleSoft is demonstrating that it may have a more effective Washington political lobbying operation than Oracle does," said Massachusetts management consultant Peter Cohan. Oracle has taken fire from angry customers after saying it would stop making PeopleSoft products. Oracle has since toned down its rhetoric and finetuned its strategy. The company has launched a publicity campaign, taking out full-page ads in major newspapers. It has reached out to PeopleSoft customers and shareholders as well. Oracle chairman Larry Ellison gave the Washington Post an exclusive interview, presenting his case for acquiring PeopleSoft, in an apparent bid to sway regulators. The ongoing probe by the Justice Department is likely to spark even more intense public and behind-the-scenes lobbying on both sides. The delay is likely to give PeopleSoft the time it needs to complete its $1.75 billion friendly merger with smaller software rival J.D. Edwards & Co., although regulators still could request a their review of that merger. But that merger has not provoked an outcry from customers or states who use PeopleSoft software like Connecticut. Oracle has said it has not ruled out the possibility of acquiring both PeopleSoft and J.D. Edwards if the two succeed in completing their merger. PeopleSoft board members have rejected two hostile bids from Oracle, arguing that regulators would not approve the merger for anticompetitive reasons. Charles Phillips, an executive vice president at Oracle, told the New York Times that he was not surprised "at all" that the Justice Department extended its review of the hostile takeover "given the complexities of the market." Phillips said Oracle needed to do a better job of getting "its message out" on how the merger would benefit customers. He argued that the business software marketplace already is highly competitive. "There is always going to be three or four leading vendors. If one brand name gets taken out of the market, there is two or three ready to take its place." In the extended Justice Department review, PeopleSoft will get another opportunity to argue that the merger would hurt customers and limit their choices, pointing out that consolidation in the marketplace for business software applications already has resulted in just three major players -- SAP, Oracle and PeopleSoft. Antitrust roadblocks could test Ellison's resolve, analysts say. The barrage of public sniping between the two companies also could harm Oracle's reputation, Cohan said. "People are not very favorable to boorish, bullying corporate behavior these days," he said. On the other hand, a lengthy review could work in Oracle's favor if PeopleSoft customers delay software purchases until the Justice Department reaches its decision, crippling PeopleSoft's business, Cohan said. Whether the hostile takeover attempt already has damaged PeopleSoft's
business remains to be seen. Its fiscal quarter ends today. |
|
|
These news clips are provided by the Public Affairs Department of The California State University. They are intended for the internal use of The California State University system and should not be redistributed. Questions and submissions may be sent to publicaffairs@calstate.edu. |
|