Oracle made a hostile $5.1 billion offer Friday to buy rival PeopleSoft, setting the stage for a dramatic battle between the strong-willed chieftains of two of the Bay Area's leading software companies.

The unsolicited, all-cash bid -- very rare in the technology world -- also set off a torrent of speculation about Oracle's true motives. Oracle Chief Executive Larry Ellison doesn't really want PeopleSoft's popular software applications -- he said he would phase them out and switch customers over to similar Oracle software.

And the bid disrupts PeopleSoft's own agreement, announced Monday, to buy a smaller software maker, J.D. Edwards, for $1.7 billion in stock.

In a conference call with analysts, Ellison said Oracle's purchase offer is a ``much safer road for PeopleSoft shareholders'' than the J.D. Edwards deal. And for Oracle shareholders, the combination would make the company ``even more competitive and profitable'' against rivals such as SAP and IBM.

But PeopleSoft CEO Craig Conway, who worked for Oracle for nine years, accused his former boss of ``atrociously bad behavior'' for trying to break up the J.D. Edwards deal.

``I think Larry saw a wedding and he showed up with a shotgun because he didn't get invited,'' Conway told the Associated Press. ``It's a page straight out of Genghis Khan,'' he said, referring to the brutal 13th-century leader of the Mongols.

Conway added, ``There is no condition that I can even remotely imagine where PeopleSoft would be sold to Oracle.''

Oracle, the second-largest software company after Microsoft, said it plans to take the offer directly to PeopleSoft shareholders Monday, offering them $16 per share.

Shares of PeopleSoft, based in Pleasanton, surged 18 percent Friday, up $2.71 to $17.82 on news of the offer.

Sweetened bid possible

The spike is an indication that investors believe the stock is worth more than what Oracle has offered, and if Oracle is serious, it will probably have to sweeten its bid.

At $5.1 billion, the PeopleSoft acquisition would be the largest U.S. technology deal since Hewlett-Packard bought Compaq Computer for $19 billion a year ago. It also would be the second-biggest all-cash deal in Silicon Valley history.

Ellison said in a conference call with analysts that Conway had approached him a year ago about creating a new company based on both firms' applications software products, which run a wide spectrum of corporate operations, from human resources to sales management to finances.

``We didn't come to an agreement so we made this offer,'' Ellison said.

A spokesman for Conway confirmed the earlier talks, but said PeopleSoft had offered to buy Oracle's applications software business at that time.

Although Ellison said Oracle would not rule out keeping the J.D. Edwards deal alive after a PeopleSoft acquisition, he called it ``a very risky merger.'' Oracle's all-cash offer is ``a much safer road for PeopleSoft shareholders.''

A spokesman for J.D. Edwards said Friday it has an agreement to merge with PeopleSoft, and the company did not want to comment on Oracle's offer until it sees the details.

Industry analysts predict a drawn-out battle that probably would require Oracle to increase its offer.

Below-premium bid

Oracle's initial bid is just 5.8 percent higher than PeopleSoft's stock price Thursday, before the deal was announced. That's far below the 30 percent premium typical for recent software deals, said Paul Crisci, a managing director with Broadview International, which does no business with Oracle.

Analysts said that PeopleSoft does have a ``poison pill'' plan in place that makes it difficult for a purchase to occur without the consent of PeopleSoft's board.

PeopleSoft could also solicit a friendly offer from a ``white knight,'' such as Oracle rival SAP, to fend off the unwanted bid.

Ellison has long envisioned the market for applications that run on top of databases as being dominated by two major players, Oracle and SAP.

Oracle's flagship product is its relational database software, used to store and manage large volumes of data. But as its core market has matured, in recent years it has developed applications that use the database to handle a variety of tasks, which is also the core of PeopleSoft's business.

``It's about critical mass. We need to bulk up and gain market share against SAP and Microsoft,'' said Oracle Executive Vice President Charles Phillips in an interview. He called the $16 offer ``a very fair price.''

The acquisition would be the biggest ever for Oracle, which had about $6 billion in cash and short-term investments as of Feb. 28.

Regardless of the outcome, the move probably will accelerate the ongoing software sector shake-up that already has produced smaller deals as firms struggle to survive during the continuing slump in spending, said analysts.

``It's a catalyzing event,'' Crisci said. ``This is being done at the grandest level, but it will have a rippling effect on the industry.''

Oracle may win even if the deal is never consummated.

``It was a clever move by Larry Ellison because if he gets PeopleSoft for $16 a share, he takes out a major competitor and gets $800 million a year in maintenance revenues,'' said JMP Securities analyst Patrick Walravens. ``And if he doesn't get it, he just created significant doubt in the buyers of software about the longevity of PeopleSoft and J.D. Edwards.''

`Regardless of intent'

In a statement, PeopleSoft said its board of directors is required by law to review all cash tender offers ``regardless of intent'' and will provide a recommendation to shareholders shortly after the review.

Oracle said that if it completes the deal, it would not actively sell PeopleSoft's products to new customers but would provide support for all PeopleSoft products.

Hostile takeovers are usually rare in technology, let alone the software industry where most of a company's assets are people who can walk out the door if they are unhappy.

But it's hard to imagine a friendly deal between Oracle and PeopleSoft.

Conway once called Oracle ``a sociopath company.'' And any deal with Oracle would probably result in the layoffs of many of PeopleSoft's 8,000 employees.

``It's not like shoving two pizzerias together and changing the menu a bit,'' said Robert Mittelstaedt, a vice dean at the University of Pennsylvania's Wharton School of Business.

Siebel Systems, another Oracle rival, also took a shot at Oracle's bid.

``A highly motivated, highly satisfied workforce is a requirement to help customers,'' said Siebel spokeswoman Clay Helm. ``It is difficult to understand how these concepts can be consistent with a hostile takeover.''

In fact, several analysts predicted the deal would never happen.

Oracle's motives will become clear shortly, suggested Jason Brueschke, an analyst at Pacific Growth Equities, who does not own any Oracle or PeopleSoft stock.

``If he does a counteroffer and raises the price then he is serious. If he drops it at 16, then someone has to raise the question of what he was doing.''