PeopleSoft Inc. has captured the high ground in its merger contest with Oracle Corp. after getting support from federal antitrust regulators, but Oracle's boss on Wednesday vowed to continue his quest to conquer PeopleSoft.

The odds in the see-saw technology battle appeared to shift Wednesday toward Pleasanton-based PeopleSoft, which continues to resist a hostile takeover bid by rival business software maker Oracle.

PeopleSoft got a big boost when antitrust staff officials for the Justice Department recommended the federal agency file a lawsuit to block Oracle's bid to buy PeopleSoft for $9.4 billion. Oracle has proposed an all-cash purchase of PeopleSoft at $26 a share.

"I would say the Oracle folks have an uphill battle," said Paul Friedman, a partner and antitrust attorney with law firm Dechert LLP. "It is not an impossible battle, but it is an uphill battle."

Justice Department officials were apparently swayed by concerns from PeopleSoft customers about high prices and a lack of competition were the merger to go through. The position of Oracle that the merger is necessary in an evolving world that requires software companies to offer customers every kind of product and service may have carried less weight, antitrust experts said.

The decision ultimately rests with the head of the antitrust division, Assistant Attorney General Hewitt Pate. Pate is expected to decide in early March whether to file a suit to block the deal, to demand that Oracle restructure its bid or divest assets, or to allow the merger to proceed.

Usually -- although there are exceptions -- the antitrust chief agrees with the staff's recommendations in such cases.

"The odds are the Department of Justice will challenge the merger," said Charles Biggio, a partner with law firm Akin Gump Strauss Hauer & Feld LLP. "Oracle's arguments about one-stop shopping are not the kinds of arguments the antitrust division would agree with. If the compelling argument is this is a merger of two of the top three companies in this industry, and customers are complaining about that, the odds are the antitrust division will challenge the deal."

Despite the potentially forbidding obstacle, Oracle's chief executive officer, Lawrence Ellison, insisted that Oracle will triumph, during remarks at a technology conference in Santa Monica. Ellison dismissed PeopleSoft's contention that the enterprise software arena has only three rivals, SAP AG, Oracle and PeopleSoft.

"We don't think those arguments will prevail in the end," Ellison said. "We think we will clear (regulatory scrutiny.) And we think we will be able to buy PeopleSoft."

Ellison also took a shot at PeopleSoft boss Craig Conway, claiming that Conway last year first proposed the idea of merging the applications software businesses of the two companies, with PeopleSoft heading up the new venture.

"It is rather disingenuous to first offer to merge, and then with Craig Conway running it, he thought it was a great idea," Ellison said. "With me running it, he thought it was an antitrust issue."

PeopleSoft officials said they didn't want to comment about the situation Wednesday. PeopleSoft's shares closed down nearly 1 percent at $21.50, while Oracle finished up 2 percent at $13.70.

If Oracle ultimately retreats, analysts believe PeopleSoft faces some challenging times, although there's no consensus as to how serious the issues will be. Among the obstacles: whether customers will continue to buy PeopleSoft products amid the uncertainty over the company's future.

"If the Department of Justice keeps to its timing of a decision by March 2, we believe PeopleSoft still has a chance to hit its license revenue targets for the quarter," Heather Bellini, an analyst with UBS Investment Research, wrote about the situation. "However, we do believe disruptions to their business during this 'wait and see' period are likely."

One analyst, Trip Chowdry of FTN Midwest Research, believes PeopleSoft's future is grim, whether it ceases to exist through a merger with Oracle, or even if it escapes being gobbled up.

"I wouldn't call PeopleSoft a dinosaur, but PeopleSoft thinks the world of today is the world of the go-go years of 1999 and 2000," Chowdry said.

During those heady times, companies could throw money at upgrading their computer and software systems. These days, in the wake of a nagging recession, companies are looking for price-cutting software solutions on a broad front, Chowdry said.

"Forward-looking companies such as Oracle are trying to bring the business software industry out of its doldrums," Chowdry said. "It is sad to see that the PeopleSoft management cannot understand the bigger picture of where the industry is heading."

But senior software analyst Richard Williams of Summit Analytic Partners believes PeopleSoft could be well positioned to benefit from a surge in technology spending and elude the takeover bid.

"The longer this goes, the better chance PeopleSoft has to win," Williams said. "If there is a recovery in business software, than PeopleSoft will likely win this. If we start to see sales growth in the group, PeopleSoft will go north of $26 a share in a hurry."