The Price Is Right for PeopleSoft

It's finally over. After 18 months of courtroom battles, boardroom machinations, and name-calling, Oracle Corp. (Nasdaq: ORCL) has its paws on PeopleSoft Inc. (Nasdaq: PSFT) for $10.3 billion (see Oracle Buys PeopleSoft).

The PeopleSoft board accepted the Oracle offer of $26.50 per share today, saying the deal is a substantial increase on the $21 offered by the Redwood Shores, Calif.-based firm back in October (see Oracle Extends Tender Offer Again).

Throughout this saga, the PeopleSoft board has sought to frustrate their Oracle counterparts in an effort to drive up the value of the deal. Last month PeopleSoft execs hit back at Oracles assault on its shareholders by arguing that the company was worth more than the previous top offer of $26. It seems their strategy has paid off (see PeopleSoft Comments on Oracle's Offer ).

Larry Ellison, however, has now got his hands on a much-prized vendor of enterprise resource planning (ERP) software and nearly 13,000 PeopleSoft customers, as his company attempts to battle the Microsoft Corp. (Nasdaq: MSFT) behemoth.

Ellison clearly wants to continue the upward momentum of his company’s software license business. In Oracle’s second-quarter results, which were originally scheduled for Thursday but were revealed today, the firm reported a 14 percent hike in new software license sales, up to $971 million. This was led by a 57 percent increase in new application sales (see Oracle Reports Q2).Undaunted as ever, Ellison said in a statement released this morning that he expects the deal to be one cent accretive in the fourth quarter of this financial year, about two cents a quarter in fiscal year 2006, and “a bit more” in 2007.

A number of Oracle users have already got their eye on some of PeopleSoft’s juiciest products, namely the J.D. Edwards’ ERP series and some of PeopleSoft’s payroll applications (see Oracle Users Eye PeopleSoft ).

Indeed, Oracle plans to keep the PeopleSoft products going strong. It confirmed today that it will enhance PeopleSoft 8 and develop a PeopleSoft 9 product, as well as add to J.D. Edwards 5 and build a new J.D. Edwards 6. The company has already committed to support PeopleSoft users for at least ten years.

All this contrasts with concerns expressed by some at PeopleSoft, who are edgy about what the future holds (see Uneasy Days for PeopleSoft Users). There remains the tricky business of merging two massive companies, their employees, and their customers.

The market responded positively to the news. In early trading today Oracle shares rose $1.25 (9.41 percent) to $14.53. PeopleSoft shares rose $2.47 (10.31 percent) to $26.42.— James Rogers, Site Editor, Next-Gen Data Center Forum