Oracle Vows To Fight DOJ PeopleSoft Decision

Oracle Corp. vowed to vigorously challenge the Justice Department's lawsuit to block its hostile bid to take over PeopleSoft Inc. Oracle plans to take its case directly to a PeopleSoft user group on Monday, while at the same time continuing its $26-a-share offer for PeopleSoft shares.

"The decision was very clear," said the DOJ's Assistant Attorney General, Antitrust Division, Hewitt Pate, in a press conference outlining his decision. "We took this action because it's the right thing to do. We believe this transaction is anticompetitive--pure and simple."

Market definition is a key to the issue with PeopleSoft--and now the DOJ, which is arguing for a narrow definition of the market with just three key players: Oracle, PeopleSoft, and SAP. Oracle maintains the market--human-resources and financial-management software, essentially--is much wider and includes multiple firms competing vigorously with each other.

Pate said his staff had interviewed customers who rely on such software and found that "a great number of them were very concerned" about the prospect of reduced competition that could result from a merger of the two firms. He said also that consulting companies were also interviewed in the DOJ investigation.

Even Microsoft--currently a minor player in this market--was interviewed about "potential for entry," but Pate indicated the potential-for-entry issue did not play an important part in its investigation.Oracle said its board of directors had met and decided to challenge the DOJ litigation, which was filed in federal district court in San Francisco. "The market is highly competitive," said Oracle co-president Charles Phillips, according to the Wall Street Journal. "Any objective analysis will come to the same conclusion. But that doesn't always carry the day."

Phillips is scheduled to address PeopleSoft's largest user group (Quest) next Monday to discuss its plans should it finally prevail in its acquisition attempt. Quest is composed primarily of J. D. Edwards users. PeopleSoft acquired the Edwards operation last year.

Phillips, formerly an industry analyst at Morgan Stanley, and investment-banking institution, was singled out for mention in the DOJ filing. Quoting from a report Phillips issued in 2002, the filing stated: "The back-office-applications market for global companies is dominated by an oligopoly comprised of SAP, PeopleSoft, and Oracle. The market is down to three viable suppliers who will help re-automate the back-office business processes for global enterprises for years to come. PeopleSoft has made it into an elite club of critical enterprise software suppliers--those with thousands of customers relying on the company for mission-critical functions."

In another development, Oracle said it was withdrawing its slate of directors for PeopleSoft and, likewise, will not be soliciting proxies for the PeopleSoft annual meeting on March 25. The firm attributed those developments to its belief that the litigation with the DOJ will extend beyond the March 25 date. Oracle said it is extending its $9.4 billion tender offer to June 25.

PeopleSoft hailed the DOJ decision. PeopleSoft chief executive Craig Conway said in a statement: "What I feel vindicated by is that all of the shareholders I've talked to feel the real value of the company is higher than Oracle's offer."Attorneys General from 11 states have joined the DOJ in the litigation. Oracle's proposed acquisition is also facing scrutiny by the European Union's antitrust agency.