Analysts: Can IBM-PeopleSoft Deal Stall Oracle Advance?

By John Pallatto  |  Posted 2004-10-01 Print this article Print

Could PeopleSoft's decision to fire CEO Craig Conway unhinge its $1 billion middleware-integration alliance with IBM? Analysts consider the deal's future—and whether the white knight role suits IBM.

The firing of PeopleSoft Inc. CEO Craig Conway shouldnt derail the $1 billion middleware alliances with IBM that the two companies announced with much fanfare last month, industry analysts said.

But Conways firing—along with the U.S. Department of Justices decision Friday not to appeal a U.S. District Court ruling that Oracles $7.7 billion buyout bid for PeopleSoft does not violate antitrust law—revives the question of whether IBM might be prepared to intervene as a "white knight" to save its business partner from a hostile takeover.

Read more here about the DOJs announcement that it wont appeal the decision.
PeopleSoft spokesman Steve Swasey said Conways firing would have no effect on the IBM deal or any other business alliance. PeopleSoft is "going to move forward as planned with all our strategic alliances," he said.

Analysts discounted the possibility that IBM would step in to take over PeopleSoft by acquiring a majority ownership in the enterprise application software business, based in Pleasanton, Calif.

"The possibility is there that IBM might want to take a minority position in PeopleSoft, just to protect its interest, but not acquire the company outright," said Paul Hamerman, a vice president of Forrester Research Inc. in Cambridge, Mass.

Click here to read more about Conways removal and what hurdles remain for a takeover by Oracle. Nor is there much chance that the $1 billion middleware deal with IBM will be thrown off-course by Conways departure, Hamerman said. Rather, he said he thinks the partnership holds great potential for the future of PeopleSofts technology and its potential survival as an independent company.

"I think the IBM relationship is significant," Hamerman said, for providing tighter integration between PeopleSoft enterprise applications and IBMs middleware, database platforms, hardware and consulting services.

From an antitrust standpoint, the prospect of IBM acquiring PeopleSoft still looks like it could hold up in court, according to Paul Friedman, an antitrust expert and a partner in the Washington firm Dechert LLP.

"At first blush, there arent any [competition issues] that leap out," he said. "It depends on what the relationships are that IBM has with other competitors of PeopleSoft."

But since IBM is prominent in this market as a consultant and systems integrator rather than as a direct applications competitor, any questions about antitrust implications should be easier to resolve than if Oracle were to succeed in taking over PeopleSoft, Friedman said.

Next Page: Scanning for white knights.

John Pallatto John Pallatto is's Managing Editor News/West Coast. He directs eWEEK's news coverage in Silicon Valley and throughout the West Coast region. He has more than 35 years of experience as a professional journalist, which began as a report with the Hartford Courant daily newspaper in Connecticut. He was also a member of the founding staff of PC Week in March 1984. Pallatto was PC Week's West Coast bureau chief, a senior editor at Ziff Davis' Internet Computing magazine and the West Coast bureau chief at Internet World magazine.

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