Page Two

By John Pallatto  |  Posted 2004-02-27 Print this article Print

"Its time for Oracle to move on," Hamerman contends. "They should focus on their own business and work on catching up. They are not that far behind PeopleSoft." PeopleSoft still faces the challenge of fully integrating J.D. Edwards into its organization and this gives Oracle a competitive opportunity, he added.

Instead Oracle will march into court to argue that enough enterprise application software producers survive to support a competitive environment. The company might certainly argue that blocking this merger is only postponing the inevitable. The industry is sure to contract some more in the coming years, so why shouldnt Oracle share in the spoils?

The answer is that a company that is dominant in one market segment shouldnt be allowed to gut the competition from another market with a mega-merger. The goals of this merger were essentially anticompetitive ones. Oracles existing applications business is doing well, has shown healthy growth with the economic recovery, and promises to generate healthy profits in the future. These applications provide a sound foundation to build its market share over the long term.

But with the PeopleSoft buyout Oracle is prepared to spend $9.4 billion in an attempt to regain its position overnight as the second largest software company in the country.

The history of American capitalism is replete with examples of mergers aimed at winning market dominance and monopoly. While this merger wouldnt give Oracle anything resembling a monopoly, it would go a long way toward sucking the vitality and diversity out of the market.

In the final analysis, this merger isnt really necessary for Oracle to achieve the same goal over the long term. Oracle was founded 27 years ago and spent more than half of that time becoming the dominant relational database vendor. There is nothing preventing Oracle from building up its application business in the same way.

However, after the shareholders and the courts finally lay this deal to rest, Oracle will still have billions of dollars burning a hole through its vaults. It wont be content to sit quietly at its Redwood City, Calif., headquarters patiently building up its existing product line.

Look for Oracle to snap up smaller point players in specific enterprise fields, such customers relationship management, product lifecycle management, supply chain management and products that service industry verticals.

Such deals are far more likely to help Oracle strengthen its product line without provoking DOJ opposition or suppressing market competition. Enterprise Applications Center Editor John Pallatto is a veteran journalist in the field of enterprise software and Internet technology. Check out eWEEK.coms Enterprise Applications Center at for more news, views and analysis. Be sure to add Our Enterprise Applications news feed to your RSS newsreader:

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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