Page Two

By John Pallatto  |  Posted 2003-11-26 Print this article Print

But the real truth of the matter is an offer of $7.3 billion can do a lot more than just buy a pretty big software company in Northern California. It can also buy a lot of fear, uncertainty and doubt. Either way, Oracle wins. If it succeeds, Oracle gets to sort through the various pieces of PeopleSoft and J.D. Edwards. It can add the most valuable chunks to its own product line and throw the rest in the trash bin. Lots of people will lose their jobs. Ousted PeopleSoft senior managers who owned big blocks of founders stock can either plan early trips to retirement homes in Hawaii or look for new ventures to invest in.
In the meantime, customers will wonder whom they should call to find out whether the ERP modules they are using actually have an upgrade path or whether they are going to have to come up with more money to pay for a future Oracle logo product. Doubtless any such product will contain more than a little code with a lineage that leads back to Pleasanton, Calif., and Denver.
The proxy fight, legal challenges and regulatory reviews will go on for months. Even if Oracle ultimately fails in its takeover bid, it will have gained at least a temporary competitive advantage by delaying and possibly permanently deranging the effective integration of PeopleSoft and J.D. Edwards. But there is no doubt that PeopleSoft, either alone or in combination with J.D. Edwards, is an irresistible target. Relatively few independent software companies besides Oracle have the financial strength to pull off such an acquisition right now. Oracle is quite conscious of the market reality that future sales of database software alone are unlikely to boom as they did in the 80s and 90s. Sales of enterprise software that adds value to existing database installations will be the source of future revenue growth. Thats what PeopleSoft and J.D. Edwards can provide. Thus PeopleSoft is well worth $7.3 billion to Oracle, especially if the buyout can circumvent the development of a robust competitor that can make it difficult for Oracle to dominate the most lucrative markets. Consolidation is inevitable in all technology markets. No company is immune to these forces. Although there is no question that the ERP market is ripe for consolidation, no company should be dragooned into a hostile takeover by the brute force of money. PeopleSoft doesnt deserve to be extinguished from the market based solely on the hard-eyed calculations of shareholders. But thats exactly what could happen. The potential value to customers as well as shareholders of an independent PeopleSoft has to be carefully weighed before Oracle gets the chance to consign the company to the corporate knackers yard. Enterprise Applications Center Editor John Pallatto is a veteran journalist in the field of enterprise software and Internet technology.

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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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