Hostile Buyouts Price

By John Pallatto  |  Posted 2004-07-23 Print this article Print

It is ironic that if Oracle and PeopleSoft had agreed to the amicable merger they discussed in mid-2002, the Department of Justices antitrust division might very well have given its blessing to the match.

Today, DOJ officials reject this theory. They say that with the enterprise applications software market dominated by just three players, the friendly merger of PeopleSoft and Oracle would have been as illegally anticompetitive as Oracles hostile bid in June 2003. The market facts and legal logic would have been the same, and the government would have acted to block the buyout.

Click here to read about Oracle CEO Larry Ellisons testimony that talks on a friendly merger failed because of PeopleSoft Craig Conways demand that he remain in charge of the PeopleSoft product line.

But there is one key variable in this scenario. In June 2003, PeopleSoft was already in the midst of an amicable buyout of enterprise resource planning rival J.D. Edwards. Oracle was making a bid to acquire two companies for the price of one. Its one thing for two companies to merge without antitrust objections. Its quite another for three to merge into one.

Hostile takeovers have been relatively rare in the IT industry. Companies that are facing increasing market pressure, are losing market share or that dont have the technology portfolio to keep pace with competitors will cast about for a friendly merger on favorable terms.

PeopleSoft was convinced that it needed to form an alliance to ensure that its technology would remain a force in the market for the long term. When it couldnt get the kind of deal it wanted from Oracle, it turned to J.D. Edwards to make a deal that would make PeopleSoft the senior partner. PeopleSoft would gain a broader products portfolio and a deeper customer base while retaining control of is own product line and corporate identity.

Now, PeopleSofts future is in Judge Walkers hands. He almost certainly wishes it wasnt.

Check out eWEEK.coms Enterprise Applications Center at for the latest news, reviews and analysis about productivity and business solutions.

Be sure to add our enterprise applications news feed to your RSS newsreader or My Yahoo page

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.

Submit a Comment

Loading Comments...
Manage your Newsletters: Login   Register My Newsletters

Rocket Fuel