Oracle Likely to Up PeopleSoft Bid, Analysts Say

 
 
By Lisa Vaas  |  Posted 2004-09-10 Email Print this article Print
 
 
 
 
 
 
 

After Oracle's win in the DOJ antitrust case, financial analysts agree that Oracle will likely raise its offer for PeopleSoft.

Following Oracle Corp.s recent legal victory in its fight to engulf PeopleSoft Inc., financial analysts can only agree on two things: that Oracle will likely sweeten its offer, and that its pockets are deep enough to give it plenty of staying power and negotiating room. For one, Minneapolis-based Piper Jaffray & Co. is maintaining its "outperform" rating on PeopleSoft stock. Software analyst Tad Jaffray said in a release that the firm believes PeopleSofts business will continue to drag for the foreseeable future and that the company will be forced to consider negotiating on Oracles current $21-per-share offer, which it called "a starting point" for negotiations.
On the other hand, John Torrey, vice president of equity research for Adams Harkness, in San Francisco, said in a release that PeopleSoft investors have two choices: hang on to the stock and expect that Oracle will sweeten its offering price, or sell now in order to lock in profits in the expectation that Oracles takeover bid will stumble as it continues to battle remaining hurdles.
"We recommend the latter response, as we believe there remain substantial, if not insurmountable, hurdles to the successful completion of this deal," Torrey wrote. Torreys reasoning is based on a refusal to "underestimate the European Commissions ability to cripple this deal independent of this trial verdict, both because SAP [AG] is extraordinarily strong in Europe and because history (e.g., the Microsoft anti-trust case) teaches us that the EC is willing to act much more forcefully than the DOJ or US courts," he wrote. Click here to read more on the European Commissions process in the Oracle-PeopleSoft case.
Paul Hamerman, an analyst for Forrester Research Inc., in Cambridge, Mass., disagrees with Torrey when it comes to Oracles chances with the European Commission. "I think Oracle can probably get past the EC, because SAPs clearly more dominant in Europe than in the United States," he said. Opinions are also mixed on whether the Justice Department will appeal the verdict. Torrey, citing contacts within the Anti-Trust Division, says that he believes theres fight left yet within the DOJ. Forresters Hamerman, on the other hand, said that Judge Vaughan Walkers decision in the DOJ vs. Oracle case was "very well-written." "I think an appeal probably wont get far," he said. As far as PeopleSofts poison pill goes, Torreys firm expects PeopleSoft to cling to the provision, in which a hostile takeover attempt would trigger a cost-prohibitive customer assurance plan designed to hobble Oracle and its ilk. At the bottom of all this conjecture, however, lies an empirical fact: namely, Oracles extremely deep pockets. Piper Jaffray expects Oracle to have close to $10 billion in cash on the balance sheet by years end. The companys standing line of credit is near $5 billion. Bob Quinn, research director and senior portfolio manager at Boston Private Bank & Trust Co., said that Oracle has some $8.6 billion in cash, working capital of $7.1 billion and not much in the way of long-term debt—all of which mean that Oracle has room to wiggle on its offering price and can afford to do battle for some time yet. "Theyve got the capacity to push the price up, certainly," said Quinn, in Boston. "Everybody expects theyll raise it at least $2 over the $21. PeopleSoft can continue to reject the offer, but as we all know, money talks, and eventually you could see that they could push it north." Check out eWEEK.coms Enterprise Applications Center at http://enterpriseapps.eweek.com for the latest news, reviews and analysis about productivity and business solutions.

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Lisa Vaas is News Editor/Operations for eWEEK.com and also serves as editor of the Database topic center. Since 1995, she has also been a Webcast news show anchorperson and a reporter covering the IT industry. She has focused on customer relationship management technology, IT salaries and careers, effects of the H1-B visa on the technology workforce, wireless technology, security, and, most recently, databases and the technologies that touch upon them. Her articles have appeared in eWEEK's print edition, on eWEEK.com, and in the startup IT magazine PC Connection. Prior to becoming a journalist, Vaas experienced an array of eye-opening careers, including driving a cab in Boston, photographing cranky babies in shopping malls, selling cameras, typography and computer training. She stopped a hair short of finishing an M.A. in English at the University of Massachusetts in Boston. She earned a B.S. in Communications from Emerson College. She runs two open-mic reading series in Boston and currently keeps bees in her home in Mashpee, Mass.
 
 
 
 
 
 
 

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