Oracle Must Build a Future Without PeopleSoft

By John Pallatto  |  Posted 2004-02-04 Print this article Print

With the chances of Oracle winning its hostile takeover bid growing more and more unlikely, the company must look for other ways to grow its business.

It appears increasingly unlikely that Oracle will succeed in its hostile takeover of PeopleSoft, even if it gets the green light from government regulators in the U.S. and Europe.

Thats because it is now highly doubtful that Oracle will be able to persuade anywhere near a majority of stockholders to toss out the current PeopleSoft board of directors in favor of Oracles nominees.

One sign that PeopleSoft senior managers are confident that the company will fend off the hostile takeover is that it has pushed up the annual meeting to March 25 from its usual date in May. This move makes sense if management believes shareholders will reject the Oracle bid because an early vote means the company can get the Oracle monkey off its back that much sooner.

The move also means PeopleSoft is not counting on the Justice Department to come to its rescue by blocking the buyout on the grounds that it would illegally curtail competition in the software industry. The Justice Department has indicated that it should be ready to report its decision sometime this or next month.

Another factor is that PeopleSoft common stock has been hovering between $21 and $22 per share, well above Oracles $19.50-per-share bid for the company. As a result, Oracle has been forced to increase its bid to $26 per share, showing that it is prepared to spend whatever it takes to win over shareholders.

While Oracle can certainly afford to offer this higher price for the stock, it still may not be enough to win over shareholders if they place an even higher value on PeopleSoft as an independent company. They dont necessarily need to look to Oracle to gain a premium on their PeopleSoft investment. However, the market has shown time and again that if the offer is high enough, investors will trade away independence for a fat profit.

Next page: Should Oracle admit defeat?

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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