Oracle Says PeopleSoft Buyout Is Inevitable

By John Pallatto  |  Posted 2004-07-01 Print this article Print

Oracle rests its case with witness testimony claiming that PeopleSoft's lack of an integration layer leaves it vulnerable, and that it will have to seek an alliance with a larger company that already has such technology.

SAN FRANCISCO–Oracle rested its case Thursday by presenting testimony supporting its argument that competition in the enterprise application software market is so intense that sooner or later PeopleSoft will have no choice but to accept a buyout by someone.

Oracle Corp. called expert witnesses Wednesday and Thursday in the Department of Justices antitrust case who said PeopleSoft Inc.s lack of an "integration layer" of middleware, database, Web services and related technology meant that must seek an alliance with larger companies that already had such technology. Besides Oracle, companies that have the integration components PeopleSoft needs to keep growing include IBM, SAP AG and Microsoft Corp., the witnesses argued.

An Oracle buyout "would bring competitive benefits and efficiencies" because it would give PeopleSoft access to the integration-layer technology, said David Teese, an economics professor at the Haas School of Business at UC Berkeley.

These components represent an essential "technology stack" that PeopleSoft must have access to if it is to remain competitive in the market, said Dale Kutnick, founder and chairman of The META Group Inc., an information industry research firm based in Stamford, Conn.

If PeopleSoft doesnt have the cash to build or buy these components itself, it will be forced into the arms of some suitor that can provide them, Kutnick suggested.

The Department of Justice presented evidence that this theory overlooks the fact that PeopleSofts enterprise business applications run on multiple databases and on open development technologies such as Java and XML, and that its ERP (enterprise resource planning) applications already run with these supposedly competing integration-layer components.

Oracles claims about PeopleSofts supposed vulnerability conflicts with Oracles earlier arguments that smaller human resources and financial management software vendors such as Lawson Software Inc. and American Management Systems Inc. "will be effective competition" for SAP or a merged Oracle-PeopleSoft, said Thomas Bartlett, deputy assistant attorney general. "Such a position seems inconsistent to me," he said.

In his testimony, Oracle CEO Larry Ellison claimed that PeopleSofts Craig Conway blew earlier talks to merge the two companies. Click here to read more. The smaller competitors presumably will face even greater challenges competing in a market where this integration layer is so important, Bartlett suggested.

With testimony in open court complete, Judge Vaughn Walker set July 20 as the date for closing arguments after both sides submit their final briefs in the case, according to court officials. It could be some time in September before Walker issues his verdict, officials said.

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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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