Oracle Sought Buyout Advice from Former CA Chief Kumar

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

Oracle Co-President Charles Phillips sought advice from former CA chairman Sanjay Kumar on how to win DOJ approval for its $7.7 billion buyout of PeopleSoft.

SAN FRANCISCO—Oracle Corp. Co-President Charles Phillips met over lunch with Sanjay Kumar, former chairman of Computer Associates International Inc., to get his advice on how to win U.S. Department of Justice clearance for its $7.7 billion buyout bid for PeopleSoft Inc.

On June 27, 2003, Phillips sent an e-mail message to Oracle CEO Larry Ellison, Chief Financial Officer Jeff Henley and Oracle President Safra Catz, saying that Kumar advised him that it was possible to get negative DOJ staff decisions overturned. "But you need lawyers who are absolutely plugged in" at the DOJs staff and management levels, wrote Phillips.

Phillips e-mail memo was presented as evidence Wednesday in U.S. District Court here in the governments lawsuit seeking a permanent injunction to block Oracles acquisition of PeopleSoft.

The memo noted that CA managed to convince DOJ management to overturn negative staff recommendations on two separate CA acquisitions.

Philips described Kumar "as the master of software deals" who worked on "every important" acquisition that CA carried out in the 1990s. However, Kumar has since fallen from grace in the wake of a Securities and Exchange Commission investigation of CA accounting practices.

He first resigned as chairman and later departed from the company after employees were fired and others were indicted on accounting fraud charges claiming that CA was chronically booking software sales revenue before it was actually realized to improve its quarterly financial reports.

The DOJ Antitrust Division reviews all merger and acquisition bids to ensure that they dont violate antitrust law by being anti-competitive. The DOJ staff recommended that the department deny Oracles buyout of PeopleSoft on the grounds that it would create an anti-competitive market for enterprise application software.

The DOJ presented the document to support its contention that Oracle wont continue to upgrade and support the current PeopleSoft product line. Instead, it will subject customers to a rapid and costly migration to Oracle applications.

Oracle CEO Larry Ellison Wednesday, testifying here Wednesday, denied that Oracle would alienate PeopleSoft customers after paying billions of dollars to acquire the company. He said Oracle would continue to support the product and allow customers to upgrade to a merged Oracle/PeopleSoft product line at a time of their own choosing.

Click here to read about Oracle CEO Larry Ellisons testimony on his early talks with PeopleSoft chief executive Craig Conway about a friendly merger. The memo recommended several steps to correct customer impressions that Oracle will not continue to support PeopleSoft applications if its buyout bid is successful.

"Well have to admit that things got off on a bad foot and we didnt express our true intentions very well," Phillips wrote. "Thats the only way to explain the reversal in our position with respect to customers."

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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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