PeopleSoft Granted Hefty Discounts to Outsell Oracle

 
 
By John Pallatto  |  Posted 2004-06-16 Email Print this article Print
 
 
 
 
 
 
 

A top PeopleSoft sales executive testifies that he approved discounts of up to 55 percent if that was what it took to take a sales win away from Oracle Corp.

SAN FRANCISCO—PeopleSoft Inc. was prepared approve discounts of up to 55 percent off list price to win business from Oracle Corp. and other competitors, a PeopleSoft sales executives testified Wednesday in U.S. District Court here.

PeopleSoft didnt hesitate to discount heavily whenever it was competing head-to-head with Oracle for new business or when it stood a chance to replace an installed Oracle application, said Phil Wilmington, executive vice president for the Americas. In this role, Wilmington manages sales operations in the U.S., Canada and Latin America.

The Department of Justice called Wilmington to the stand to highlight the fierce competition that exists between PeopleSoft and Oracle, which along with SAP AG comprise the top three vendors that hold the vast majority of the market share for high end high-end enterprise resource planning software.

DOJ is seeking an permanent injunction to block Oracle from carrying out its hostile $7.7 billion takeover of PeopleSoft. One of DOJs key arguments in the trial is that enterprise application software buyers will pay substantially higher prices because such heavy discounting will disappear in a market reduced to two major players, Oracle and SAP.

The DOJ is also suggesting that the buyout is predatory and illegal under antitrust law because Oracle wants to buyout PeopleSoft specifically to eliminate the competition and gain control of PeopleSoft customer population, not because it wants to acquire PeopleSoft technology.

Wilmington said he personally reviews and approves all proposed discounts over 50 percent. Such discounting allowed PeopleSoft to outbid Oracle for major sales to Target Corp., Cardinal Health System Inc., and CareFirst Inc. to name a few, he testified.

Click here to read about PeopleSofts argument that the Oracles attempt to buy it out is an illegal "predatory" action. In the CareFirst deal, PeopleSoft approved a 55 percent discount and might have considered a 65 percent discount if that is what it took to win the business, according to documents accepted into evidence in court Wednesday.

In this case, PeopleSoft was prepared to offer a particularly steep discount "to incent the customer to close the sale within a particular quarter" to improve the revenue report for that period, he said.

Wilmington also adhered to the DOJs theory that there none of the mid-market enterprise software providers such as Microsoft Business Solutions or Lawson Software are able to offer the same range of application functionality and scalability as the top three players.

Microsoft on Wednesday offered more details of its enterprise software development strategy. Click here to read more. Under direct questioning by DOJ lead litigator Claude Scott, Wilmington said he rarely encounters Lawson in head-to-head competition. Lawson "is not a viable competitor for the up-market customers" that PeopleSoft typically deals with, he said.

Oracles legal team has argued that the court has to consider such mid-market players, particularly Microsoft and Lawson as competitors who will keep the pressure on SAP and Oracle to maintain fair prices and to keep improving their products.

Click here to read about DaimlerChryslers worry that a PeopleSoft buyout could cost it $50 million to $100 million to buy replacement software. During a break in the trial testimony Wednesday, Oracle lead attorney Daniel Wall offered an impromptu critique of the DOJs presentation so far, saying there was a "lack of coherence to the governments theory" that Oracles goal is to unilaterally control prices and the market for enterprise resource software by taking over PeopleSoft.

He called it a "bit of a grab bag" of claims and arguments that wont stand up to careful examination.

In particular, Wall disputed testimony from multiple DOJ witnesses that they feared Oracle would stop supporting PeopleSoft applications and rapidly force them to migrate to Oracle applications at great expense if the Oracle takeover is successful.

"The acquisition would make no sense" if Oracle planned to pressure PeopleSoft customers with higher maintenance fees or demands for rapid migration to Oracle applications.

Oracle "would be destroying the very relationships we are trying to build by jacking up the maintenance charges," Wall said.

However, customers have testified they were concerned by statements Oracle executives made that they didnt plan to provide long-term support for PeopleSoft applications because they were more interested in the customer base. Oracle officials have since said they would continue to support the applications for at least 10 years.

The trial will resume Thursday with what Oracles legal team says could be a two-hour cross examination of Wilmington.

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John Pallatto John Pallatto is eWEEK.com'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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