Analysts: Oracles Fight for PeopleSoft Just Beginning

Oracle wins the antitrust case but it now must convince PeopleSoft's board and shareholders to embrace it, analysts say. That's another round altogether.

Oracle Corp. overcame a major hurdle by winning a favorable verdict in the governments antitrust lawsuit against it, but observers said its battle to buy competitor PeopleSoft Inc. remains far from won.

A federal judge on Thursday ruled in Oracles favor, finding that the Department of Justice had failed to prove its antitrust allegations. The verdict largely lifts the domestic antitrust cloud on Oracles $7.7 billion bid for PeopleSoft, barring an appeal from the Justice Department, legal experts said.

Justice Department officials have yet to say whether they will appeal.

The decision turns attention back to Oracles financial jostling for PeopleSoft that started in June 2003, IT analysts said. Late Thursday, Oracle again extended its $21-a-share offer for PeopleSoft, this time through Sept. 24. It also announced that it had sent a letter to PeopleSofts board requesting a meeting.

"This means game on," said Jeff Comport, a vice president at IT market researcher Gartner Inc. "Oracle is continuing its pursuit by reasserting its offer. PeopleSoft has not yet responded. [But] we expect PeopleSoft to continue to actively resist the Oracle bid."

Oracle, of Redwood Shores, Calif., still faces potential European Union antitrust action, a battle over PeopleSofts "poison pill" to block a merger and opposition from PeopleSofts board of directors, Comport said.

"Oracle [now] wants to position itself as a force and encourage PeopleSoft to lower its barriers voluntarily," he said.

The verdict from U.S. District Court Judge Vaughn Walker came as little to surprise to long-time antitrust attorney Paul Griffin. He said that it is always difficult for the government to win antitrust cases to block mergers and that its case against Oracle had appeared weak.

"The government was having trouble defining the markets and proving it was not a global market," said Griffin, a partner at Thelen, Reid & Priest LLP, in San Francisco. "They had trouble proving that a merger would have an anticompetitive effect.

"It would have been a surprise if the judge had gone the other way," he observed.

/zimages/5/28571.gifClick here to read a recap of closing arguments in the antitrust case.

What happens next in the bigger picture of Oracles merger attempt will depend largely on PeopleSoft. The management of the Pleasanton, Calif., company must continue to press its case with the board of directors and shareholders that PeopleSoft is better off as an independent company, Comport said.

At the same time, Oracles overtures have cost PeopleSoft about $70 million in its legal fight, affected its earnings and, according to analysts, hurt its ability to sign new customers.

"In the end its PeopleSoft as a company and its board of directors and shareholders who ultimately will decide what they want to do with this company," Comport said "Certainly as things get closer it increases the pressure, and at some point in time this will all be about money."

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