Citing recent developments that it said were misunderstood by analysts and the media, Oracle Corp on Monday set out to clarify its stance on its $7.3 billion takeover bid of PeopleSoft Inc.
In a conference call with financial analysts and the press, Oracle officials reiterated the companys commitment to the hostile takeover bid—and suggested PeopleSoft is proceeding illegally in its efforts to remain independent.
"PeopleSoft has said it committed itself to approximately $156 million in refunds. Our concerns start with revenue recognition since [their Customer Assurance Program] can be triggered without an acquisition, it could be an obligation to PeopleSoft," said Jeff Henley, chief financial officer at Oracle, in Redwood Shores, Calif. "We believe they have a revenue recognition problem. We dont know of any way they should have recognized a certain amount of revenue in their second quarter."
Henleys reference is to PeopleSofts CAP program, which looks to refund between two and five times some customers license fees if specific conditions are met.
In addition to what Henley suggested as illegally-recognized revenue in PeopleSofts filings to the Securities and Exchange Commission, Oracle contends that PeopleSofts management is entrenched and that the company is deliberately going about destroying value in the company, again through the CAP program.
Regarding the ongoing investigations into the potentially anticompetitive nature of the proposed merger, Oracle said it expects to comply with both the Department of Justice and the European Commissions request for information within the next few weeks, and expects the DOJs investigation to be complete early in 2004.
Oracle reminded analysts that the ECs four-month second-phase investigation announced last week is an outside estimation and the investigation could end sooner.
In either case, Oracle executives are looking at other means of obtaining PeopleSoft. The company will file an independent slate in January for consideration in the next election of PeopleSofts board of directors—even if that means filing before the DOJ makes its decision on the competitive nature of the proposed deal.
"PeopleSoft changed their bylaws from 30 days to 120 days [in nominating directors]," said Oracle executive Safra Catz "So we have to file the independent slate now. The European Commission and DOJ [decision] will be similar time frames, frankly. And then the vote will be much later."
Katz said she is unsure when PeopleSofts board is up for re-election.
Oracles strategy here will come into play if Oracle is unsuccessful in its bid to acquire PeopleSoft, of Pleasanton, Calif., through traditional buy-out measures. Oracle will force a change of guard at the board level of PeopleSoft and then vote in the merger.
Meanwhile, Oracle also said it is on the lookout for additional companies to acquire.
"Were looking at a multiple set of ideas in technology and in applications," said Henley. "If we end up acquiring PeopleSoft, it can be absorbed quickly and we have a fair amount of flexibility to be able to handle other acquisitions. Thats what were trying to say here. We may not do any more, but we definitely have more of an appetite than we used to have."
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