J.D. Edwards Sues Oracle

By John S. McCright  |  Posted 2003-06-12

J.D. Edwards Sues Oracle

J.D. Edwards & Co. Thursday said it is suing Oracle Corp. and two of its executives for allegedly interfering with its proposed acquisition by PeopleSoft Inc.

Denver-based J.D. Edwards is asking for $1.7 billion in damages, the value of its deal with PeopleSoft.

The suits were filed against Oracle, of Redwood Shores, Calif., Oracle CEO Larry Ellison, and Oracle executive vice president Chuck Philips, in state courts in California and Colorado. J.D. Edwards said in a statement that these parties "engaged in wrongful conduct and unfair business practices."

J.D. Edwards also sought a court injunction to stop Oracles offer to buy PeopleSoft for $5 billion.

"Oracles unsolicited offer for PeopleSoft will only destroy value for our companies shareholders, customers and employees and the technology community overall," J.D. Edwards Chief Executive Officer Bob Dutkowsky said, in a statement. Earlier this week, Dutkowsky told customers at his companys user conference that an Oracle purchase of PeopleSoft would likely be drawn out by federal regulators investigating the antitrust implications of the deal.

Oracle officials said on Thursday afternoon that they had just heard about the J.D. Edwards lawsuit.

"Clearly PeopleSoft and J.D. Edwards prefer to fight in the courts than let shareholders decide. We believe that this case has no merit whatsoever," said Oracle spokesman Jim Finn, in a prepared statement.

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Ellison said in a television interview that he was not surprised by the lawsuit. He said J.D. Edwards executives were probably disappointed that they werent going to get what he said were lucrative bonuses if PeopleSoft bought their company.

PeopleSoft President and CEO Craig Conway acknowledged on Thursday during a conference call with analysts and press that he and Ellison have discussed merging the companies application software businesses before. Conway also predicted that Oracle would lose PeopleSoft customers database business to IBM as a result of its takeover bid.

"I had approached Larry a little bit more than a year ago when Oracle was having some very significant problems with the quality of their applications release, Oracle 11i," Conway recounted. "At the time… industry analysts were encouraging Oracle to be a technology stack company, and I offered to acquire the Oracle applications suite and maintain it and improve it under PeopleSoft. That discussion led to one other discussion between he and I, and he dismissed that.

"Ironically, one of the reasons he dismissed it was he felt that there needed to be one code base. And I felt that it was not advisable to leave 10 or 12,000 customers having to convert," Conway said.

PeopleSoft Chief Financial Officer Kevin Parker added that one other meeting of senior managers from Oracle and PeopleSoft did occur.

There were few new revelations during the conference call to detail why PeopleSofts Board of Directors voted unanimously to reject Oracles takeover bid as Conway and Parker reiterated that the deal was rejected largely because of fears that it would be held up by antitrust scrutiny, leaving customers, employees and the industry itself in limbo.

Conway and Parker declined to comment on whether or not PeopleSofts Board might approve the deal if Oracle increased its offer from $16 per share.

Conway said that the issue is now closed.

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"From our point of view, this process is at an end," he said. "The board has carefully considered and extensively considered the prospect [of acquisition by Oracle] and the concerns the board has have been extensively documented. But their evaluation is over and weve got business to do."

Conway said PeopleSoft would continue work on its own plan to acquire J.D. Edwards, a deal that remains on schedule to close by late in the third quarter, early in the fourth, he said. The company will also focus on salvaging its second quarter, which ends at the end of the month.

"There are 8,000 people here that are energized…that are focused, that have a single mission and that is to make the quarter. So thats what we intend to do," Conway said.

Conway predicted that PeopleSoft customers may change database software providers from Oracle to IBM in retribution for Oracles incursions on PeopleSoft.

"Some say [enterprise software leader] SAP [AG] may want to capitalize on this. The real beneficiary of this last week is more likely going to be IBM," he said. "IBM is the only significant competitor to Oracle in the database industry. Its somewhat costly to change databases, [but] the level of concern, frustration and outrage [from PeopleSoft customers] is so high, that I think IBM has the opportunity to convert Oracle customers into IBM customers. I think thats going to be the interesting development out of all of this."

This story was altered since it was originally posted to include comments from Conway, Parker and Finn. eWEEK Senior Writer Lisa Vaas contributed to this story.

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