States Weigh Suing Oracle

By Renee Boucher Ferguson  |  Posted 2003-06-30

States Weigh Suing Oracle

Attorneys general from a handful of states are weighing their legal options for stopping Oracle Corp.s hostile takeover bid for enterprise software rival PeopleSoft Inc.

Oracle also is expecting the U.S. Department of Justice to submit questions to the company as early as today regarding the proposed acquisition.

Attorneys general from California, Texas and Massachusetts and an undisclosed number of colleagues last week took part in a conference call to discuss whether the combination of the software developers would violate antitrust laws.

The action came a week after Connecticut said it would sue Oracle, of Redwood Shores, Calif., on antitrust grounds. Connecticut Attorney General Richard Blumenthal contacted every state asking them to join the suit. Blumenthal charged that the combination would restrict competition, damage Connecticut and its economy, and raise prices for businesses.

Oracle spokeswoman Jennifer Glass said the company is looking forward to explaining to Connecticut officials how its acquisition of PeopleSoft would result in lower costs, better support and enhanced functionality for state agencies.

At the federal level, the DOJ is conducting a routine review of the transaction. A DOJ spokesman said the Washington agency had until June 30 to request information from Oracle regarding the bid, after which it will decide if it needs to institute a waiting period before the merger can be approved.

"Considering the high profile nature of this transaction and the fact that DOJ just received the case less than two weeks ago, we fully expect to receive a second request" for information, Oracle spokesman Jim Finn said in a prepared statement. "We remain very optimistic that DOJ will conclude that this transaction is not anti-competitive and that we will complete the transaction in a timely manner."

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Aside from enforcing antitrust laws, states may also pursue a suit for reasons of self-interest. PeopleSoft, of Pleasanton, Calif., boasts more than 350 customers in state, local and federal governments, including 15 states that have standardized on its applications.

California, Texas and Massachusetts, like Connecticut, have significant investments in PeopleSoft software. Massachusetts, for instance, runs PeopleSoft human resources modules across its executive branch offices, courts, and state and community colleges.

"The impact on state agencies will be a factor, but this is an antitrust case first and foremost," said Sarah Nathan, a spokeswoman for the Massachusetts attorney generals office, in Boston.

Indiana is also a big PeopleSoft customer. Laura Larimer, CIO for the state of Indiana, forwarded information to her states attorney general on Connecticuts lawsuit against Oracle in hopes that he would consider the ramifications of Oracles actions.

"We are very, very reliant on [PeopleSoft] and their HR and procurement [software]," said Larimer, in Indianapolis. "I find it unimaginable that this would ever become an approved merger. My concern is how this is distracting both companies from enhancing their products and helping customers."

"The [PeopleSoft] financials are crucial to our business," said Bill Monroe, chief of operations at the Texas Educational System, in Austin. "Weve been able to survive and flourish by using [PeopleSofts applications]."

Monroe said that at the appropriate time he will provide his input to the Texas attorney general. In the meantime, his department is discussing its next steps.

"If this thing happens, maybe we would just run PeopleSoft on our own," said Monroe. "This is one of the few vendors where if you sign, you get the code."

Monroes prime objection to Oracle is the cost of its database. TES runs its software on IBM and Microsoft Corp. databases.

"We see only the potential downside of significant cost [to switch vendors]," said Monroe. "If there is some upside for us, I cant find it."

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