The Method to Ellisons Madness
While hostile bids are not supposed to be part of the technology industry lexicon, the Oracle proposal to take over PeopleSoft makes sense when youve taken as many swings at the ball as has Ellison. Oracle is primarily known as a database vendor to big companies and, despite a number of attempts, has never reached the top rank of companies selling business applications that sit on top of those databases. PeopleSoft had a firm, but limited niche as a supplier of human resource management software until the present company president made a big bet on business applications based on Internet standards.
The fact that PeopleSoft Chairman Craig Conway worked at Oracle for eight years and has been loud in championing the companys success against the likes of Oracle and another Oracle alumnus, Tom Siebel of Siebel Systems, makes the current high technology theatre all the more compelling. On Monday, PeopleSoft announced it was going to acquire competitor J.D. Edwards for $1.7 billion, and by Friday, Oracle said it was launching a $5.1 billion, $16-a-share hostile bid for PeopleSoft. After three years of hearing about the tech wreck, the popped bubble and a general disinterest in technology spending, you could sense the Silicon Valley execs start to think about upgrading from their pre-millennium BMWs now that someone is interested enough in tech to buy a company.
The Oracle bid was only the latest takeover spark this week. Earlier in the week Palm Inc. said it was going to acquire rival Handspring Inc. in a stock deal worth about $169 million. While my crystal ball is no better than anyone elses, I think the still relatively high-tech stock valuations, at least compared with the airy heights once reached, combined with the recent run-up in tech shares, have given the impetus to a now or never acquisition fervor. For companies that were wondering how they would ever pay back their investors and even make a few bucks, the acquisitions are welcome.
The Oracle bid is especially compelling. In the business application space, the big player is still Germanys SAP AG. Whereas SAP has been slow to adapt its software to Internet standards, PeopleSoft has made the concept of Internet standards-based computing its rallying cry. Through both acquisition and development, the company has broadened its offerings to the full range of critical business applications. Oracle, despite considerable effort to succeed in the business applications space, needed a boost.
While Ellison was out championing his bid for PeopleSoft, he was quiet about a recent closing of another of his Internet efforts. His New Internet Computing Co., which was going to sell an inexpensive Web surfing appliance as an alternative to the personal computer, announced in early June it was shutting down. Maybe it was pushing one wreck to the side that allowed Ellison to focus on the vehicles that were still running well.