The number of major enterprise software players out there decreased by one today as PeopleSoft Inc. announced a deal to buy rival J.D. Edwards & Co. in a deal valued at about $1.7 billion.
The deal, which has been approved by the boards of both companies and is expected to close in the third or fourth quarter, gives PeopleSoft, of Pleasanton, Calif., stronger offering and an established customer base in the manufacturing vertical. PeopleSoft will expand its presence in 20 vertical industries in total, officials from the company said.
Denver-based J.D. Edwards also brings a strong presence among mid-sized companies. It will become a subsidiary of PeopleSoft. The combined companies will have about 13,000 employees.
Both companies will plug holes in their overall product offerings, officials said. After the deal closes, PeopleSoft will have an enterprise unit, a mid-market unit and an AS/400 unit—the latter two based on J.D. Edwards offerings.
PeopleSoft Chief Marketing Officer Nancy Calwell said that J.D. Edwards, as the leader in the mid-market business applications space with strength in key verticals like manufacturing and distribution, would bring synergies to PeopleSoft, which is stronger in the enterprise space and services verticals like financial services, health care, education, communications and government.
“Together, well have incredible growth opportunities,” said Calwell. “As we move forward, well bring the strengths of our respective applications to each other.”
“We have a good set of products but we dont know how to sell them at the high end,” said J.D. Edwards CEO Bob Dutkowsky, citing his companys strategic networking optimization products as an example. PeopleSoft e-procurement, sourcing and Sarbanes-Oxley compliance software are examples of products that could be sold to J.D. Edwards user base, he added.
Integration of the two companies offerings will not be difficult since they are both based on Internet standards, according to Dutkowsky.
“Their software is Internet enabled, as is ours, so we can plug the holes fast,” he said.
No firm integration plans have yet been made, however. In places where there is overlap, such as CRM (customer relationship management), PeopleSoft may opt to sell two different product lines.
“It is conceivable we could have two CRM offerings,” Dutkowsky said. “We could have a heavyweight CRM offering and a lightweight CRM offering.”
With combined revenue of $2.8 billion, the expanded PeopleSoft will surpass ERP software provider Oracle Corp. in size. That makes it the second-largest enterprise software provider behind SAP AG.
“We compete against them [SAP and Oracle] every day,” Dutkowsky said. “We almost never compete with PeopleSoft.”
Dutkowsky said he sees little threat from Microsoft Corp., which has been building up its presence in the enterprise software market. Microsofts target customers are companies smaller than either J.D. Edwards or PeopleSofts, he said.
Dutkowsky and PeopleSoft CEO Craig Conway, who was in Paris today and unavailable for comment, first discussed the deal last fall when the boards of both companies were exploring ways they could accelerate software sales. Enterprise software developers have reported mixed results over the last year when it comes to overall profitability, but nearly all are struggling when it comes to new software license sales.
After discussing the implications of an acquisition for seven months, the two chief executives got the rest of their management involved to do a serious due diligence, which has been going on for the last month, Dutkowsky said.
PeopleSofts Calwell conceded that few companies have successfully taken their software up- or down-market, though she said one out of three new customers that PeopleSoft has acquired has been for its mid-market software, which the company introduced 18 months ago.
“We feel good about what weve accomplished in the mid-market, but this is a way to accelerate that effort and combine their expertise in manufacturing with our expertise in services,” she said.
She also said both companies had similar cultures, both passionately focused on the satisfaction and success of their customers.