Oracle Paid Real Money to Land PeopleSoft

Opinion: After months of posturing and talking down PeopleSoft, Oracle finally acknowledges that it is going to get significant technology and business benefits for its $10.3 billion.

"A billion here, a billion there, pretty soon it adds up to real money." Thats one of the better known bon mots from the late Everett Dirksen, the famously puckish U.S. senator, when he was talking about the federal government budget deficits in the 1960s.

Well it took a billion more here and there before Oracle presented PeopleSoft with the offer that it couldnt refuse. The final price was $10.3 billion, double Oracles original $5 billion offer in June 2003. Oracle had to repeatedly sweeten the offer from $16 before it made what it claimed was its "best and final offer" of $24 per share in November.

The final price tag is just one of the many concessions that Oracle had to make over the past 18 months before it cajoled PeopleSoft to yield in one of the more prolonged and bruising hostile buyouts in recent memory.

Oracle might have closed this deal months sooner if it hadnt confronted PeopleSoft with a lowball bid of $16 per share along with the arrogant declarations that Oracle would apply a scorched earth policy to the PeopleSoft product line. Oracles initial statements, CEO Larry Ellisons protestations at last weeks OpenWorld conference notwithstanding, indicated that the company was mainly buying PeopleSoft for its customer base.

/zimages/3/28571.gifClick here to read why Wall Street is giving a thumbs up to the deal.

Those statements also indicated that PeopleSofts ERP (enterprise resource planning) product line would receive minimal support, although Oracle later made a seemingly grudging concession to support the PeopleSoft products for 10 more years. But that didnt tell customers whether they could expect to receive any significant upgrades during those 10 years.

It wasnt until last week that Ellison and other Oracle executives made the clearest public statements to date that the company is going to complete the development of PeopleSoft 9 and even Version 6 of the former J.D. Edwards World product line. Only then did customers and PeopleSoft management have serious hope that their technology investments had some semblance of a 10-year life expectancy.

/zimages/3/28571.gifClick here to read about Oracles rapid transition plans for the combined companies.

Its very likely those statements helped convince PeopleSofts leadership that they finally had a firm basis to reach an agreement. PeopleSoft founder Dave Duffield and other longtime employees certainly needed to hear some assurance that the software assets they had developed over the past 17 years would not be scrapped.

The extra $2.50 cents that PeopleSoft requested to bring the total offer to $26.50 was likely a final face-saving demand to show that PeopleSoft retained its independence and control of its fate to the end.

In a telephone news conference on Tuesday, Oracle co-President Charles Phillips acknowledged that his company is getting some significant technology benefits for its money.

"PeopleSoft had a substantial presence in financial services and its a strategic vertical for us as well," Phillips said. "One of the reasons for the merger was to get more critical mass in selected verticals," and financial services was one of those, he said.

Next Page: What Oracle gets for $10.3 billion.

John Pallatto

John Pallatto

John Pallatto has been editor in chief of QuinStreet Inc.'s since October 2012. He has more than 40 years of experience as a professional journalist working at a daily newspaper and...