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    Oracle Says PeopleSoft Buyout Is Inevitable

    Written by

    John Pallatto
    Published July 1, 2004
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      SAN FRANCISCO–Oracle rested its case Thursday by presenting testimony supporting its argument that competition in the enterprise application software market is so intense that sooner or later PeopleSoft will have no choice but to accept a buyout by someone.

      Oracle Corp. called expert witnesses Wednesday and Thursday in the Department of Justices antitrust case who said PeopleSoft Inc.s lack of an “integration layer” of middleware, database, Web services and related technology meant that must seek an alliance with larger companies that already had such technology.

      Besides Oracle, companies that have the integration components PeopleSoft needs to keep growing include IBM, SAP AG and Microsoft Corp., the witnesses argued.

      An Oracle buyout “would bring competitive benefits and efficiencies” because it would give PeopleSoft access to the integration-layer technology, said David Teese, an economics professor at the Haas School of Business at UC Berkeley.

      These components represent an essential “technology stack” that PeopleSoft must have access to if it is to remain competitive in the market, said Dale Kutnick, founder and chairman of The META Group Inc., an information industry research firm based in Stamford, Conn.

      If PeopleSoft doesnt have the cash to build or buy these components itself, it will be forced into the arms of some suitor that can provide them, Kutnick suggested.

      The Department of Justice presented evidence that this theory overlooks the fact that PeopleSofts enterprise business applications run on multiple databases and on open development technologies such as Java and XML, and that its ERP (enterprise resource planning) applications already run with these supposedly competing integration-layer components.

      Oracles claims about PeopleSofts supposed vulnerability conflicts with Oracles earlier arguments that smaller human resources and financial management software vendors such as Lawson Software Inc. and American Management Systems Inc. “will be effective competition” for SAP or a merged Oracle-PeopleSoft, said Thomas Bartlett, deputy assistant attorney general. “Such a position seems inconsistent to me,” he said.

      /zimages/5/28571.gifIn his testimony, Oracle CEO Larry Ellison claimed that PeopleSofts Craig Conway blew earlier talks to merge the two companies. Click here to read more.

      The smaller competitors presumably will face even greater challenges competing in a market where this integration layer is so important, Bartlett suggested.

      With testimony in open court complete, Judge Vaughn Walker set July 20 as the date for closing arguments after both sides submit their final briefs in the case, according to court officials. It could be some time in September before Walker issues his verdict, officials said.

      /zimages/5/28571.gifCheck out eWEEK.coms Enterprise Applications Center at http://enterpriseapps.eweek.com for the latest news, reviews and analysis about productivity and business solutions.

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      John Pallatto
      John Pallatto
      John Pallatto has been editor in chief of QuinStreet Inc.'s eWEEK.com since October 2012. He has more than 40 years of experience as a professional journalist working at a daily newspaper and computer technology trade journals. He was an eWEEK managing editor from 2009 to 2012. From 2003 to 2007 he covered Enterprise Application Software for eWEEK. From June 2007 to 2008 he was eWEEK’s West Coast news editor. Pallatto was a member of the staff that launched PC Week in March 1984. From 1992 to 1996 he was PC Week’s West Coast Bureau chief. From 1996 to 1998 he was a senior editor with Ziff-Davis Internet Computing Magazine. From 2000 to 2002 Pallatto was West Coast bureau chief with Internet World Magazine. His professional journalism career started at the Hartford Courant daily newspaper where he worked from 1974 to 1983.

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