February 16, 2004
(Computerworld)
In the high-stakes chess game of Oracle vs. PeopleSoft, federal antitrust lawyers put Larry Ellison in check last week -- just two days after the database king raised his takeover bid to $26 a share in what is now a $9.4 billion offer. What started last June as a $5.1 billion acquisition gamble has nearly doubled for Oracle, with the database maker looking increasingly determined (or desperate) to buy its way into PeopleSoft's No. 2 spot in the business applications market.
The final call on whether Uncle Sam will file suit to block Oracle's acquisition plans will be made by DOJ Assistant Attorney General Hewitt Pate early next month. But the preliminary staff recommendation against the merger signals a significant setback to Oracle. Another obstacle may arise in March when the European Union's antitrust regulatory body also weighs in.
If you have a taste for irony, Ellison's predicament is a gourmet treat. After years of urging and supporting DOJ actions against Microsoft, he's likely to end up competitively hobbled by the same agency -- all while struggling to position his company for future battles with the convicted monopolist. If the PeopleSoft acquisition founders, Oracle's chances of taking on market leader SAP in the $20 billion enterprise application space will founder as well.
"Oracle is slowly, slowly losing ground against its competition, both in mind share and market share, and it doesn't appear that the tide has turned," said B2B Analysts' David Dobrin ["Oracle Changes Strategy, Embraces App Integration," QuickLink 44431].
Many enterprise users lost interest in the takeover drama months ago. But in a gratifying turn of events, customers didn't end up as pawns sacrificed and kicked off the board. Both vendors have been competing harder than ever to keep you content.
A case in point: Oracle has suddenly seen the light about providing a more open application-integration strategy, with tools coming later this year to help IT managers tie eBusiness Suite 11i software into other systems. And at the Oracle AppsWorld Conference last month, Ellison was pitching the importance of software vendors providing customers with clear, predictable costs of ownership ["Oracle Promises to Deliver Exact Cost of Ownership," QuickLink 35834].
Of course, it could be a coincidence that these user-friendly changes are popping up now. But I suspect not.
For PeopleSoft users, the initial angst about the takeover attack has been eased by the combatively protective stance taken by CEO Craig Conway. He moved swiftly to set up a rebate program so sales wouldn't stall, effectively guaranteeing customers refunds on their software purchases should Oracle prevail. PeopleSoft also wrapped up its merger with J.D. Edwards with remarkable speed. The only stumble in that friendly acquisition has been some public bickering with Quest, the J.D. Edwards user group ["PeopleSoft at Odds With J.D. Edwards User Group," QuickLink 43921].
A onetime Oracle exec himself, Conway learned from the master how to spin a story. He's been telling customers since last fall that the takeover deal is a dead issue, although that is clearly more wishful thinking on his part than reality.
With the forces of antitrust regulators gathering against him, Ellison now has to convince his own board to engage in yet another protracted legal battle. But whoever ends up in checkmate here -- and I think it'll be Oracle -- what really matters is how hard both vendors keep working at keeping you happy.
Maryfran Johnson is editor in chief of Computerworld. You can contact her at maryfran_johnson@computerworld.com.
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