Oracle's PeopleSoft bid could mean trouble for users

IDG News Service - If Oracle Corp. succeeds in its bid to acquire PeopleSoft Inc., users are in for a rough transition, industry analysts said today.
With Oracle's offer of a lowball price for PeopleSoft, it's not clear how likely the takeover attempt is to succeed. But based on Oracle's culture and past history, it would face significant challenges in meshing its products and operations with PeopleSoft's, observers said.
"The cultural differences at Oracle and PeopleSoft are night and day," said Michael Dominy, an analyst at The Yankee Group in Boston. "I'm skeptical at this point. I would need to see a lot more detailed information from Oracle on how they would do this so they wouldn't piss off all the customers that are PeopleSoft customers."
One customer agreed that more time is needed to sort out the implications of the potential acquisition.
"I can think of all kinds of things that would be positive and all kinds of things that would be negative. It's just too early," said George Muller, vice president and CIO at Imperial Sugar Co. in Sugar Land, Texas.
Oracle is offering $5.1 billion cash, at $16 per share, to acquire Pleasanton, Calif.-based PeopleSoft (see story). Company executives said they would stop selling PeopleSoft's products to new users, but continue selling them to current users, while encouraging those users to eventually migrate to Oracle applications. Oracle also intends to incorporate some of PeopleSoft's technology into its Oracle E-Business Suite.
PeopleSoft executives haven't commented on Oracle's offer.
Chicago-based analyst Ted Kempf of Gartner Inc. said a merger would be bad from the perspective of PeopleSoft's customers.
"I don't think [Oracle is] interested in developing the products. They just want the support revenue. If you're a die-hard PeopleSoft client, you'd have to migrate to Oracle or something else."
The takeover bid likely took PeopleSoft by surprise, both analysts said, noting that PeopleSoft probably wouldn't have proceeded with its June 2 announcement of its intended J.D Edwards & Co. buyout if it had seen Oracle's attempt coming (see story).
Whether Oracle is serious in its offer is another open question.
"When you look at Oracle's positioning over the past year, and what [Oracle Chairman and CEO] Larry Ellison has been saying about the market shakeout, it's clear he didn't view PeopleSoft as a long-term survivor," Dominy said.
Oracle's offer, for a 5% premium on PeopleSoft's share price, is a bit of an insult, he said. On the other hand, Dominy said he wouldn't be surprised to see Oracle raise the offer.
Financial analysts

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