PeopleSoft Offers Refunds in Event of Oracle Takeover

Computerworld - PeopleSoft Inc. has begun promising to pay refunds to some new or upgrading customers if it's acquired and the products they purchased are discontinued, sources said last week.

And on June 9, the same day that Oracle Corp. launched its hostile bid to buy it, PeopleSoft sent a letter to a potential customer that included a contractual offer to pay the user twice the cost of its software licenses. According to the letter, which was obtained by Computerworld, the payment would be triggered should PeopleSoft be bought within a year and if within two years the new owner drops the purchased applications or sets plans to stop supporting them.

The refund strategy is seen as an attempt by Pleasanton, Calif.-based PeopleSoft to keep concerned users from delaying software purchases because of Oracle's hostile bid. It could also serve as a "poison pill" takeover deterrent.

The takeover battle intensified last week, as Oracle upped its offer to $6.3 billion, and PeopleSoft and J.D. Edwards & Co. amended their merger agreement in an effort to speed up that deal.

The identity of the user that received the June 9 letter was shielded from Computerworld. PeopleSoft declined to comment about the letter and said it doesn't publicly discuss customer contracts. But a spokesman confirmed that PeopleSoft has initiated "a prudent response to Oracle's attempt to disrupt our business." He added that PeopleSoft is taking steps "to protect our customers' investments and our market position."

Jim Prevo, CIO at PeopleSoft user Green Mountain Coffee Roaster Inc. in Waterbury, Vt., said he has heard about such letters but hasn't seen one. Prevo described the refund provisions spelled out in the letter as "a good offer" for users.

"If I had any pending purchases with PeopleSoft, I'd move forward as a vote of confidence in the management team," Prevo said, noting that the promise of refunds would let users do so "without extraordinary financial risk."

PeopleSoft and J.D. Edwards users alike have said that they may put off software purchases until the buyout fracas is resolved .

For example, Bruce Leidal, director of technology at Hayes Lemmerz International Inc. in Northville, Mich., last week said the uncertainties raised by Oracle's offer may affect a plan to consolidate the automotive parts maker's ERP systems.

Leidal said he sees potential benefits in PeopleSoft's plan to acquire J.D. Edwards because it would combine J.D. Edwards' manufacturing applications and PeopleSoft's human resources software. But now, he said, "maybe we ought to stand away from a selection with Oracle, PeopleSoft or J.D. Edwards." Hayes Lemmerz officials planned to meet with ERP market leader SAP AG last week, Leidal added.