Hostile Bid for PeopleSoft May Delay Apps Purchases

J.D. Edwards sues Oracle for obstructing merger

DENVER -- Whatever the outcome, Oracle Corp.'s hostile takeover bid for PeopleSoft Inc. is already creating confusion and doubt among users of both PeopleSoft and J.D. Edwards & Co. business applications.

Some users last week said they may delay software purchases until the buyout attempt is resolved. For example, John Hill, CIO at Praxair Inc. in Danbury, Conn., said the maker of industrial gases will wait to see which acquisition scenario plays out before making a decision on whether to potentially standardize its human resource operations on a single set of applications.

"I believe it's Oracle's motivation to stall the market as long as possible," Hill said at the annual conference of J.D. Edwards' Quest user group here last week. Denver-based J.D. Edwards this month agreed to be acquired by Pleasanton, Calif.-based PeopleSoft, a deal that now could hinge on whether Oracle succeeds in its effort to buy PeopleSoft.

Larry Ellison, CEO of Oracle Corp.
Larry Ellison, CEO of Oracle Corp.
Hill said Praxair runs applications from all three vendors in its various business units, including Oracle financials and PeopleSoft human resource and payroll systems. He added that if Oracle prevails in its takeover attempt, he would reconsider his PeopleSoft investment -- even though Oracle CEO Larry Ellison has promised free migrations to Oracle's E-Business Suite 11i software or Version 8 of PeopleSoft's applications.

"It never happens that way," Hill said. "Any ERP conversion is a highly costly and complex endeavor, and [the need to do one] would cause us to re-evaluate the marketplace."

Oracle, which formally launched a tender offer for PeopleSoft's stock last week, has said it would continue to support PeopleSoft's existing users and wouldn't force them to migrate to its own applications. But Oracle doesn't plan to actively sell PeopleSoft's products to new customers and has indicated that it would reassess PeopleSoft's agreement to buy J.D. Edwards.

Craig Conway, CEO of PeopleSoft Inc.
Craig Conway, CEO of PeopleSoft Inc.
"We see only a potential downside of significant additional costs," said Bill Monroe, chief operating officer at the Texas Education Agency in Austin, which runs PeopleSoft's financial management and CRM software.

"Conversion to another system could cost over $2 million, plus database costs," Monroe said. He added that agency officials have yet to assess other factors that could result from a takeover by Oracle, such as the potential that software projects will have to be delayed or that future functionality will be lost.

Mark Federle, CIO at The Weitz Co., a Des Moines, Iowa-based construction firm that runs hosted versions of J.D. Edwards' OneWorld XE applications, is considering an upgrade to Version 8 of the ERP software within the next year.

That project wouldn't be affected by a merger of J.D. Edwards with PeopleSoft, Federle said. But he added that if Oracle buys the two companies and then eliminates OneWorld XE functions that are specific to the construction industry, he will stick with the J.D. Edwards applications for as long as he can while looking for new software that meets his needs.

PeopleSoft's board last week voted unanimously to recommend that shareholders reject Oracle's $5.1 billion offer, saying that the takeover "would undoubtedly face lengthy antitrust scrutiny" and has "a significant likelihood" of being blocked by the government. Oracle and PeopleSoft are currently the No. 2 and No. 3 business application vendors, respectively, behind market leader SAP AG.

PeopleSoft also claimed that the unsolicited offer undervalues the company and was designed to disrupt its operations and sales momentum by creating uncertainties for users.

Meanwhile, J.D. Edwards filed lawsuits in Colorado and California state courts charging that Oracle had engaged in unfair business practices and illegally interfered with the planned merger of PeopleSoft and J.D. Edwards. "We will not sit by idly while Oracle pursues this arrogant, unlawful and destructive course of action," J.D. Edwards CEO Bob Dutkowsky said in a statement.

Oracle responded that the J.D. Edwards suits have "no merit whatsoever." It also asserted that PeopleSoft has "put the self-interest of [its] management over the best interests of PeopleSoft shareholders" by rejecting Oracle's offer.

Several J.D. Edwards users at the Quest Global 2003 conference said they have yet to fully assess what a takeover of PeopleSoft by Oracle would mean to them. "I think the only thing to do is sit back and wait," said Leah Hansen, applications manager at CanWel Distribution Ltd., a building materials distributor in Vancouver, British Columbia. "We don't know what's going to happen."

Copyright © 2003 IDG Communications, Inc.

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