Inside Oracle’s High-Stakes PeopleSoft Grab

Oracle’s high-stakes bid for PeopleSoft, announced Friday, seemed to come out of nowhere.

“I absolutely did not” expect this to happen, Forrester analyst Byron Miller told the E-Commerce Times. “I got a phone call at 6:15 a.m. [Friday] from Oracle from analyst relations, saying they were going to make an announcement at 8:30 a.m. Eastern time.”

Yankee Group senior analyst Kosin Huang also told the E-Commerce Times that the announcement also took her by surprise.

“I think it stunned everybody, since it followed on the heels of PeopleSoft’s planned acquisition of J.D. Edwards,” Huang said, adding that many industry observers saw that acquisition as a positive step for those companies.

What is really behind Oracle’s sudden attempt to acquire PeopleSoft? Is it a serious offer or just a show of gamesmanship in the tight ERP/CRM market?

Reactions Not Soft

In a surprisingly blunt statement, PeopleSoft president and CEO Craig Conway called Oracle’s actions “atrociously bad behavior from a company with a history of atrociously bad behavior.”

“Obviously, it is a transparent attempt to disrupt the acquisition of J.D. Edwards by PeopleSoft announced earlier [last] week,” Conway said.

J.D. Edwards spokesperson Victor Chayet told the E-Commerce Times that his company cannot comment on Oracle’s offer until it is actually filed, which Oracle has said will occur Monday. However, he said, “We strongly agree with all the comments issued by [PeopleSoft CEO] Craig Conway” on Friday.

Neither PeopleSoft’s nor J.D. Edwards’ reaction to the news seems extreme. In a press release issued Friday, Oracle stated that if the takeover is approved, it will cease selling PeopleSoft products and will reassess the merger agreement with J.D. Edwards once the acquisition of PeopleSoft is completed.

You Can’t Be Serious

PeopleSoft spokesperson Dee Anna McPherson told the E-Commerce Times that her company does not believe the offer is legitimate, though she declined to specify why.

“We believe Oracle intended to disrupt our business,” McPherson said. “They are trying to freeze our pipeline.”

In addition, the Yankee Group’s Huang said Oracle’s proposed offer left many observers skeptical because the proposed buyout price of US$16 per share was too low and unrealistic. The bid was only 5.8 percent higher than the price of PeopleSoft’s shares at market close the day before the announcement; since then, PeopleSoft’s share price has jumped to $17.95.

She added that Oracle’s proposal underscores how saturated and cutthroat the entire ERP space has become.

“The only way to expand [in the ERP/CRM market] is through buying other [companies’] customer bases before technology and functionality,” Huang said. “Beyond upgrading, what else are you going to sell?”

Whose Worst-Case Scenario?

Forrester analyst Miller said that if the PeopleSoft/J.D. Edwards merger goes through as planned, PeopleSoft will pass Oracle to become the second largest business application vendor after German giant SAP.

On the other hand, if Oracle actually completes a hostile takeover of PeopleSoft, “the bottom line will be that Oracle will have killed a competitor, left customers with one less alternative and created a bunch of employees without jobs,” Miller said.

Siebel spokesperson Clay Helm agreed that an Oracle takeover of PeopleSoft likely would not produce positive results. “Enterprise software is about customer satisfaction and return on investment. A highly motivated, highly satisfied workforce is a requirement to help customers achieve these objectives,” he said in an e-mailed statement. “It is difficult to understand how these concepts can be consistent with a hostile takeover.”

Miller called Oracle’s strategy heavy-handed and suggested that it might end up backfiring on the company.

“Let’s face it — if PeopleSoft customers liked Oracle, they would be on it already,” he said. “Just because Oracle takes over [PeopleSoft’s customer base] doesn’t mean PeopleSoft people will stay in Oracle’s camp. SAP may end up being the beneficiary.”