PeopleSoft’s Board Shoots Down Oracle—Again

PeopleSoft’s Board Shoots Down Oracle—Again

Lisa Vaas

PeopleSoft Inc.’s board of directors on Tuesday again snubbed Oracle Corp.’s attempt to take it over, releasing a letter to shareholders that called Oracle’s tender offer an underbid and a business destabilizer.

Oracle’s attempted hostile takeover, which it launched earlier last month, “poses extraordinary risks,” the letter stated, and is “destructive to stockholder value.”

Danger and destruction would be wrought by court-related delays, as well as the infliction upon customers of fear, uncertainty and doubt, according to PeopleSoft. Indeed, the U.S. Justice Department’s antitrust division is investigating the proposed merger, and attorneys general from a number of states are considering taking legal action to stop the takeover.

“The combination of PeopleSoft and Oracle faces many months of delay for review by antitrust authorities and a significant likelihood that, in the end, the transaction would be blocked as uncompetitive,” the letter said.

PeopleSoft, of Pleasanton, Calif., also reinforced the uncertainty factor of Oracle’s move. “Oracle’s statements regarding its plans for PeopleSoft’s products create serious uncertainty as to the level of support and enhancements that PeopleSoft customers could expect,” the letter said. “Customers will not commit millions of dollars to enterprise software that is subject to such uncertainties. Employees will not remain with a company when its business vitality and their future are in doubt. If we had recommended that the offer be accepted, and the transaction was not completed, the damage to stockholder value could be enormous.”

Another risk is that Oracle’s offer could be withdrawn at any time, the letter continues, “adding to the risk that the transaction would never be completed.”

Oracle’s bid, which now stands at $19.50 per share, also “severely undervalues” PeopleSoft, based on its financial performance and future opportunities to earn revenue, according to PeopleSoft’s board.

The letter reiterated PeopleSoft’s ongoing faith in its merger with J.D. Edwards & Co. That merger, the announcement of which preceded Oracle’s takeover attempt by a few days, is a “strong and financially compelling business combination,” according to PeopleSoft. “PeopleSoft’s leadership in the large enterprise space complements J.D. Edwards’ strength in the midmarket, while PeopleSoft’s leadership in service industries is complemented by J.D. Edwards’ strength in asset-intensive industries,” PeopleSoft’s board wrote.

For its part, Oracle, of Redwood Shores, Calif., on Monday announced that it will launch an intensive effort to meet with PeopleSoft customers so as to assure them of support and product enhancements for “years to come”—10 years over whatever PeopleSoft had in mind, to be specific. The outreach campaign will encompass souped-up advertising and direct contact with PeopleSoft customers so as to drill home certain promises.

Those points include that Oracle will not shut down PeopleSoft products nor force conversion to Oracle E-Business Suite applications; that customers who do choose to migrate will be given free module-to-module upgrades; that an extended support period for PeopleSoft products will persist for “at least 10 years beyond the timeframe to which PeopleSoft itself has committed”; that PeopleSoft specialists will be brought on board Oracle’s service organization; and that there will be ongoing product enhancements.

Copyright © 2003 Ziff Davis Media Inc. All Rights Reserved. Originally appearing in eWEEK.