DoJ slows Oracles move on PeopleSoft
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Oracle's hostile bid for rival PeopleSoft hit an unexpected delay when Department of Justice officials examining the takeover demanded more information from Oracle.
The DoJ informed Oracle that it would be seeking a second tranche of information on the company's proposed acquisition in order to help it determine how that might impact competition in the market for business applications software.
Additionally, the DoJ is also looking at how Oracle's dominance in the database market could influence its market position in enterprise applications and vice versa.
Oracle had hoped that the DoJ would draw a line under its investigation on Monday and declare that it saw no anti-competitive issues arising from a combined Oracle and PeopleSoft. The 'Second Request' from the DoJ's Antitrust Division could now stretch the assessment period for several weeks or even months.
As a result, it looks more likely that PeopleSoft's own acquisition of rival JD Edwards will go through before Oracle has a chance to complete its move.
PeopleSoft has given JD Edwards shareholders until 17 July to accept its offer of $14.33 per share, an offer that values the company at $1.75 billion. If that goes through, Oracle would then have to raise its all-cash offer to more than $8 billion in order to still pay an additional premium to PeopleSoft investors.
By its own figures, Oracle is the number two vendor in the business applications software market, with revenues for the year to the end of May of $2.7 billion.
However, that applications unit is only a third the size of market leader SAP, which had revenues of $7.98 billion in 2002. PeopleSoft's revenues for the same period were $1.95 billion; JD Edwards' revenues for the year to the end of October 2002 were $904 million.
Oracle is also arguing that even if it acquires both PeopleSoft and JD Edwards, its position is coming under pressure from Microsoft, following the software giant's acquisitions of mid-range applications vendors Navision and Great Plains.
Several analysts have suggested that one option open to the DoJ is to impose a radical condition on Oracle: that if its acquisition is successful, the resulting $5.5 billion applications business would need to be operated separately from Oracle's database business.
