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6 June 2003 Leading the most audacious acquisition bid the software industry has ever seen, Oracle's Larry Ellison has outlined details of his company's planned $5.1 billion hostile bid for business applications software giant PeopleSoft.

In a hastily arranged conference call early Friday morning, the Oracle founder and CEO said that if the bid is successful Oracle will seek to move users of PeopleSoft's human resources, manufacturing, financials and other applications to the equivalent Oracle products — effectively sounding the death-knell for the complete PeopleSoft product line.

Outlining the nascence of the bid, Ellison said that PeopleSoft CEO Craig Conway approached him a year ago with a proposal that Oracle and PeopleSoft pool their applications businesses to form a new company, mounting a stronger challenge to enterprise resource planning software market leader SAP.

Ellison rejected that approach, but has now been spurred into action by several recent events. "A year ago Conway said that the two applications businesses together would [create] a very formidable player in the market. That hasn't changed," said Ellison.

Above all, Oracle's action was triggered by PeopleSoft's move, announced on 2 June, to buy fellow applications software vendor JD Edwards. But Oracle executives point to other factors. One is a reticence on the part of many PeopleSoft customers to move from version 7 of the company's suite to version 8.

PeopleSoft is pressuring customers to make that shift by calling an end to support for version 7 in December 2003, Oracle CFO Jeff Henley highlighted. Oracle would extend that deadline, he said, and waive the licence fee of the move from 7 to 8.

While pointing out that the future migration path for PeopleSoft customers would be to a 'next-generation' product based on the Oracle eBusiness Suite, Ellison said that Oracle would continue to "keep those [PeopleSoft versions] current."

"We expect there will be minimal business integration risks as we will not be integrating the product line," added Henley. "We will not be actively selling PeopleSoft products to new customers."

The product transition at PeopleSoft has contributed to a sharp slowdown in software sales in the company's most recent quarter. In contrast, Oracle announced earlier that it has beaten Wall Street analysts' earnings expectations for its final quarter of fiscal 2003, ending 31 May — the fifth consecutive quarter it has either met or exceeded analyst estimates.

Oracle intends to file details of the takeover bid with the Securities and Exchange Commission on Monday 9 June and is aiming to close the transaction sometime in July.

That desire for such a rapid transaction is one reason the company intends to use cash rather than shares in the tender. Oracle has $4.1 billion in cash, but it will also draw on bridge financing from investment bank Credit Suisse First Boston. Henley also said that the deal closure would be hastened by the fact that it would not be subject to due diligence, but he did admit that Oracle would have to overcome PeopleSoft's 'poison pill' provisions.

Ellison said that Oracle was "interested" in PeopleSoft's agreed merger with JD Edwards, and would consider pushing ahead with that deal too. However, he drew a distinction between the two acquisitions: "PeopleSoft's acquisition is an acquisition of diversification, moving them into new markets," he said. "Ours is an acquisition of consolidation."

Links:
Oracle offers $5.1 billion for PeopleSoft
PeopleSoft buys JD Edwards for $1.7 billion
Ebullient Conway promises "We'll keep JDE products"