24 June 2003 Several US states are considering plans to launch coordinated legal action to try and block Oracle’s hostile takeover of rival PeopleSoft.
The move follows the launch of an antitrust action on the 18 June by the State of Connecticut. PeopleSoft’s software is widely deployed in US government and Oracle CEO Larry Ellison’s comments that development will be discontinued and users migrated to Oracle’s E-business Suite has caused consternation among many PeopleSoft users.
The US educational and public sectors account for one-fifth of PeopleSoft’s revenues.
Connecticut governor, John Rowland, was particularly angry at Larry Ellison’s comments because the state had only last year spent $100 million on a five year PeopleSoft deal.
Representatives of several high profile US states, including Oracle’s home state of California, have arranged to discuss their response today. The action is being led by Texas attorney general Greg Abbott.
“We take great interest any time a situation threatens competition and puts the customer, whether an individual or government entity, in jeopardy of paying higher prices for a particular product,” Abbott told the Wall Street Journal. California attorney general Bill Lockyer is less able to speak out because the headquarters of both Oracle and PeopleSoft are located in his state.
The action adds some weight to PeopleSoft’s claims that were stockholders to accept Oracle’s bid, it could become bogged down in an antitrust investigation that could ultimately damage the company, regardless of whatever regulators decided.
But it is also part of the behind-the-scenes public relations battle that is being waged by PeopleSoft to build up opposition to the deal. For example, the WSJ suggests that PeopleSoft CEO Craig Conway met with Connecticut officials earlier in the month to discuss antitrust issues.
And PeopleSoft has persuaded a number of its flagship customers to add their support to its fight for survival.
Air New Zealand’s program director Chris Alderson, bristles at Oracle’s proposal to scrap the PeopleSoft product line and upgrade users to its own applications. “I don’t agree with Larry Ellison. Even if the upgrade [from PeopleSoft] to Oracle had been free, there would have been unpalatable implementation and training costs resulting in no benefit,” he said. “The only thing an Oracle takeover of PeopleSoft would do is to hurt the customers.”
That cost analysis is echoed by the chief information officer (CIO) of healthcare group Alcon Labs. “Having to convert to Oracle would cost us millions and millions of dollars without any benefit,” said Dr Robert Brobst.
Others, such as Fujitsu America’s human resources management systems head Glenn Marfell, have already said they will boycott Oracle’s applications. “We would never move to an inferior Oracle product,” said Marfell. Further support comes in testimonials from the CIOs of Domino’s Pizza and airline Lufthansa, which is also a SAP user.
Oracle has taken the line that it will scrap the complete PeopleSoft product range in favour of its own. But analysts point out that it could not say otherwise, as identifying any PeopleSoft product as having a future, post-merger, would be tantamount to admitting the product is superior to the Oracle equivalent — a situation that would be a sales and marketing nightmare for Oracle if the deal fell through.
For its part, Oracle maintains that if the $6.3 billion offer is successful, it will not wind down support for PeopleSoft products.
“Contrary to what PeopleSoft management would have you believe, Oracle intends to fully support PeopleSoft customers and products for many years to come. Satisfying those customers is the key to the success of this acquisition,” Ellison said in a statement 18 June.