15 June 2004 The US Department of Justice (DoJ) case against Oracle’s $7.7 billion takeover of rival PeopleSoft has reached gridlock in its second week, as Microsoft attempts to conceal key documents from public view.
The documents are believed to contain information about the software giant’s strategy in the business software market, which could have a major impact on the case, particularly in the light of its secret takeover talks with German SAP, the world’s largest applications software vendor.
The trial is examining how the enterprise application market is defined and whether sufficient competition exists within that space, particularly at the high end. The US government argues that a takeover of PeopleSoft by Oracle will harm competition and raise software prices.
News of Microsoft’s flirtation with SAP has raised considerable suspicion. Microsoft had provided the DoJ with a sworn statement in March 2004 saying that it had no plans to enter the high end of the enterprise applications market for at least two years.
The case will therefore need to study the intentions of the two companies in various markets, said Steve Trotta, software industry analyst for Technology Business Research (TBR). “This is where things could get interesting because everyone is targeting small businesses as their next major growth opportunity,” he added.
Microsoft lawyer Charles ‘Rick’ Rule pleaded with US District Judge Vaughn Walker to seal the documents since they hold “things that are extremely confidential” such as plans for new products, their descriptions and timetables, as well as revenue projects, expectations for markets and partner and customer relationships, he said.
Judge Walker will review the documents behind closed doors in order to decide which ones can be introduced in an open court.
Further evidence at the trial came in the form of PeopleSoft customers who demonstrated mixed attitudes towards the hostile takeover.
An executive from wireless services provider Nextel Communications claimed it would have no motivation to upgrade its PeopleSoft system, but an Emerson Electric executive claimed he was in favour of the merger, because it would allow the company to compete better with SAP.
Some analysts, such as TBR’s Trotta, maintain the case could go either way. “Although Oracle came out strong in the beginning of the trial, I think detail will show that several verticals are dominated by the big three — PeopleSoft, Oracle and SAP,” he said.