PeopleSoft’s rising sales leave Oracle in a quandary

Enterprise application software supplier PeopleSoft has reported stronger than expected fourth quarter results, heaping pressure on rival Oracle to either raise its hostile takeover bid for a third time — or to abandon it completely.

For the fourth quarter to the end of December, PeopleSoft recorded revenues of $685 million, up by one-third compared to the same period a year earlier. However, net income fell from $57.4 million to $17.4 million.

Full year revenues rose less dramatically, from $1.95 billion to $2.27 billion, while net income also dropped, to $85 million compared to $182.6 million achieved in 2002. The fall in profitability was due to an increase in sales and marketing and product development costs.

PeopleSoft CEO Craig Conway attributed the rising revenues to improving economic conditions, increased corporate IT spending and PeopleSoft's merger with JD Edwards. "We started the year in an economic downturn and ended the year the second largest enterprise software company in the world," said Conway. "We couldn't be better positioned for 2004."

But, he added, without the "extremely hostile approach by Oracle", the year could have been even better.

PeopleSoft shares stood at $22.10 at the close of trading yesterday, well above Oracle's hostile bid of $19.50 per share.

Oracle launched its bid for rival PeopleSoft in June 2003 and has twice raised its bid to reflect both PeopleSoft's rising market value, as well as its successful acquisition of JD Edwards. Oracle CEO Larry Ellison says that a merger of Oracle and PeopleSoft will help the combined company to better compete with market leader SAP.

But PeopleSoft has adopted a number of measures in a bid to fight off Oracle's unwelcome approach. These include guarantees to PeopleSoft customers of between two and five times their licence fees should certain 'trigger events' occur, such as the company being acquired within two years.

Such guarantees would make Oracle's bid — if successful — prohibitively expensive. However, Oracle is hoping to overcome PeopleSoft's 'poison pill' tactics by taking control of PeopleSoft's board of directors.

Oracle must also convince US antitrust regulators that the takeover will not undermine competition in the software sector. They are expected to announce a decision before the end of March 2004.

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Ben Rossi

Ben was Vitesse Media's editorial director, leading content creation and editorial strategy across all Vitesse products, including its market-leading B2B and consumer magazines, websites, research and...

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