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Oracle vows to fight DOJ suit

Oracle says it isn't done with its battle to acquire PeopleSoft -- even if the Department of Justice says the deal violates antitrust laws. In a twist, the department said it was Oracle co-president Chuck Phillips who provided some of the evidence cited in the lawsuit.

If Oracle Corp.'s fight to acquire PeopleSoft Inc. isn't over until Oracle CEO Larry Ellison says so, then the IT community can bet on at least one more round of the nasty corporate slugfest.

Fulfilling the expectations of many industry professionals, Oracle last night vowed to "vigorously challenge" a Department of Justice lawsuit filed yesterday. The suit characterized the hostile takeover as "anticompetitive."

Indeed, the department quoted Chuck Phillips, newly appointed Oracle co-president, as having assessed the market as having only "three viable suppliers" when he was a Morgan Stanley analyst in 2002.

On page 9 of the 17-page lawsuit, Justice lawyers wrote that Phillips "issued a report that stated: The back-office market for global companies is dominated by an oligopoly comprised of SAP, PeopleSoft and Oracle. The market is down to three viable suppliers who will help re-automate the back-office business processes for global enterprises for years to come."

"Oracle is realizing this deal is very important to them, in order for their applications side to survive."
Azim Fahmi
senior systems analystESPN

Yesterday, Oracle disputed the department's assessment of the market and slammed PeopleSoft for what it called an intensive lobbying effort.

"The department's claim that there are only three vendors that meet the needs of large enterprises does not fit with the reality of the highly competitive, dynamic and rapidly changing market," said Oracle spokesman Jim Finn, in a statement released last night.

Oracle, Finn said, looks forward to proving its case in court. The company recently raised its bidding price for PeopleSoft to $9.4 billion.

Since the litigation will extend beyond the PeopleSoft stockholders' meeting later this month, Finn said, Oracle is "withdrawing the slate of independent directors and will not be soliciting proxies for use at the meeting."

While plenty of PeopleSoft users have worried for months that they would lose investments, and jobs, if Oracle succeeds in taking over PeopleSoft, Oracle users say the proposed takeover could benefit them.

"Oracle is realizing this deal is very important to them, in order for their applications side to survive," said Azim Fahmi, a senior systems analyst at Bristol, Conn.-based ESPN and a SearchOracle.com site expert. He said he believes customers of both vendors could benefit if Oracle succeeds in court.

"PeopleSoft has a much better HR product than Oracle does," Fahmi said. "I don't know to what extent the deal violates the antitrust laws, but based on the fact that PeopleSoft has already acquired J.D. Edwards, that does make it more difficult. Now you do have only three companies."

SAP responded to the lawsuit, and to Oracle's responses, by saying the legal maneuverings and verbal volleys have little to do with them, or with the needs of customers.

"Today's DOJ announcement is just another in a series of chapters being written about this situation -- a situation that is clearly far from over,'' said SAP spokesman Bill Wohl. "Until the final chapter is written, little has changed in our marketplace. There remains considerable uncertainty among customers who don't have a clear and comfortable vision of the future (especially customers of PeopleSoft, JDE and Oracle)."

SAP has repeatedly said it is able to provide stability and clarity to the market at a time when the Oracle-PeopleSoft saga is an unnerving distraction for some users.

Kyle Lambert, an Oracle user and vice president of information solutions at John I Haas Inc., a producer of hops and hops products, said he considers the lawsuit unfair.

"I find it ironic that the DOJ considers Oracle anticompetitive in its bid for PeopleSoft, when they virtually did nothing when Microsoft was determined to act in an anticompetitive way," Lambert said. "I object to the DOJ acting randomly more than anything else."

Oracle will now head into the discovery process. The Department of Justice will release to Oracle's attorneys any evidence collected by Justice investigators, including interviews with software customers.

At the close of business yesterday, PeopleSoft's stock had slipped only 35 cents, closing at $21.78. Oracle's offer translates to $26 a share, a price PeopleSoft says shortchanges stockholders when the value of a merged company is considered.

News writer Barney Beal and site editor Robyn Lorusso contributed to this report.


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