PeopleSoft’s acquisition of JD Edwards is likely to boost the vendor’s European presence where it has failed to convince customers that it has moved beyond being a human resources application company.
The move also means the combined entity will become the second largest enterprise application player in the world behind only SAP but ahead of Oracle, with which it has been vying for the number two slot for years, according to an alert by AMR Research. JD Edwards had maintained a solid fourth position.
AMR explained: “This is one of the main reasons for the combination. Both companies were finding it increasingly hard to compete globally and domestically against the mammoth SAP in such a depressed technology economy. They will now have a solid footing against SAP.”
PeopleSoft has seen its stock tumble by more than 50 per cent over recent quarters and has warned that it expects to see much lower revenues for this fiscal year than last. JD Edwards, meanwhile, posted its first loss in six consecutive quarters and reported a 20 per cent drop in license revenues last week.
But AMR expects the combination to give PeopleSoft strength in overseas markets, particularly in Europe and Asia Pacific. “Neither company had enough people on the ground to be effective in many of these global offices. Now they will have twice as many people and gain a lot of credibility in the regions,” it said.
This is particularly true in Europe, where not having a viable manufacturing product “hurt it a lot, but JD Edwards has a pretty strong European presence giving PeopleSoft the credibility it needed”.
The complementary nature of the two firms’ product sets means AMR does not expect that the $1.7 billion purchase will have much immediate impact on customers, especially as both companies were quick to point out that no changes to product support are anticipated.
“We don’t expect the product lines to be merged or that the new company will try to force customers to migrate. Both products are well positioned for their respective markets and built on modern technology architectures. Even JD Edwards’ large World software base on the AS/400 platform is likely to continue to be supported for a very long time,” the alert concluded.