State of Connecticut becomes first PeopleSoft customer to sue to block Oracle bid

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The State of Connecticut filed a federal lawsuit Wednesday to block Oracle's hostile takeover of PeopleSoft in a bid to protect what it sees as a threat to its $100 million applications investment.

The state is in the second year of a five-year contract with PeopleSoft and has spent about $80 million to upgrade its human resources and payroll computer systems using the company's Soft software. The project, called Core-Ct., will eventually cost a total of $100 million. The first phase is scheduled to go online on 8th July - around the time of Oracle?s hostile takeover bid deadline.

State officials are concerned about reports that Oracle plans to discontinue the PeopleSoft line of products, forcing the state and other customers - including universities such as the University of Connecticut and businesses such as Aetna Inc. - to buy new software, retrain Oracle employees or spend more money to install software Oracle might provide.

Gov. John G. Rowland said the takeover of PeopleSoft Inc. by Oracle Corp. would violate state and federal antitrust laws, and would have a "devastating financial impact on the state." "We could be forced to spend millions of dollars to retool our system," Rowland said. "And that will be at the expense of the taxpayers."
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"The takeover would cripple competition, threatening higher prices and lower quality," said Attorney General Richard Blumenthal. "It would cause terrible waste in the human and financial investments already made."

In a letter to the Rowland and the attorney general in response, Oracle CEO Larry Ellison insisted that it was never the intention of Oracle to force customers to "migrate to Oracle applications." Ellison wrote: "In fact, we have consistently said we would extend PeopleSoft's current support deadlines, providing service through our much larger global support orgnaization."

But Blumenthal is not convinced. "They may be intending to continue some kind of support, but discontinuing a product line is a death knell," he said. "It would be a question of time how quickly the state's investment is made worthless."

He added that the state plans to rally other states to its cause. "We are assembling a powerful coalition of states and other consumers that will suffer . . . unacceptable costs if this unlawful, anticompetitive takeover is permitted,? he said. "Oracle is threatening to force its products on consumers by illegally seizing a key rival and thus amassing market dominance."

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