Oracle v PeopleSoft; pragmatism v emotion

With immaculate timing - you'd almost think they were made for one another - the massed ranks of Oracle and PeopleSoft gathered in Europe the past seven days. Inevitably the thorny topic of that takeover bid came to the fore. Equally inevitably, the rhetoric was very different.

In Barcelona, PeopleSoft CEO Craig Conway spoke with a chosen few and banged the drum for the takeover bid being dead in the water. It was game over, he declared, Oracle's bid was now irrelevent. In addition, PeopleSoft has been putting out some positive numbers to suggest that the company will be posting some sound financials in the coming six months or so, negating fears that its merger with JD Edwards will have a negative impact.

So game over to Conway? Well, not according to the considerably less emotional Chuck Phillips over at Oracle in Paris. Phillips - who as a veteran of Wall Street is well placed to know about these things - argues rationally that PeopleSoft's brandishing of its 'poison pill' is so much rhetoric as such devices are merely weapons used by shareholders to bump up the asking price.

He also points out that until the European Commission (EC) and the US Justice Department rule on the monopoly aspects of the deal, there can be no further progress. In that light, PeopleSoft shareholders cannot tender their stock, so claims that the number offering up their shares is declining should be taken with a pinch of salt.

Phillips also dismissed the financial projections for PeopleSoft, arguing that if the combined revenues of PeopleSoft and JD Edwards are taken into consideration, PeopleSoft will actually be looking at a significant decline. The problem for PeopleSoft here is that until Phillips jumped on board the Oracle boat, all of the software vendors cited him as the man on Wall Street that had the inside track on numbers in their industry. So if his assessments were sound then, then...

So what do we know after what seems an awfully long summer. We know that PeopleSoft has merged with JD Edwards. We know that PeopleSoft has laid off an awful lot of people as a result of the merger (although Conway appears to think that the percentage headcount reduction is not a lot). They're cutting costs all over the place, including shutting down the charitable arm of JD Edwards. We know that PeopleSoft stock is standing pretty high on Wall Street.

On the other hand, we don't know how long that share price will hold. If Phillips assessment proves remotely correct, then Wall Street may react unfavourably. We don't know how the Justice Department or the EC will react (although SAP's market dominating position in Europe must surely remove monopoly concerns there at least!). We don't know if Oracle will raise its price and win over the PeopleSoft shareholders that way if and when clearance comes through (although if they really want the company, they're most likely going to be forced into another bid hike).

We also know we're not likely to find out much more until the run up to Christmas as the regulatory approval is unlikely to appear before early December. That would still leave time for Larry Ellison to ruin Conways's Christmas if he puts his mind to it.

My own opinion remains that Oracle will take PeopleSoft - maybe not as smoothly or as quickly as they'd hoped, but they will get it. Conways's best bet lies with the EC or the Justice Department coming down against the bid - it would only take one of them to scupper the whole thing. But if that approval comes through, the calm pragmatism of Phillips looks like more of a winner to me than the tub-thumping of Conway.

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