Craig Conway, the president and CEO of business software maker PeopleSoft, the target of a hostile takeover by Larry Ellison of Oracle, is shown in a photo at his company's headquarters, Wednesday, June 12, 2003, in Pleasanton, Calif. (AP Photo/Dino Vournas)
08:25 AM EST June 13, 2003
The Associated Press
SAN FRANCISCOBusiness software maker PeopleSoft Inc. has spurned Oracle Corp.'s $5.1 billion hostile takeover, but it might be unable to escape its unwelcome suitor unless it can close sales with skittish customers during the next two weeks.
Even after PeopleSoft's board unanimously rejected Oracle's offer Thursday, Oracle Chairman Larry Ellison vowed to continue stalking PeopleSoft, holding firm at the current $16-per-share offer.
"We don't think PeopleSoft management has done a very good job for shareholders," Ellison said after announcing Oracle's earnings beat analyst expectations in the quarter ending in May.
Ellison predicted investors eventually will favor Oracle's all-cash bid instead of sticking with PeopleSoft's plan to buy another software maker, J.D. Edwards & Co., for $1.8 billion in stock.
At first blush, Ellison's logic doesn't seem to make sense given PeopleSoft's shareholders have little incentive to sell their stock to Oracle right now.
PeopleSoft's shares, which have been above $16 since Ellison made his surprise offer last week, closed Thursday at $17.37 on the Nasdaq Stock Market Thursday.
Ellison appears to be hoping customer anxieties triggered by his bid will dampen PeopleSoft's sales as the company wraps up the final two weeks of its current quarter - the period when most software deals get done.
If PeopleSoft's sales suffer, the company's earnings could fall below the consensus estimate of 11 cents per share among analysts polled by Thomson First Call. If that happens, PeopleSoft's stock could plunge below $16, said analyst Patrick Walravens of JMP Securities.
"He is betting that PeopleSoft's quarter won't be very pretty and suddenly $16 per share won't look so bad," Walravens said. "I think he might be right because none of the PeopleSoft and J.D. Edwards customers that I have been talking with want to buy software right now."
Denver-based J.D. Edwards entered the fray Thursday by filing a Colorado state lawsuit against Oracle seeking $1.7 billion, plus unspecified punitive damages, for trying to interfere with its PeopleSoft deal. The suit also names Ellison and Chuck Phillips, a former software securities analyst Oracle hired recently.
Oracle, based in Redwood Shores, Calif., called the suit meritless.
The unanimous rejection of PeopleSoft's board was no surprise since company CEO Craig Conway recoiled from Oracle's unsolicited offer almost as soon as he heard it.
Conway, a former Oracle executive, reiterated his contempt for the bid Thursday, describing the offer as an attempt "to enrich Oracle at the expense of PeopleSoft's stockholders, customers and employees."
If it acquires Pleasanton-based PeopleSoft, Oracle has said it would boost profits by cutting thousands of jobs and phasing out PeopleSoft's software, which helps companies run their personnel departments and other behind-the-scenes operations.
Ellison accused Conway of trying to kill the bid even before PeopleSoft's board had a chance to consider it, contending CEO is more interested in protecting his job than doing the right thing for shareholders.
In an interview Thursday, Conway said he and the other six members of PeopleSoft's board gave the offer "careful and due consideration."
PeopleSoft's board said it concluded that a takeover by Oracle would raise serious antitrust concerns in the United States and Europe, creating "a significant likelihood" that government regulators wouldn't approve the deal.
A union between PeopleSoft and Oracle would create the world's second largest maker of business software applications behind German-based SAP. Oracle doesn't believe the merger would be opposed by antitrust regulators because the business applications software is "highly fragmented."
PeopleSoft's takeover of J.D. Edwards & Co. also would create the second largest vendor of business applications software.
Conway said PeopleSoft's planned merger wouldn't cause antitrust problems because J.D. Edwards sells most of its software to mid-sized companies.
In contrast, big companies depend on three vendors - Oracle, PeopleSoft and SAP - for business applications software.
Because Oracle's proposed takeover would eliminate PeopleSoft from the mix, only two suppliers would be left to sell business applications software to big companies - something Conway believes regulators wouldn't tolerate.
But Ellison said Conway wasn't worried about antitrust issues a year ago when the PeopleSoft CEO approached him about a combination of the two companies' business applications line.
The only difference between the offers, Ellison said, came down to control. Last year, Conway envisioned Peoplesoft running the combined businesses.
Oracle plans to meet with major PeopleSoft shareholders to explain why it believes its bid represents a better alternative to the J.D. Edwards merger. Executives will be able to brag about improved profits in the presentations.
In the final quarter of its fiscal year, Oracle said it earned $858 million, or 16 cents per share, a 31 percent increase from net income of $656 million, or 12 cents per share, at the same time last year. The results exceeded the consensus estimate of 14 cents per share, according to First Call.
Revenue totaled $2.83 billion, up from $2.77 billion a year earlier. Oracle reported its quarterly sales of business applications software totaled $246.2 million, an uptick from $245.7 million last year. In its last quarter ended in March, Peoplesoft's sales of new software licenses plunged 39 percent.
---
On the Net:
https://www.oracle.com
https://www.oracle.com
https://www.peoplesoft.com
https://www.peoplesoft.com
|