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Oracle Preps For PeopleSoft Proxy War

Despite pending government investigations, Oracle Monday said it remains very firm in its proposal to purchase PeopleSoft for $19.50 per share or about $7.5 billion.

During a conference call designed to combat what it called "conflicting information" about the merger, the Redwood Shores, Calif.-based software giant said it is looking beyond possible government interdiction and preparing a slate of new directors that it hopes will help its chances should a proxy war break out.

"To be clear, we remain committed to acquiring PeopleSoft, there's no merit to the proposition that the deal is dead. Ironically, the people who are saying that have no say in the matter," Oracle vice president Chuck Phillips said. "This deal is in the hands of shareholders and the transaction has been progressing as expected."

A representative for Pleasanton, Calif.-based PeopleSoft was not immediately available for comment. The Internet business software maker, which acquired Denver's J.D. Edwards some months ago to bolster its position in the mid-market, has fought wildly to stay Oracle's menacing overtures with a series of legal filings and some poison pill effects, but Oracle has pressed on, largely undeterred.

The proposal is currently under review by the U.S. Department of Justice (DOJ), which is expected to take at least until January to conclude its preliminary inquiry. The EC said that its initial one-month investigation has shown that the combination of two of the largest competitors in the market merits further analysis because the number of key players would be reduced from three to Oracle and SAP in the applications software markets. The Commission also said it may investigate any potential effects in the relational database market, where Oracle is strongest.

If the DOJ and EU give a green light to the proposal, Oracle executive vice president Safra Catz said the company will suggest a new membership on PeopleSoft's board of directors next month that would give it 55 percent control and favor an Oracle takeover.

"Once we clear the DOJ, we will have an alternate slate up for the proxy battle," she said. "There are a number of different things that could happen then... too many to try and predict an outcome."

One reason Oracle said it feels confident about its chances is because it has been fastidiously educating the DOJ about its rationale for the takeover.

"We spent the last five months compiling our information and believe the case will be well received by the DOJ," Catz said. "We have been very clear with regulators that this is not the telecommunications industry that they are used to reviewing. This is an e-commerce business and in the end there can be little doubt that this will help us compete against SAP and the combination of Oracle and PeopleSoft will put us into the number two position as well as taking on companies such as Lawson, Sage, IBM and new entries such as Microsoft."

Oracle said much of investors' confusion stems from PeopleSoft's recent financial statements, the refusal to meet with Oracle and a recent bylaw amendment.

"We believe PeopleSoft has a revenue recognition problem," Oracle vice president Jeff Henley said. "It's puzzling to me that anyone could say that PeopleSoft is doing well unless you are comparing apples to oranges. Seven quarters of losses is not productive."

Oracle's Phillips also said the company would not "pay just any price" and that it would consider "redirect existing PeopleSoft products" that it feels are irrelevant to its core business.

"In context, we are prepared to take this all the way to the end," Phillips said. "Time is on our side and our against managements."

The plan, announced back on June 6 and revised in July, has been extended several times to accommodate an increase in PeopleSoft stock and possible government interdiction. Oracle's latest tender is scheduled to expire midnight EST on Wednesday, December 31, 2003.

Phillips also reiterated that Oracle is looking at other potential acquisitions to help pad its business offerings and compete more efficiently characterizing PeopleSoft's assets as "not critical to our business."

Phillips declined to state which kinds of companies Oracle has its eyes on, and said this was the first time out of 30 acquisitions in Oracle's history that a company has experienced this kind of resistance from management.