RealTime IT News

Oracle Argues Takeover Bid Before EU

European regulators put Oracle's $9.4 billion plan to acquire PeopleSoft under the microscope this week, but may delay a decision until the U.S. courts have their say.

The Redwood Shores, Calif.-based software giant Thursday wrapped up its two-day hearing behind closed doors in response to the European Commission (EC) "statement of objections," which Oracle said it received in March 2004.

Specifics of the complaint are being kept under wraps. The EC's final decision is expected to be issued on or before May 11. But sources following the case say the EC would rather have all of the facts in place before issuing its ruling. And that would mean waiting until the U.S. Department of Justice wraps up its court case against Oracle.

The government and seven states are looking to block Oracle's unsolicited bid for rival PeopleSoft. The trial is scheduled to begin on June 7. Lawyers are expected to be back in the courtroom April 16 to settle additional pre-trial motions.

Oracle Director of Corporate Communications Deborah Lilienthal declined to comment on the meeting with the EC or on the company's pending litigation with the DoJ.

Ken Marlin, managing partner of New York-based Marlin & Associates, a mergers and acquisitions investment bank focused on media and technology, told internetnews.com it should come as no surprise that the EC is trying to block the deal.

"First, the U.S. SEC ruling sent them a signal that the U.S. government would not object. Second, if the merger were to go forward, it would combine two US companies and put them in a somewhat better position to compete against a European company... SAP," Marlin said. "We agree that both the US and the EC are taking too narrow a view of the market. We believe Oracle has a shot to win in court."

The government's argument suggests that the number of firms offering a full array of enterprise resource planning (ERP) tools (Human Resource Management or Financial Management Services) is currently limited to three: German-owned SAP , Oracle and PeopleSoft and that a merger between Oracle and PeopleSoft would limit customer choice.

Oracle's defense identifies the software vendor as a competitor in the broader software market facing stiff competition in the mid-tier sector from Microsoft, IBM and others.

But Giga Research Director Paul Hamerman says for Oracle to play the "Microsoft card" is way off base. The Redmond, Wash.-based software giant has already cooperated with the DoJ in support of its case. In a sworn statement filed last month, Microsoft said it has no such plans to enter the same business market as Oracle within the next two years.

"Microsoft Business Solutions [MBS] does not currently have the robust functionality or technical scalability to compete with Oracle, PeopleSoft and SAP in large enterprise applications," Hamerman told internetnews.com. "Also, its next generation of applications -- known as Project Green -- is still a few years away from delivery. MBS continues to be heavily focused on the mid-market, leveraging its indirect sales model, and is less interested in the large enterprise space -- which are sold directly. Oracle's argument, therefore, that Microsoft is a significant potential competitor in high-end applications doesn't have much substance."

In a separate announcement, Oracle said it is now taking bids for its advertising budget as part of its standard annual review. The company has used MediaCom for the last five years, which still may turn into a sixth.

"We value the contributions MediaCom has made over the last five years," Julie Gibbs, Oracle vice president said in a statement. "This is just part of our ongoing practice of reviewing our communications partners to ensure that we have the best resources in place."

Oracle said its annual budget for this media account is approximately $40 - $50 million. The company said it expects to finalize its decision in late May.