RealTime IT News

IBM, Microsoft Top Oracle, DoJ Witness Lists

Software executives with IBM and Microsoft are expected to testify for both sides in the U.S. Justice Department's case against Oracle , according to court papers filed Tuesday.

The DoJ and ten states are seeking to block Oracle's now $7.7 billion proposal to acquire PeopleSoft by arguing that the merger between two major enterprise software providers would be anti-competitive and limit customers' choices. Oracle is fighting to thwart the DoJ's stance.

Both sides submitted their amended lists of 25 people who could be called to the stand to testify for either side. Marquee names on Oracle's list include CEO Larry Ellison, who is expected to justify the unsolicited bid and a six-hour session with PeopleSoft CEO Craig Conway.

Conway, a former Oracle exec, could testify to a prior proposal to combine Oracle and PeopleSoft applications businesses. He may also be asked talk about the competitive dynamics in the enterprise resource planning (ERP) tools sector. German-owned SAP currently dominates the space, which includes Human Resource Management (HRM) software or Financial Management Services (FMS).

Lawyers with Oracle and the government are keenly interested in executives with IBM and Microsoft for different reasons. The government has subpoenaed Nancy Thomas with IBM Global services business consulting services to testify about the company's software selection and implementation services as well as the selection process that customers go through. The DoJ is also interested in showing off Douglas Burgum, a senior vice president with Microsoft Business Solutions who knows the Redmond, Wash.-based firm's ERP lines as well as its CRM applications.

Oracle is going for the jugular in asking IBM Steve Mills, the senior vice president and group executive in charge of IBM's $14 billion software business to talk about the company's strategies when it comes to database, application, integration layer, and stack positioning. Oracle is also planning on calling Microsoft's Cindy Bates, who helps run the company's Small and Midmarket Solutions & Partners Group. Oracle's contention is that it competes on the broader software market facing stiff competition from Microsoft , IBM and other mid-tier players.

"The toughest thing for Oracle will be to tell a compelling story predicting net improvement in competition, consumer choice and consumer satisfaction if it acquires PeopleSoft," Rob Christopher Coudert Brothers Head of Litigation for Northern California told internetnews.com. "At a minimum, that will require convincing the court that the relevant market is broadly defined, and that Oracle is competitively disadvantaged due to economies of scale or other considerations enjoyed by its larger European rival. That is a difficult task to perform without contradiction when also arguing, presumably, that existing smaller companies in the market are viable competitors whose presence assures future innovation and lower market concentration."

Oracle's likely argument that barriers to entry facing other major companies are quite low is not likely to be persuasive, Christopher said because the enterprise software market, however defined, is not brand new, and does suffer from relatively high concentration in just a few sellers.

"Finally, Oracle must tell the court to disregard completely the DoJ's likely evidence about Oracle's actual plans and intentions in pursuing PeopleSoft, which is a bit like the Wizard of Oz telling Dorothy to ignore the man at the microphone behind the curtain," he said.

The DoJ is expected to capitalize on how Oracle's takeover plans could seriously impact not only other IT organizations but government entities as well. Representatives with the State of North Dakota as well as officials from Erie County, New York are scheduled to talk about their HRM/FMS system needs. The government has already subpoenaed representatives from Cox Communications, Verizon, Pepsi, Nextel, and DaimlerChrysler.

For its part, Christopher said the DoJ's toughest task will be to justify preventing a company from becoming a more effective competitor against a dominant rival.

"Throw in the politically incorrect, but possibly influential distinction (compared with the Staples/Office Depot situation a couple years back) that the applicant now is an American company and the dominant rival is European, and there could be a judicial perception that this move would be net pro-competitive"

Christopher said the judge may look at the power of threes particularly as it applies to competitive dynamics in otherwise relatively concentrated markets.

"I do not expect the court to disrupt that magic here. My money is on the DoJ," Christopher said.

Money is something that Oracle is also focused on. Last Friday, the company revised its tender offer for all of the outstanding shares of PeopleSoft to $21 per share, or approximately $7.7 billion. Previously, Oracle was prepared to shell out $26 per share, or $9.4 billion for its rival. So far, Oracle has reported losing $43.4 million in its pursuit.

In related news, Calif. State Attorney General spokesperson Halley Jordan told internetnews.com criminal charges were dismissed against former Gray Davis policy director Kari Dohn. The twelve-count felony criminal complaint alleged she altered documents relating to the Oracle Enterprise License Agreement (ELA).

The case stemmed from an investigation of the governor's staff and a controversial $95 million database contract between Oracle and the state.