RealTime IT News

A Big Night for Oracle and PeopleSoft

Should we stand and fight or take the money and run?

Such is the plight of PeopleSoft's institutional shareholders who have been asked to vote by midnight tonight in favor of or against Oracle's "final offer" of $24 per share (an estimated $9.2 billion) to merge the companies.

If more than 50 percent of PeopleSoft's roughly 375 million shares are tendered in Oracle's favor, analysts suggest PeopleSoft will need to work out with Oracle how to make the deal attractive to PeopleSoft customers.

"In particular, there must be a coherent plan regarding how PeopleSoft customers will be supported going forward," Yankee Group Enterprise Services analyst Mike Dominy said.

But the deadline isn't really a deadline at all. It's a line in the sand, according to Joshua Greenbaum, a principal analyst with Enterprise Applications Consulting.

"No matter how many shares are tendered, we're still going to see posturing, pressure, recriminations, and the like," Greenbaum told internetnews.com. "If Oracle doesn't get the shares it wants by the 19th, then my guess is they'll wait until Q1 and buy it for a price that could be substantially lower than the current offer.

"If they do get enough shares, the PeopleSoft board will either have to resign en masse or sit tight until the shareholder meeting this spring when a new board will be voted in. Either way, it's still far from over."

Already some of the major shareholders have chosen sides. California Employees' Retirement System (CalPERS) confirmed Friday that it is tendering its 1.5 million shares in favor of Oracle's plan. Ohio's state pension fund told Reuters it has also tendered its 527,790 shares in favor of Oracle.

The two largest investors in PeopleSoft have also chimed in. Los Angeles-based Capital Guardian Trust told Oracle executives that it was in favor of the deal. Private Capital out of Naples, Florida filed papers with government regulators supporting PeopleSoft's position.

The non-binding straw poll is no guarantee the two companies will merge. A Delaware Chancery court is still considering whether PeopleSoft must remove its so-called "poison pill" and customer rebate provisions, both anti-takeover measures. If the battle for control of PeopleSoft stretches into next year, PeopleSoft still has a $1 billion lawsuit against Oracle pending. The case is expected to start in January.

Ultimately, if Oracle is successful in its bid, the software industry will witness a period of turmoil over the next six to 12 months that it has not seen before, according to Philip Fersht, integration and infrastructure analyst with The Yankee Group.

"On the whole, this is great news for many vendors and systems integrators who will find opportunities for their products and services with regards to integration, new business application development etc.," Fersht told internetnews.com.

"Oracle will feel they have a great chance to level the playing field with SAP in the business apps space, but similarly, SAP will seize the chance to convert disaffected PeopleSoft customers to their applications," he continued. "However, who's mentioned Microsoft? Surely this is their chance to make their entry into the high-end corporate business applications arena. Expect some reaction from Seattle, as this is the missing link in their armory. Their ability to develop ecosystems around their products has been their biggest strength, and the time is rife for more high-end Microsoft business applications."

Oracle said it would publish the results after 1:00 a.m. EST, Nov. 20.