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PeopleSoft Sues Over Oracle's Takeover Bid

Enterprise application vendor PeopleSoft , moving to fend off a hostile takeover bid from database giant Oracle , filed a lawsuit Friday that charges "unfair business practices, trade libel," and "tortious interference" with PeopleSoft's customer relationships.

The complaint characterized Oracle's $5.1 billion cash bid for the company as a "sham tender offer aimed at destroying PeopleSoft's business."

The complaint, filed in Alameda County Superior Court in California, came one day after mid-market application vendor J.D. Edwards filed two complaints against Oracle charging it with interfering with its proposed $1.7 billion merger with PeopleSoft, which was announced one week prior to the Oracle offer.

PeopleSoft's complaint is the latest tactic in an intensifying battle among Oracle, J.D. Edwards and PeopleSoft that was joined after Oracle surprised the industry on June 6th with an unsolicited $5.1 billion cash bid for PeopleSoft. Earlier in the week, the board voted unanimously to recommend that shareholders reject Oracle's tender offer of $16 per share.

In an industry where hostile bids are rare, the events have generated a barrage of reaction from analysts and other rival software companies whose own market positions and strategy could hinge on the Oracle-PeopleSoft-J.D. Edwards outcome.

PeopleSoft's complaint said Oracle's true intent in making the $16 per share tender is "to undercut PeopleSoft's business operations by disparaging PeopleSoft's products, services, and future prospects, undermine PeopleSoft's viability by creating uncertainty and doubt in the minds of PeopleSoft's customers and prospective customers, and interfere with PeopleSoft's plan to merge with J. D. Edwards and Company."

PeopleSoft also accused Oracle of "misrepresentations" in various press releases, conference calls, and other communications about the proposed merger, which it alleged are "part of a scheme to freeze customer purchase decisions, and to adversely affect PeopleSoft's end-of-quarter sales."

In a statement late Friday, Oracle spokesman Jim Finn said, "PeopleSoft seems to have revived its on-again, off-again litigation strategy. This matter must be decided by PeopleSoft shareholders and not by frivolous litigation."

On Friday, PeopleSoft's President and CEO Craig Conway stepped up the rancor, saying that PeopleSoft would continue moving forward with its merger plans with J.D. Edwards, "despite Oracle's unlawful efforts to destroy competition."

Also on Friday PeopleSoft's board of directors voted to approve a pay package of $1 million for Conway, about double his salary, if Oracle succeeds in its takeover plan.

In its own press release, Oracle labeled PeopleSoft's latest actions as "Entrenchment Tactics." Oracle's Finn said: "As for PeopleSoft's cryptic reference to its secret 'discussions' with J.D. Edwards, any action by the PeopleSoft board to take the vote away from PeopleSoft shareholders and to further entrench themselves would only compound their abuse of fiduciary duty."

David Alschuler, an analyst with technology research firm Aberdeen Group, noted in a recent research report that the Oracle offer would "unleash many forces, regardless of its ultimate denouement" in what he called a "high stakes chess game involving nearly every major enterprise application vendor."

Alschuler wrote that "every customer of the companies that become involved in these transitions needs to be alert to the impact of this market consolidation on future support and enhancement of their current application portfolio."

Shares of PeopleSoft closed Friday at $16.92, down about 45 cents from the previous day's trading session. Oracle's shares closed at $13.48, up 15 cents from Thursday when it released earnings that met expectations. J.D. Edwards' stock price was down by 32 cents Friday to close at $13.04 during the regular trading session.