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PeopleSoft: Oracle E-mails Point to Hostile Intent

Two weeks after expanding its lawsuit against Oracle , PeopleSoft Wednesday yielded evidence to support its complaints by unveiling internal e-mails from Oracle employees that suggest they were aware of just how the company's actions were hurting PeopleSoft.

The revelation is the latest in a pernicious takeover battle between two enterprise application rivals. Redwood Shores, Calif.'s, Oracle is trying to purchase PeopleSoft against its will for $7.3 billion. In turn, Pleasanton, Calif.'s PeopleSoft has been doing everything in its power to stymie Oracle's hostile overtures.

PeopleSoft's lawsuit amendment, filed in a California court August 12, had originally been sealed, but PeopleSoft chose to unseal the amended complaint, highlighting what would appear to be damning e-mails from Oracle in which employees discussed how the hostile takeover attempt could damage PeopleSoft's business.

PeopleSoft alleged Oracle knew exactly how its takeover attempt was affecting the target company. Some of the e-mails portray the Oracle authors in gloating tones.

"We've certainly wounded PSFT," one employee said, according to the PeopleSoft complaint. "Even if we don't end up closing the deal, this is going to take PSFT time to recover. And, of course, our corporate image of being aggressive, brash, and marching to the tune of a different drummer has been reinforced. I dunno about you guys, but today I was very proud to be an Oracle employee!"

PeopleSoft also made a bid to prove Oracle tried to sway analysts to dissuade customers from buying PeopleSoft software.

"Obvious customer advice such as wait on purchases until this is over should be highlighted," PeopleSoft quoted Peggy O'Neill, vice president of analyst relations, as writing to one analyst.

There are also e-mails from Oracle executive vice president Safra Catz suggesting it would not continue support for PeopleSoft products, something Oracle has steadfastly said it would do to assuage any customer fears that they might be locked out of their license agreements.

Oracle was prepared for the maneuver and downplayed PeopleSoft's claim as a "diversionary tactic." Oracle spokesperson Jim Finn said in a statement that PeopleSoft was simply taking the e-mails out of context. In fact, he said, Oracle would have preferred the court documents be made public from the outset to show that the company has nothing to hide and that it meant no ill will.

Finn said Catz' comments in the PeopleSoft filing are especially twisted out of their original context.

"The e-mail..." Finn said, "...is a good example of PeopleSoft's attempt to take a single sentence fragment from a lengthy document out of context and try to turn it into something salacious." Rather, he said, Catz' e-mail focuses on the opportunity for Oracle and the positive impact of the proposed transaction to Oracle's earnings per share. "It does not talk about harm to PeopleSoft."

What the experts say

Why the "he-said, she-said"-style jousting over e-mails? Pure strategy on PeopleSoft's part, says one attorney.

PeopleSoft's intent in unsealing such documents is to demonstrate motives proving antitrust on the part of Oracle -- something Coudert Brothers attorney Robert Christopher anticipated in June.

"If I'm the DOJ or FTC, I'm going to ask Oracle for internal documents," Christopher told internetnews.com in a June 27 interview. "I want to know how they perceive the market and how just how broad it is. I might ask 'What is truly the relevant product market? Does Oracle see this as a move to consolidate a market?' And I would expect Oracle is prepared to deal with that."

The thinking, Christopher said then, is that if PeopleSoft can demonstrate hostile intent, the Department of Justice would be forced to take PeopleSoft's claims of unfair trade practices seriously.

Christopher reiterated his thoughts Wednesday, and said the quotes PeopleSoft provided to the public as evidence could be damning to Oracle's case as well before the DOJ.

"Sure, these e-mails should be taken in context of what was written, but what about the overall context in what is going on?" Christopher said. "I read the quote "Time is on our side'... That particular point is consistent with what PeopleSoft is claiming Oracle is trying to do -- that they are happy to hurt PeopleSoft even though they want to acquire it. Everybody knows that what businesses hate most is uncertainty and that is what Oracle is doing to PeopleSoft because uncertainty hurts the core of their business."

As for the almost jubilant quote from an Oracle employee claiming it hurt PeopleSoft, Christopher said its shows Oracle knows they are dangerous.

"In a way, what that's saying is that 'we know that we're wolves'" Christopher said. "But wolves kill. There's truth there, and it may work for PeopleSoft in their legal claims of anticompetition. What I haven't seen is e-mails in which Oracle is expressing great concern about their ability to survive and compete effectively with SAP if they do not acquire PeopleSoft. That could help them in the eyes of the DOJ because it is perfectly legitimate."

But Ken Marlin, managing partner of Marlin & Associates, a mergers and acquisitions investment bank focused on media and tech, called PeopleSoft's attention to Oracle's internal e-mails a desperation move.

"It's the red herring, it's the magician's trick," Marlin told internetnews.com. "They're diverting attention from the real issues. Not only are they taking it out of context, if you read what PeopleSoft is whining about, it's just not that big a deal."

For example, Marlin cited a quote from Oracle executive vice president Chuck Phillips, who said a customers concern that migrating from one software platform to another is never easy or cost-free was absolutely true. PeopleSoft had pointed it out as evidence that the migration would be disruptive.

"It's true," Marlin said. "Take the simplest thing you can think of -- like creating a document in [Microsoft] Word and sending it to a computer that will read it in WordPerfect, or vice versa. There is a utility to do that and it never comes out perfect and that is a very, very simple application."

Moreover, Marlin argued that Oracle should migrate PeopleSoft software to one integrate product suite and struck down the notion that Oracle is hurting customers.

"One point that PeopleSoft's management is ignoring, is that it's not in Oracle's interest to make enemies of PeopleSoft customers. It's completely in Oracle's self-interest to keep them happy and to give them an easy migration path. To imply that Oracle's 'secret, nefarious' plan is to spend billions of dollars to get PeopleSoft customers to go to SAP is crazy."

Meanwhile, the DOJ continues to probe Oracle's takeover bid for antitrust issues. Oracle's own lawsuit against PeopleSoft, asking that the court force PeopleSoft to drop its takeover defenses and negotiate, is still pending in Delaware. A hearing is scheduled in mid-September.