Ellison Rounds Up Oracle’s Defense

SAN FRANCISCO — Oracle CEO Larry Ellison took the stand in federal court today to defend his company’s plan to merge with PeopleSoft .

The co-founder of the software giant discussed his role in the current $7.7
billion bid to take over the assets and customer contracts of his company’s Pleasanton, Calif.-based rival.

“We reviewed our positions in the application business and thought that we had never done a large merger before and did a combined analysis of what would happen,” Ellison said. Consolidation was happening. HP had acquired Compaq, and, in looking at it, Oracle had to consider an acquisition strategy that it never had to do before, Ellison continued.

Wearing an uncharacteristic suit with a tie, the executive also said that the ideal situation would be acquiring PeopleSoft over a company like JD Edwards because of its larger customer base and its geographical proximity to Redwood Shores, Calif.-based Oracle.

When asked why Oracle did not just develop its own software to better compete in the marketplace, Ellison point that his world was the world of heavy competition and drew a comparison to the historic battle over Web browsers.

“Netscape did that [to compete with Microsoft]. They went out of business,” he quipped. In general, Ellison was jovial about his testimony and even got lost in talking about how “best of breed is dead except at dogs shows.”

“You can stop me at any time,” Ellison asked the judge.

This is the fourth time that Oracle has tried to merge with PeopleSoft. The latest round of conversations between the two companies proved unsuccessful.

“The only way that he [PeopleSoft CEO and former Oracle executive Craig Conway] would agree to the merger would be if he ran the merged companies. I tried
to convince Craig that we could do better. We had no choice but to bypass management and take the acquisition to the shareholders,” Ellison said.

Ellison said Oracle was still considering three or four other acquisitions of unnamed public companies including one that specialized in business intelligence software, a pure software application company and a middleware infrastructure company.

In earlier videotaped testimony, Ellison recounted some of the rationale to acquire not only PeopleSoft but as many as eight different acquisition targets, including Siebel and Lawson, which approached Ellison separately with their own acquisition proposals and J.D. Edwards (acquired by PeopleSoft).

The DoJ and 11 states are asking District Judge Vaughn Walker to block Oracle’s acquisition of PeopleSoft on the basis that it reduces the number to just two companies — SAP and Oracle — that supply Enterprise Resource Planning (ERP) software designed to help a company run its critical business functions.

DoJ lead attorney Claude Scott hammered at Ellison’s strategy to knock out the competition, suggesting that without PeopleSoft around, there would be no competition and asked if Ellison felt that Oracle would benefit from the transaction even if it did not come to fruition.

“From my point of view there are no benefits if we don’t get PeopleSoft,” Ellison said. “We will have wasted a tremendous amount of money and time. It would be a colossal mistake.”

Deputy Assistant Attorney General Thomas Barnett said he was pleased with the government’s case.

“It doesn’t matter who instigated the merger talks. This is the merger of two out of the three largest high-level software providers for enterprise and it is anticompetitive.

Oracle defense attorney Dan Wall said he felt good about his case and commented that the government’s stance was very limiting and that they only spoke with Oracle executives that Oracle’s defense team had called to the stand.

Ellison’s testimony wraps up a four-week trial that uncovered plans by Microsoft to acquire SAP or PeopleSoft. The trial could wrap up Thursday pending Oracle’s final witness and a rebuttal witness called by the DoJ.

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