Gates’ eMail Discussed PeopleSoft Stake

UPDATED: SAN FRANCISCO — Like a pebble thrown into a still pond, Oracle’s hostile bid for PeopleSoft sent ripples through
the boardrooms of its rivals.

Bill Gates, who after learning about the hostile
takeover last June, fired off an e-mail to Microsoft CEO
Steve Ballmer asking to consider taking a financial stake in
Pleasanton, Calif.-based PeopleSoft or acquiring Enterprise Resource
Planning (ERP) software market leader SAP . The e-mail was
revealed during Oracle’s first day of defending itself against the U.S.
Department of Justice’s antitrust claims.

“Thinking about this PeopleSoft bid… made me wonder if we should
approach them and suggest a minority investment to bolster their
independence,” Gates said in his e-mail. As for SAP, Gates’ note said it was
about time Microsoft made a move, “given our view of the need to strengthen
our platform and willingness to use value to do it seems interesting.”

Eventually, Microsoft entertained merger
talks
with SAP to the tune of $65 billion. But Douglas Burgum, vice
president of Microsoft’s Business Solutions, confirmed that the company
dropped the discussions earlier this year and has no plans to renew its
efforts.

The DoJ claims Redwood Shores, Calif.-based Oracle’s acquisition of
PeopleSoft would reduce the number of major enterprise software players to
just two companies — SAP and Oracle. Oracle’s argument is that the
government’s market definition of ERP players is too narrow and must be
widened to include Microsoft and IBM as well as Fidelity and Ceridian. The DoJ subpoenaed Burgum in a bid to show how Microsoft is not a factor in the large enterprise markets.

Microsoft’s interest in PeopleSoft and SAP are key points in Oracle’s
antitrust defense strategy. Despite Microsoft’s
public statements that it would not enter the mid-to-large business sector
for at least two years, Oracle claims that its rival in Redmond has already
made movements into high-end enterprise markets and has customer wins to
show for it.

Oracle released a 29-page white paper to the press Tuesday detailed how
Microsoft’s Great Plains division beat out a bid from PeopleSoft for theme
park owner Six Flags Inc.’s $1 billion business. Oracle also points to
Microsoft’s future development in the markets with its “Project Green.”
Microsoft has said the initiative is an open, service-oriented architecture
(SOA) and a new process-centric design based on getting everything under the
.NET architecture, creating a new generation of component-based business
applications.

Independent of Microsoft’s advances, SAP was also reacting to Oracle’s
hostile takeover plans. Earlier on the stand, Richard Knowles, vice
president of operations SAP America, was asked about his company’s neutral
stance toward Oracle’s takeover plan.

“We are agnostic on the acquisition. This is not our fight. We do not
side with either Oracle or the DoJ,” Knowles said.

But when asked further about how the Waldorf, Germany-owned firm reacted
to the original merger news, Knowles recounted that the company saw the
merger as putting an extra dimension on their bidding contracts, considering
that SAP went head to head with Oracle and PeopleSoft on a regular basis.

“We anticipate the same level of or greater amount of competitiveness,”
he said. “It is about winning that relationship with the client. It’s nice
to know with whom we are competing against, but that doesn’t affect the way
we [structure a competitive] discount.”

Knowles also pointed out that SAP had also added Microsoft to its short
list of companies it considered its closest rivals when competing for bids
from companies that made under $1.5 billion.

Mike Dominy, Director of Enterprise Services at research firm Yankee
Group, said the battle for IT dominance within the enterprise and eventually
beyond the four walls of the enterprise is well underway.

“Oracle’s long-term strategy is reflective of the consolidating market
for IT used within large and medium enterprises,” Dominy told
internetnews.com. “Surviving the shake-out requires having a large
customer base that provides recurring maintenance revenue and the ability to
sell additional applications and technologies — often called composite
applications (applications that improve information flow and coordination
between the enterprise and its network of business partners) into that
enterprise customer base.”

Steve Swasey, director of PeopleSoft’s corporate public relations, said the company has claimed all along that the merger is not good for its customers. “Oracle’s claim that it will continue to support our development in PeopleSoft or even J.D. Edwards’ software is only for about 10 years,” he told internetnews.com. “What does that cover? Just bug fixes?”

Oracle is scheduled to continue its defense Thursday with testimony
expected from Retail.In.Genius CEO Ken Harris. Fidelity Vice President
Michael Sternklar and Bank of America executive Brian Mearns are also slated to appear.

Despite its best efforts to pry away from the DoJ’s anti-trust claims,
Oracle’s attempt to take over PeopleSoft still faces many hurdles, including
the shareholder rights “poison pill,” PeopleSoft’s Customer Assurance
Program, and a potential antitrust challenge from the European Union.

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