IBM, Microsoft Top Oracle, DoJ Witness Lists

Software executives with IBM and Microsoft are expected to testify for both sides in the U.S. Justice Department’s case against Oracle , according to court papers filed Tuesday.

The DoJ and ten states are seeking to block Oracle’s now $7.7 billion proposal to acquire PeopleSoft by arguing that the merger between two major enterprise software providers would be anti-competitive and limit customers’ choices. Oracle is fighting to thwart the DoJ’s stance.

Both sides submitted their amended lists of 25 people who could be called
to the stand to testify for either side. Marquee names on Oracle’s list
include CEO Larry Ellison, who is expected to justify the unsolicited bid and
a six-hour session with PeopleSoft CEO Craig Conway.

Conway, a former Oracle exec, could testify to a prior proposal to combine Oracle and PeopleSoft applications businesses. He may also be asked talk about the competitive dynamics in the enterprise resource planning (ERP) tools sector. German-owned SAP currently dominates the space, which includes Human Resource Management (HRM) software or Financial Management Services (FMS).

Lawyers with Oracle and the government are keenly interested in
executives with IBM and Microsoft for different reasons. The government has
subpoenaed Nancy Thomas with IBM Global services business consulting
services to testify about the company’s software selection and
implementation services as well as the selection process that customers go
through. The DoJ is also interested in showing off Douglas Burgum, a senior
vice president with Microsoft Business Solutions who knows the Redmond,
Wash.-based firm’s ERP lines as well as its CRM applications.

Oracle is going for the jugular in asking IBM Steve Mills, the senior
vice president and group executive in charge of IBM’s $14 billion software
business to talk about the company’s strategies when it comes to database,
application, integration layer, and stack positioning. Oracle is also
planning on calling Microsoft’s Cindy Bates, who helps run the company’s
Small and Midmarket Solutions & Partners Group. Oracle’s contention is that
it competes on the broader software market facing stiff competition from
Microsoft , IBM and other mid-tier
players.

“The toughest thing for Oracle will be to tell a compelling story
predicting net improvement in competition, consumer choice and consumer
satisfaction if it acquires PeopleSoft,” Rob Christopher Coudert Brothers
Head of Litigation for Northern California told internetnews.com. “At
a minimum, that will require convincing the court that the relevant market
is broadly defined, and that Oracle is competitively disadvantaged due to
economies of scale or other considerations enjoyed by its larger European
rival. That is a difficult task to perform without contradiction when also
arguing, presumably, that existing smaller companies in the market
are viable competitors whose presence assures future innovation and
lower market concentration.”

Oracle’s likely argument that barriers to entry facing other major
companies are quite low is not likely to be persuasive, Christopher said
because the enterprise software market, however defined, is not brand
new, and does suffer from relatively high concentration in just a few
sellers.

“Finally, Oracle must tell the court to disregard completely the DoJ’s
likely evidence about Oracle’s actual plans and intentions in pursuing
PeopleSoft, which is a bit like the Wizard of Oz telling Dorothy to ignore
the man at the microphone behind the curtain,” he said.

The DoJ is expected to capitalize on how Oracle’s takeover plans could
seriously impact not only other IT organizations but government entities as
well. Representatives with the State of North Dakota as well as officials
from Erie County, New York are scheduled to talk about their HRM/FMS system
needs. The government has already subpoenaed representatives from Cox
Communications, Verizon, Pepsi, Nextel, and DaimlerChrysler.

For its part, Christopher said the DoJ’s toughest task will be to justify
preventing a company from becoming a more effective competitor against a
dominant rival.

“Throw in the politically incorrect, but possibly influential distinction
(compared with the Staples/Office Depot situation a couple years back) that
the applicant now is an American company and the dominant rival is European,
and there could be a judicial perception that this move would be net
pro-competitive”

Christopher said the judge may look at the power of threes particularly
as it applies to competitive dynamics in otherwise relatively concentrated
markets.

“I do not expect the court to disrupt that magic here. My money is on the
DoJ,” Christopher said.

Money is something that Oracle is also focused on. Last Friday, the
company revised its tender offer for all of the outstanding shares of
PeopleSoft to $21 per share, or approximately $7.7 billion. Previously,
Oracle was prepared to shell out $26 per share, or $9.4 billion for its
rival. So far, Oracle has reported losing $43.4 million in its pursuit.

In related news, Calif. State Attorney General spokesperson Halley Jordan
told internetnews.com criminal charges were dismissed against former
Gray Davis policy director Kari Dohn. The twelve-count felony criminal
complaint alleged she altered documents relating to the Oracle Enterprise
License Agreement (ELA).

The case stemmed from an investigation of the governor’s staff and a controversial $95 million database contract between Oracle and the
state.

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