Oracle Argues Takeover Bid Before EU

European regulators put Oracle’s $9.4 billion plan to acquire
PeopleSoft under the microscope this week, but may delay a decision until
the U.S. courts have their say.

The Redwood Shores, Calif.-based software giant Thursday wrapped up its
two-day hearing behind closed doors in response to the European Commission
(EC) “statement of objections,” which Oracle said it received in March 2004.

Specifics of the complaint are being kept under wraps. The EC’s final
decision is expected to be issued on or before May 11. But sources following
the case say the EC would rather have all of the facts in place before
issuing its ruling. And that would mean waiting until the U.S. Department of
Justice wraps up its court case against Oracle.

The government and seven states are looking to block Oracle’s unsolicited
bid for rival PeopleSoft. The trial is scheduled to
begin on June 7. Lawyers are expected to be back in the courtroom April 16
to settle additional pre-trial motions.

Oracle Director of Corporate Communications Deborah Lilienthal declined
to comment on the meeting with the EC or on the company’s pending litigation
with the DoJ.

Ken Marlin, managing partner of New York-based Marlin & Associates, a mergers and acquisitions investment bank focused on media and technology, told it should come as no surprise that the EC is trying
to block the deal.

“First, the U.S. SEC ruling sent them a signal that the U.S. government
would not object. Second, if the merger were to go forward, it would combine
two US companies and put them in a somewhat better position to compete
against a European company… SAP,” Marlin said. “We agree that both the US
and the EC are taking too narrow a view of the market. We believe Oracle
has a shot to win in court.”

The government’s argument suggests that the number of firms offering a
full array of enterprise resource planning (ERP) tools (Human Resource
Management or Financial Management Services) is currently limited to three:
German-owned SAP , Oracle and PeopleSoft and that a merger
between Oracle and PeopleSoft would limit customer choice.

Oracle’s defense identifies the software vendor as a competitor in the broader
software market facing stiff competition in the mid-tier sector from
Microsoft, IBM and others.

But Giga Research Director Paul Hamerman says for Oracle to play the
“Microsoft card” is way off base. The Redmond, Wash.-based software giant
has already cooperated with the DoJ in support of its case. In a sworn statement filed last
month, Microsoft said it has no such plans to enter the same business market
as Oracle within the next two years.

“Microsoft Business Solutions [MBS] does not currently have the robust
functionality or technical scalability to compete with Oracle, PeopleSoft
and SAP in large enterprise applications,” Hamerman told “Also, its next generation of applications — known
as Project Green — is still a few years away from delivery. MBS continues
to be heavily focused on the mid-market, leveraging its indirect sales
model, and is less interested in the large enterprise space — which are
sold directly. Oracle’s argument, therefore, that Microsoft is a significant
potential competitor in high-end applications doesn’t have much substance.”

In a separate announcement, Oracle said it is now taking bids for its
advertising budget as part of its standard annual review. The company has
used MediaCom for the last five years, which still may turn into a sixth.

“We value the contributions MediaCom has made over the last five years,”
Julie Gibbs, Oracle vice president said in a statement. “This is just part
of our ongoing practice of reviewing our communications partners to ensure
that we have the best resources in place.”

Oracle said its annual budget for this media account is approximately
$40 – $50 million. The company said it expects to finalize its decision in
late May.

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