Oracle/DoJ Trial Goes to the Judge

SAN FRANCISCO — The fate of Oracle’s quest for
PeopleSoft is now in the hands of a federal judge.

District Judge Vaughn Walker heard closing statements Tuesday as part of
the U.S. Department of Justice’s antitrust lawsuit to block Oracle’s $7.7
billion unsolicited bid — but not before chiding each side for making the
process confusing.

“Why don’t these people speak English in this case?” Judge Walker said in
reference to the jargon discussed by dozens of witnesses, present in
hundreds of court filings and permeating thousands of documents of evidence
submitted in the four-week trial. The veteran of antitrust trials frequently
interrupted both sides during the 3 1/2 hour proceedings to clarify final

The government spent four weeks trying to prove that the deal would limit
choices to just Oracle and SAP AG and create a monopoly in
the enterprise resource planning (ERP) market.

“The merger would end fierce head-to-head competition that has brought
consumers lower prices and better products,” DoJ lead attorney Claude Scott.
“Whether it’s a worldwide market or a U.S. market, there is a set of
customers who will no longer have that competition [between Oracle and

Judge Walker’s retort: “How can this be anything but a global market?”
pointing out that software from Oracle, PeopleSoft, and SAP work just as
well in the U.S. as it does anywhere else on the planet.

During the trial, Oracle’s lawyers called several witnesses including CEO
Larry Ellison to argue that the government’s ERP definition is too narrow
and must be widened to include Microsoft and IBM, as well as Fidelity and

“The government wants us to focus on a tiny corner of this world. That’s
not the world Oracle lives in,” Oracle lead attorney Dan Wall said.

“What is the justification [for this merger] except to obtain market
power?” Judge Walker asked.

In a surprise move, PeopleSoft CEO Craig Conway attended the court
proceedings. Conway was originally called as a witness for Oracle’s case but
never took the stand. When asked about his feelings on the litigation, the
former Oracle exec said he hoped for “an expeditious decision.”

“I was tired of the litigation a long time ago,” Conway declared. “I
think the case has been about harm to the customers and to the industry.”

The judge said he will now review the testimony. His decision is not
expected until at least until next month.

Changing the Court of Opinion

While the odds were stacked in favor of the DoJ at the beginning of the
case, analysts have recently been siding with Oracle.

“I think there is a greater chance that Oracle will prevail in the U.S.
case than I have ever thought possible – but I think it’s still a bit below
50/50. There is no chance the EU will permit the deal to go through,”
Melanie Hollands, president of Koala Capital, a hedge fund that focuses on
technology stocks, said.

Mike Dominy, Yankee Group director of enterprise services, said if Oracle
is successful in court, they must convince investors that they have a solid
plan for integrating PeopleSoft.

“They must also make it financially attractive to those investors,”
Dominy told “Assuming Oracle does this well,
shareholders — especially institutional shareholders — will pressure
PeopleSoft to eliminate the poison pill.

Clearing the deal with the European Union will also be a challenge for
Oracle. Historically, deals that have been approved in the U.S. have been
derailed by concerns raised by the EU.

“One thing is clear, the big are getting bigger and market continues to
consolidate,” Dominy said. “Financial results from the largest tech players
including IBM and SAP demonstrate how important it is to be a large player
in the market. Enterprises are not shy about working with SAP or Oracle.”

Despite how the judge in the case decides, Oracle will still be spending time in
court this year. Starting in November, the company will be defending itself
as part of PeopleSoft’s civil trial that aims to prove that Oracle’s
acquisition plans did nothing but hurt PeopleSoft’s business.

“I think PeopleSoft’s decision to stop the guarantee did have a negative
impact on revenues in the latest quarter,” Hollands said. “Obviously
business didn’t completely dry up but on the margin people sat on their
hands waiting to see what happens next. If that were all that was bugging
people that would be great but there was weakness in the call center
business generally (the common thread between Siebel and PeopleSoft).
Enterprise software companies are only easy to trade in a bubble. They will
be tough this cycle because we are in a weak demand cycle and because the
industry is consolidating – that’s a combo that makes it tough to make

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