Oracle’s Waiting Game

Oracle extended its tender offer for Peoplesoft common stock Friday, giving shareholders of the Pleasanton, Calif.-based enterprise software vendor until September 19 to take advantage of its offer to buy their shares at around 8.5 percent above the street’s price.

It’s the third time the Redwood Shores, Calif.-based software giant has extended the offer to buy shares, and it won’t be the last.

So far, less than eleven percent of PSFT-owners have bit at the $19.50/share Oracle offer.

“I would say it’s a disappointment for [Oracle CEO Larry] Ellison,” Tom Taulli, author of “The Complete M&A Handbook,” told “But it’s not surprising, given the price he is offering appears to be low.”

Taulli, an instructor at the University of southern California’s Marshall School of Business, said that in order to get shareholders to sell, Oracle would have to increase the price. PeopleSoft closed today at $16.59; its 52-week range was from $11.75 to $22.50.

The price for PeopleSoft got around $1 billion higher with its acquisition of business software maker J.D. Edwards , completed July 18. That’s not a problem for Oracle.

“Oracle can borrow a lot of money at a low rate of interest,” Taulli said. “Ellison can wait if he wants to.” Look for the game to go on for as long as a year.

In the meantime, Taulli said, Oracle may go shopping. “There’s this theory that what customers want is a full suite of solutions. Oracle does have some gaps in its product line.”

Word on the street, Taulli said, is that Ellison is looking at content management companies such as Vignette or Interwoven .

Oracle has promised it would continue to “enhance” Peoplesoft offerings, and that it would support Peoplesoft customers using other databases. At the same time, it said it would evaluate what PSFT had in the works and “prioritize” projects.

“If Oracle would increase the bid, that would put lot of pressure on Peoplesoft,” Taulli said. “At this point, it’s a long waiting game.”

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