PeopleSoft’s Standing Debated at Trial

SAN FRANCISCO — PeopleSoft’s place in the global IT marketplace is key in the U.S. Department of Justice case against Oracle , which opened today.

Based on opening statements, either the Pleasanton, Calif.-based software vendor is the only significant competition to Oracle and SAP, or it is a flawed player in the growing number of companies designing all-encompassing enterprise resource planning (ERP) software suites.

“PeopleSoft is not the end-all be-all of competition,” Oracle lawyer Dan Wall argued during his opening statement. “This is not a traditional antitrust case. As we discussed in the technical tutorial, the [software] stack is what makes companies like Oracle, IBM, Microsoft and SAP compete and PeopleSoft does not have a software stack.”

Oracle argues that the government’s definition of ERP is too narrow and must be widened to include Microsoft and IBM as well as Fidelity and Ceridian, which are also blurring the lines of ERP.

But Justice Department lead attorney Claude Scott pointed to numerous instances where customers like greeting card maker Hallmark, soft drink maker Pepsi, and telecom carrier Verizon had only considered Oracle and PeopleSoft as choices when considering ERP tools such as Human Resource Management (HRM) or Financial Management Services (FMS) applications.

The DoJ is joined by 10 states seeking to block Oracle’s unsolicited plans to acquire PeopleSoft in the name of preserving competition.

“If Oracle is not stopped, head-to-head competition in procurement and other areas will be reduced to just two players: Oracle and SAP,” he said. “If you take one of those competitors off the table — PeopleSoft in this case — then Oracle has a better advantage of pricing against real competition.”

Scott also highlighted Oracle’s practice of undercutting PeopleSoft’s sales tactics to “lowball the price to nowhere.”

District Court Judge Vaughn R. Walker called the issue “good old fashioned competition.”

Scott then presented taped depositions of Oracle CEO Larry Ellison and company chairman and CFO Jeff Henley describing the importance of acquiring PeopleSoft.

Ellison suggested that it was not critical that Oracle purchase its Silicon Valley rival, pointing to the company’s positive annual sales. “We march toward that scale every year,” Ellison said.

Henley discounted PeopleSoft’s acquisition in relationship to Oracle’s competition against IBM.

“This is not a big deal for us against IBM. While we do compete with them in the database, this is a different kind of acquisition,” Henley said.

Oracle’s Wall countered that the ERP sector is broader than the DoJ’s definition, revealing Microsoft and SAP discussed a merger of their own until a couple of months ago. Microsoft confirmed that it initiated preliminary discussions with SAP late last year to explore the possibility of merger. A few months ago, Microsoft said it killed the discussions because it would be too complex to pull off and there would be several integration issues. In its statement, Microsoft said there are no intentions to resume these talks.

Whatever deficiencies the company may have in its product portfolio, PeopleSoft’s financial value has been diminished. Last month, Oracle shaved its original $9.4 billion proposal down to its current $7.7 billion bid.

In related news, members of the Software & Information Industry
Association (SIAA) issued a statement Friday in support of Oracle’s bid for
PeopleSoft. The consortium, which includes Microsoft, IBM and Oracle in its
ranks, suggests the DoJ’s argument is overly broad.

The trial is expected to last between four and six weeks.

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