States’ Case Vs. Oracle Draws Cheers, Jeers

Apparently there are no fence-sitters when it comes to Oracle’s $9.4 billion proposal to acquire PeopleSoft.

The Attorneys General of Connecticut and Ohio filed a motion in federal
District Court in San Francisco late Wednesday to intervene in the antitrust
suit brought forward by the U.S. Justice Department.


The government is
seeking to block the unsolicited bid that it claims reduces the number of
firms offering a full array of enterprise resource planning (ERP) tools
down to two. Currently, German-owned SAP leads the pack with Oracle and
PeopleSoft trailing.

Connecticut and Ohio now join eight other states including Michigan,
which also filed paperwork Wednesday to stand underneath the umbrella of the
DoJ’s case. Connecticut had filed its own suit in state court
when the original deal was announced in June 2003. This is the first time
Ohio has entered into the argument.

The states claim the Oracle takeover threatens loss or damage to the
business or property, as well as the general welfare and economies, of each
state. According to Connecticut Comptroller Nancy Wyman, a takeover would
create an “enormous and expensive upheaval” of the state’s ongoing
conversion of its computer system, known as Core-CT.


The $100 million conversion is based on software purchased from PeopleSoft under a five-year contract signed in 2002. A spokesperson for Ohio State Attorney General Jim
Petro did not disclose what kind of financial damages could be incurred as a
result of the takeover. But Michigan Attorney General Mike Cox said his state’s
taxpayers could be looking at more than $130 million in damages were the
merger to succeed.

Oracle’s has staunchly maintained that its ERP 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.

An Oracle spokesperson was not immediately available for comment on the
addition of Michigan, Connecticut or Ohio, but court documents show that the
Redwood Shores, Calif.-based company “does not oppose this motion.”

On the opposite side of the argument sits the silent majority who are in
favor of Oracle’s acquisition plans, according to the Association for
Competitive Technology. The advocacy group represents nearly 3000 software
developers, systems integrators, IT consulting and training firms, and
e-businesses companies.


ACT President Jonathan Zuck told internetnews.com that his organization is considering filing some amicus briefs in favor of the merger.

“We’re still in the planning stages of how we’re going to respond,” Zuck
said. “We may be looking to find others in participating in the process, but
we don’t know. It’s not on everybody’s radar.”

One issue Zuck said he has is that the DoJ and for that matter many of
the 10 states are hypocritical when it comes to putting Oracle into any
particular category.

“The lawsuit Michigan chose to join today is predicated on a single fact:
Oracle, SAP and PeopleSoft are the only companies in the world providing
accounting and human resources software to large companies and government
agencies. Yet, the state of Michigan itself uses software from a completely
different company than the ‘only three options’ named in the lawsuit,” Zuck
said in a statement.

He also pointed out that the DoJ awarded a massive $24 million contract
for its own accounting software to a company other than ‘the only three that
exist’ in its legal case. Zuck called on both the DoJ and Michigan to
immediately withdraw from the case to avoid further embarrassment.

The trial is scheduled to begin on June 7 in U.S. District Court in San
Francisco. Judge Vaughn R. Walker is expected to hear pre-trial arguments
April 16 on whether the states’ case will continue to piggyback on the
Justice Department’s case.

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