Facebook Twitter

PeopleSoft rejects bidder

SHARE PeopleSoft rejects bidder

SAN FRANCISCO — Business software maker PeopleSoft Inc. rejected rival Oracle Corp.'s $5.1 billion hostile takeover bid Thursday, but the snub didn't repel its unwelcome suitor.

After announcing quarterly results that exceeded analyst expectations, Oracle Chairman Larry Ellison vowed to continue to stalk PeopleSoft, holding firm at the current $16-per-share offer.

Ellison told analysts in a conference call Thursday that he believes investors eventually will favor Oracle's all-cash bid instead of sticking with PeopleSoft's plan to buy another software maker, J.D. Edwards & Co., for $1.8 billion in stock.

The comments may dampen hopes among investors who have been betting Oracle would sweeten its bid.

PeopleSoft's shares fell 25 cents to close at $17.37 on the Nasdaq Stock Market Thursday, then shed another 7 cents in extended trading. Oracle's shares gained 6 cents to close at $13.33 on the Nasdaq, then added 17 cents in extended trading.

Before Oracle's hostile offer, PeopleSoft's shares stood at $15.11, a 17 percent drop for the year. At the same point, Oracle's shares had surged by 24 percent for the year while the tech-driven Nasdaq composite index had increased 23 percent.

"We don't think PeopleSoft management has done a very good job for shareholders," Ellison said.

Denver-based J.D. Edwards waded into the fray Thursday by filing a Colorado state lawsuit against Oracle seeking $1.7 billion, plus unspecified punitive damages, for trying to interfere with its PeopleSoft deal. The suit also names Ellison and Chuck Phillips, a former software securities analyst Oracle recently hired.

Oracle, based in Redwood Shores, Calif., said the suit is meritless.

The unanimous rejection of PeopleSoft's board was no surprise since company CEO Craig Conway recoiled from Oracle's unsolicited $16-per-share offer almost as soon as it was made last week.

Conway, a former Oracle executive, reiterated his contempt for the bid Thursday, describing the offer as an attempt "to enrich Oracle at the expense of PeopleSoft's stockholders, customers and employees."

If it acquires Pleasanton-based PeopleSoft, Oracle has said it would boost profits by cutting thousands of positions and phasing out PeopleSoft's software, which helps companies run their personnel departments and other behind-the-scenes operations.

Ellison accused Conway of trying to kill the bid even before PeopleSoft's board had a chance to consider it, contending the CEO is more interested in protecting his job than doing the right thing for shareholders.

In an interview Thursday, Conway said he and the other six members of PeopleSoft's board gave the offer "careful and due consideration."

Oracle contends it is in far better shape than PeopleSoft and J.D. Edwards, making its proposed takeover a safer option for PeopleSoft shareholders.

In its quarter ended May 31, Oracle said it earned $858 million, or 16 cents per share, a 31 percent improvement from net income of $656 million, or 12 cents per share, at the same time last year. The results exceeded the consensus estimate of 14 cents per share among analysts polled by Thomson First Call.

Revenue totaled $2.83 billion, up from $2.77 billion a year earlier. Oracle reported its quarterly sales of business applications software totaled $246.2 million, an uptick from $245.7 million last year. In its last quarter ended in March, PeopleSoft's sales of new software licenses plunged 39 percent.

PeopleSoft's board said it concluded that a takeover by Oracle would raise serious antitrust concerns in the United States and Europe, creating "a significant likelihood" that government regulators wouldn't approve the deal.

A union between PeopleSoft and Oracle would create the world's second largest maker of business software applications behind German-based SAP. Oracle doesn't believe the merger would be opposed by antitrust regulators because the business applications software is "highly fragmented."

PeopleSoft's takeover of J.D. Edwards & Co. also would create the second largest vendor of business applications software.

Conway said PeopleSoft's planned merger wouldn't cause antitrust problems because J.D. Edwards sells most of its software to mid-sized companies.

In contrast, big companies depend on three vendors — Oracle, PeopleSoft and SAP — for business applications software.

Because Oracle's proposed takeover would eliminate PeopleSoft from the mix, only two suppliers would be left to sell business applications software to big companies — something Conway believes regulators wouldn't tolerate.

But Ellison said Conway wasn't worried about antitrust issues a year ago when the PeopleSoft CEO approached him about a combination of the two companies' business applications line.

The only difference between the offers, Ellison said, came down to control. Last year, Conway envisioned PeopleSoft running the combined businesses.

Oracle intends to meet with major investors to drum up support for its bid, said Jeff Henley, the company's chief financial officer. "The goal is to get out and educate the market on the choices they have," Henley said.