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Oracle may lower its bid for rival

WILMINGTON, Del. — Oracle Corp. CEO Larry Ellison testified Friday that the business software maker is leaning toward lowering its $7.7 billion bid for rival PeopleSoft Inc., a shift that might create another snag in the takeover tug-of-war.

Taking the witness stand in a trial contesting PeopleSoft's antitakeover defenses, the mercurial Ellison indicated that Oracle isn't certain PeopleSoft is worth the $21-per-share price currently on the table.

Oracle, based in Redwood Shores, Calif., has had "more discussions about lowering the price than raising the price," Ellison said during roughly 6 1/2 hours of testimony.

His comments came just three days after PeopleSoft director Steven Goldby delivered testimony signaling willingness to end a 16-month fight against the hostile takeover bid and negotiate a sale if Oracle sweetens the offer.

Oracle director Joseph Grundfest confirmed the company is mulling a revised bid during his testimony Thursday, but didn't indicate whether it would be higher or lower.

Investors have been anticipating a higher bid since PeopleSoft fired Craig Conway as CEO last week. Conway had stridently opposed Oracle's overtures.

The prospect that Oracle might instead lower its offer rattled investors. After Ellison's remarks were first reported, PeopleSoft's shares plunged by as much as $1.28 before rebounding to close at $21.95, down 58 cents, on the Nasdaq Stock Market.

The recovery reflected a realization that Ellison's testimony might be a strategic move in a corporate chess game as Oracle tries to minimize its takeover expense while PeopleSoft's board maneuvers for a higher price, said American Technology Research analyst Donovan Gow.

Berkeley, Calif., software industry consultant Joshua Greenbaum agreed, predicting it's only a matter of time before Oracle and PeopleSoft set aside their differences to negotiate the final sale price.

"I can't even imagine a scenario where this deal doesn't get done," Greenbaum said. "There is just too much at stake. Oracle really needs this acquisition, and PeopleSoft really needs a partner to survive."

In his Friday testimony, Ellison acknowledged that "acquiring PeopleSoft is very, very important for Oracle's future."

Since its initial offer of $16 per share, Oracle has revised its bid three times. The last change came in late May when Oracle dropped the all-cash bid from $26 per share to the current offer, contending that PeopleSoft has become less valuable as its sales have sagged and the company's management made new financial promises to employees and customers that could make a takeover more expensive.

PeopleSoft, based in Pleasanton, Calif., contends a surprisingly strong performance in its latest quarter proves the company is worth more than $21 per share.

Oracle is trying to convince a Delaware Chancery Court to remove two antitakeover defenses that PeopleSoft has employed to stop Oracle's bid. PeopleSoft is fighting to preserve them. The trial is expected to last another week.