Oracle ended an 18-month battle to acquire one of its biggest rivals and cemented its position as the second-largest business software vendor in the world last month after PeopleSoft’s board of directors approved a takeover bid of US$10.3 billion.

The merger go-ahead came on the same day Oracle

was to face off against PeopleSoft in a U.S. court over a poison pill that would have potentially blocked the takeover. Oracle had initially made a final offer for PeopleSoft of US$24 per share, but the deal approved by the PeopleSoft board is valued at US$26.50. The two firms said they expect to close the deal this month.

Corporate customers of PeopleSoft have been in limbo ever since June 2003, when Oracle made an unsolicited offer for the company only four days after PeopleSoft had agreed to acquire J.D. Edwards for US$1.7 billion. At the time, Oracle said it would “”review”” PeopleSoft’s plan to move its human resource and financial applications into J.D. Edwards’ installed base of mid-market customers, but protracted legal wranglings and corporate shakeups — including the departure of PeopleSoft CEO Craig Conway earlier this year — delayed Oracle’s hostile takeover.

Customers still appeared to be in limbo.

“”Many times we’ve always talked about the same thing: What would it mean to us? I don’t see that there’s anyone who can answer our questions. At this point in time, I’m anxious to see how the new organization is going to unfold. I’m anxious to see what kind of support Oracle is going to bring forth for the three PeopleSoft platforms,”” said Marie Sargent, vice-president of IT at Cambridge Towel Corp. and president, PeopleSoft Eastern Canada User Group.

Gordon Thompson, regional contact for PeopleSoft’s National User Group, shares Sargent’s concerns.

“”I don’t know how they’re going to match up. It looks like there’s two solutions, I guess. I kind of need more direction on where they’re heading with it.””

In a PeopleSoft shareholder vote, close to 61 per cent approved the takeover. Speculation about the future of PeopleSoft’s product line was a hot topic at Oracle’s OpenWorld conference last month, where 25,000 IT managers and database administrators gathered to hear Oracle chief executive Larry Ellison outline his plans for grid computing.

Most Oracle executives refused to provide specific details about how the two firms’ products might evolve, but in a recent press conference, Oracle president Chuck Phillips downplayed any suggestion that corporate enterprises would abandon their PeopleSoft deployments.

“”They’re not going to have knee-jerk reactions and throw out all their stuff just because they don’t like Oracle,”” he said, adding there would be separate development tracks for PeopleSoft/JDE products and Oracle’s E-Business Suite. “”But the E-Business Suite will be the faster track.””

The merger would probably nullify an agreement launched earlier this year between PeopleSoft and one of its closest allies, IBM, to standardize its applications on Big Blue’s middleware platform, while both vendors market the joint solutions. The deal, which called for a joint investment in the initiative of US$1 billion over the next five years, is the most significant enterprise applications alliance in the history of the two companies, covering core components of WebSphere Portal, WebSphere Business Integration, WebSphere Application Server and WebSphere Studio Application Developer. At OpenWorld, however, Oracle unveiled an aggressive middleware strategy of its own, with an Integration Server and revamped Collaboration Suite designed to better compete with IBM.

Oracle’s move to take over PeopleSoft will leave SAP as the only other large vendor of high-end business software competing with Oracle in a number of market segments. SAP executives have suggested that questions of instability among Oracle and PeopleSoft has helped its business, but Phillips denied any fallout from the prolonged merger fight.

“”(SAP’s) market share has been shrinking for the last two-and-a-half years. When you’re in that position, you’ve almost got nowhere to go but up,”” he said. “”A lot of that growth too, if you look at it, comes from within their installed base, with customers changing for an upgrade. There’s not a lot of new growth.””

On the firing line

In a discussion with selected international journalists following his keynote speech at last month’s OpenWorld conference, Ellison suggested SAP won’t be the only vendor on Oracle’s firing line. He said Veritas, for example, continues to make Oracle’s software very expensive to use.

“”(Customers) tell us they can’t do things because (Veritas) is not integrated with Oracle,”” he said. “”If you use their file system, you can’t use (Oracle’s) integrated storage management. It just makes Oracle more difficult to use.””

Ellison also pointed to SAP’s certification of Oracle’s products, including its Real Application Clusters, as proof of its technology leadership. “”When your largest competitor endorses your product, you must have done something pretty interesting,”” he said.

Oracle pledged to continue development on PeopleSoft 9, to enhance J.D. Edwards’ 5 and to create J.D. Edwards 6.

— with files from ITBusiness Staff

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