Oracle's Wish Comes True
Friday, September 10, 2004; 10:06 AM
The Justice Department had sued to block Oracle's proposed takeover, but the federal government's case got slammed in the new ruling. "U.S. District Court Judge Vaughn R. Walker in San Francisco ... faulted the Justice Department for defining too narrowly the market for high-end human resources and payroll software and said there would be enough remaining rivals after a merger to assure healthy competition. Walker's decision increases the pressure on PeopleSoft to negotiate directly with Oracle," The Washington Post wrote in its synopsis of yesterday's ruling. "Walker's decision, following a month-long trial earlier this summer, was a stinging -- and rare -- defeat for government antitrust regulators. ... The government failed to prove that large businesses can turn to only three suppliers -- Oracle, PeopleSoft and [German company] SAP -- for business applications software, he found. Rather, he said, other rivals, including Microsoft and technology-outsourcing firms, could constrain anticompetitive actions by Oracle," the Wall Street Journal reported.
USA Today: Oracle Wins Right to Pursue Rival
The San Jose Mercury News: Ruling Lets Oracle Pursue PeopleSoft (Registration required)
The Washington Post: Judge Clears Oracle Bid for Rival (Registration required)
The Wall Street Journal: Court Says Oracle Can Pursue Bid for PeopleSoft in Antitrust Ruling (Subscription required)
Bloomberg gave some perspective on how Oracle would fare if its merger plans go through. "The purchase would eliminate Oracle's closest competitor and vault the company to number two in the world from number three among providers of business applications software," the wire service said. Meanwhile, the ruling could prove to be a boon for other technology companies shopping around for mergers. "In sweeping aside antitrust objections raised by the Justice Department," the Wall Street Journal reported, Walker's ruling "could serve as a trigger for a long-anticipated consolidation in the $170 billion business software market. After Oracle set its sights on PeopleSoft in June 2003, rivals such as Microsoft Corp., SAP AG and [IBM] Corp. considered mergers of their own."
Bloomberg via the Boston Globe: Oracle Bid Gets Green Light
And from the Financial Times: "Though the U.S. government's case was based on traditional antitrust analysis, the theory has been largely untested in court when it comes to the technology industry, said David Balto, an antitrust lawyer at Robins Kaplan Miller & Ciresi. The judge's ruling that the antitrust regulators had not met the basic market-definition test opens the way to other potential deals in the software industry, he added."
USA Today: Oracle's Win Could Mean More Tech Mergers in Future
The Financial Times: Court Rules in Favor of Oracle Over Hostile Bid
The ruling certainly isn't expected to cool the bad blood between Oracle and PeopleSoft. Recall that PeopleSoft chief executive Craig Conway, a former Oracle employee, and Oracle's head honcho Larry Ellison have made a sport out of trading barbs over the hostile takeover bid. PeopleSoft has been fighting to stay out of the clutches of Oracle. But now Ellison has scored a significant match point and it could be difficult for PeopleSoft to avoid Oracle's advances. USA Today reported that Ellison and Oracle Chairman Jeff Henley "wasted no time in firing off a letter to PeopleSoft's board, requesting a meeting to hammer out a deal, potentially the largest tech merger since Hewlett-Packard and Compaq Computer in 2002. PeopleSoft has rejected four bids from Oracle during [the] relentless 15-month pursuit. PeopleSoft says it will review the 'implications' of the ruling. The company is seeking damages of more than $1 billion in a separate lawsuit against Oracle."
The Mercury News said: "In a statement, PeopleSoft showed no immediate signs of backing down from a fight that the company recently said is beginning to drag down its business. After the court decision, the company said its board was meeting to review the ruling and decide on its next course of action. PeopleSoft's board is likely to face increased pressure from shareholders to negotiate with Oracle. Investors sent PeopleSoft's share price soaring in after-hours trading in anticipation that the deal is more likely to happen."
The San Francisco Chronicle, in one of the hokier lead-ins to coverage, wrote: "Larry fought the law and Larry won." "'It's a historic loss for the Justice Department,' said Gregory Taxin, chief executive officer of San Francisco's Glass, Lewis & Co., which advises institutional investors on proxy votes. 'Rarely have companies challenged the judgment of the federal government on antitrust matters and even more rarely have they won.'"
The San Francisco Chronicle: News Analysis: Antitrust Case Verdict Is Vindication for Ellison