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Oracle's Perry Mason Moment
washingtonpost.com Staff Writer Tuesday, June 8, 2004; 9:42 AM
It's a risky legal bet for Oracle, according to the handicapping reported in today's papers. According to The Associated Press, "Oracle views Microsoft's acknowledged interest in SAP as a coup in its case, theorizing that the talks will help prove the software giant wants a bigger piece of the business applications software pie -- a market that has been estimated between $20 billion to $25 billion. But the government could just as easily cite Microsoft's interest in SAP as proof that even the world's biggest software maker lacks the resources to make a dent in the business applications software market on its own, said Chicago antitrust attorney Nate Eimer. 'This (evidence) could backfire on Oracle.'"
The San Francisco Chronicle's coverage echoed Eimer's view with a quote from Thomas Barnett, a senior official in the Justice Department's antitrust division. Barnett, the paper said "dismissed the Microsoft issue as a distraction. He said Microsoft's aborted plan to merge with SAP supports the department's argument that the company has no capability to become a major player in the market and can become one only through a major acquisition. 'It's ultimately not that relevant to the issues in the case,' he said. 'Those talks are dead.'"
Oracle attorney Daniel Wall said "Microsoft began its pursuit of SAP last June, the day after Redwood City, Calif.-based Oracle announced its unsolicited bid for PeopleSoft. He said Microsoft's move showed how quickly the business software market could adjust to new conditions," The Los Angeles Times reported. More from Jim Finn, Oracle's spokesman. "The way they [the Justice Dept.] are defining the market, they might block us from buying PeopleSoft but let Microsoft buy SAP. It's insane."
The Urge to Merge
And maybe Oracle has a strong case to make, as the Times said the merger talks "strongly suggest that Microsoft's ambition is to become the leader in the corporate software market and climb to the top as quickly as possible." The Wall Street Journal said the Microsoft-SAP "talks ... show how slow growth and tight-fisted customers in the business-software sector are forcing rivals to consider joining hands. The talks also could indicate an increased appetite by Microsoft for business combinations beyond its existing partnerships."
The Financial Times noted "the pursuit of such a big merger represents a radical departure for Microsoft and could herald a new phase of consolidation in the fast-maturing technology business. SAP, with a current stock market value of nearly $51bn, is the world's third biggest independent software company, after Microsoft and Oracle. A deal with Microsoft would have threatened the balance of power in the market for selling technology to large companies and governments, where International Business Machines is the dominant force."
No Deal in the End
ARC Advisory Group analyst John Moore told The Seattle Times that "he was taken by surprise" by news of the Microsoft-SAP talks. "'That was a bit of a jolt,' he said. 'SAP is just a very different company in many ways from Microsoft and operates with a very different business model.' SAP offers complex business applications at a very high cost to large Fortune 1000 customers, he said. It has prided itself for avoiding huge, messy acquisitions that would be tough to integrate."
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