PeopleSoft's Knightly Quest

Oracle may be breathing fire down its neck with an ongoing hostile takeover effort, but PeopleSoft is trying to withstand the siege and stay independent. The business software company has struck a pact with IBM to woo customers and bolster its business, although there's plenty of debate over whether Big Blue will pull off a dramatic rescue.

The IBM deal is "an attempt to show that [PeopleSoft] is moving forward aggressively despite the turmoil created by Oracle's $7.7-billion hostile takeover bid," the New York Times said. PeopleSoft is banking on the IBM deal to also do wonders for customer relations.

"PeopleSoft's chief executive, Craig Conway, told more than 11,000 corporate customers gathered for its annual user convention that the deal with IBM would help PeopleSoft customers adapt to changing technology. The deal, which has been in the works for several months, calls for a combined investment by the two companies of at least $1 billion over the next five years," the Times said. "Since Oracle began its takeover effort in June 2003, Mr. Conway has said that the move was causing some customers to consider not buying PeopleSoft products, a situation that the company estimates has cost it more than $1 billion in lost revenue. The IBM deal seemed intended to let customers know that PeopleSoft was moving ahead in spite of all this."
• The New York Times: PeopleSoft, Unfazed, Announces 5-Year Pact With IBM (Registration required)

Despite a recent ruling by a federal judge that scuttled the Justice Department's attempt to block Oracle, PeopleSoft is continuing to thumb its nose at its unwanted suitor. At the company's convention, Conway said the ruling "does not mean PeopleSoft will be acquired by Oracle," the San Jose Mercury News reported. "Conway, a former Oracle executive, tried to reassure a convention hall packed with customers and PeopleSoft employees that the takeover was not final, could still be appealed by the U.S. Justice Department and had yet to be ruled on by European Union antitrust regulators," Reuters said. Company leader Conway is also playing the role of martyr to a tee (get ready to break out the small violins). From the Times: "He told customers that the last 15 months had been 'a bad dream,' but that PeopleSoft was determined to fight off Oracle. The struggle, he said, 'has stretched our resources and challenged our values, but we didn't give up and we're not going to give up.'"

The Los Angeles Times had one of the sillier unattributed quotes about PeopleSoft's wishes, since PeopleSoft has made no bones about its discontent with being pursued by Oracle. "PeopleSoft hasn't publicly responded to Redwood City, Calif.-based Oracle's request for talks. ... And not much more has been happening in private: A person close to Pleasanton, Calif.-based PeopleSoft said, 'PeopleSoft is not for sale,'" the paper reported. That's been obvious since last year.
• The San Jose Mercury News: Takeover Bid Clouds PeopleSoft Meeting (Registration required)
• The Los Angeles Times: PeopleSoft CEO Maintains Stance (Registration required)

The Merc explained why the clock is ticking on PeopleSoft: "As PeopleSoft's conference kicks off this week, the company finds itself at a critical turning point in its battle to evade Oracle's clutches. With Oracle gaining momentum after winning a key legal ruling this month, Conway must now find a way to reassure shareholders and customers that PeopleSoft can -- and should – win."

However, it doesn't look like IBM is going to be PeopleSoft's knight in shining armor. The company "brushed off suggestions that the closer ties might eventually lead to a friendly takeover bid for the embattled software concern," the Financial Times reported. Reuters said, "Conway and IBM Senior Vice President Steve Mills refused to comment on whether the alliance was a stepping stone toward IBM possibly buying PeopleSoft. Some analysts have speculated that such a 'white knight' offer for PeopleSoft could not be ruled out despite Oracle's takeover effort."

More on this theme, from the Los Angeles Times: "The public terms of the alliance were vague, analysts said. But IBM had felt threatened by the prospect of a combined Oracle and PeopleSoft, according to documents submitted in the antitrust trial. Some PeopleSoft customers said they hoped Tuesday's deal could lead to the computer giant emerging as a white knight bidding for PeopleSoft ownership." Some analysts added to the speculation game too. "There's been a lot of speculation that there is a white knight out there and this will certainly add to that speculation," American Technology Research analyst Donovan Gow told the San Francisco Chronicle. "He said IBM 'has the size and scope to absorb something like PeopleSoft. They also want to keep Oracle from gaining power.'"

But some don't think partnering with IBM will be akin to building a fortress to keep Oracle away from PeopleSoft. "For PeopleSoft, this is an important vote of confidence from their most important partner," said AMR Research analyst Jim Shepherd, as quoted by CNET's News.com. "But it doesn't solve the underlying Oracle problem at all."
• Reuters: PeopleSoft Defies Oracle Bid, Pursues IBM
• The Financial Times: PeopleSoft Joins Forces With IBM
• The San Francisco Chronicle: Is Big Blue a White Knight?
• CNET's News.com: Could IBM-PeopleSoft Deal Stave Off Oracle?

White knight or not, some customers were happy with Conway's tough stance against Oracle. Alan Vannice, application manager for Adams County, Colo., spoke to eWeek: "'I don't know what the eventual outcome of the Oracle bid will be,' Vannice said. But Conway's keynote address 'set my mind at ease that he is going to fight it as hard as he can.'"