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Filter - Cynthia L. Webb
Oracle Seeks Some Rough Justice in Court


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By Cynthia L. Webb Staff Writer
Thursday, June 17, 2004; 9:35 AM

Oracle Corp. is trying to prove to a judge that its hostile takeover bid for rival PeopleSoft won't strangle competition, but lawyers for the Justice Department yesterday trotted out witnesses who told a different story.

"In morning testimony, an information-technology executive for the state of North Dakota said that organizations using PeopleSoft software would be held hostage if Oracle succeeded with its buyout. The reduction in competition would eliminate Oracle's incentive to generate new releases of PeopleSoft software every 18 to 24 months as the company does now, said Curtis Wolfe, North Dakota's chief information officer. 'The vendor has you locked in?' asked U.S. District Judge Vaughn Walker. 'Yes, sir,' Mr. Wolfe answered. 'You're kind of in a captive environment,'" Dow Jones Newswires reported.

Also from Dow Jones: Wolfe said that when the state was looking for software to replace its financial and human resources systems, six vendors bid on the contract. "By the time the bid was awarded, PeopleSoft's price sunk to $21 million and Oracle's was $3 million less. 'I don't believe we would have seen that price competition if we hadn't had that head-to-head competition,' he said."

That kind of testimony proved nothing but beneficial for the Justice Department, which has sued to block Oracle's $7.7 billion bid for PeopleSoft, claiming that it would violate antitrust law. "Mr. Wolfe's testimony provided support for the government's case that the market for financial and human-resources software used by the nation's largest organizations is concentrated in three vendors: Oracle, PeopleSoft and SAP. The loss of one will significantly reduce competition and give Oracle the power to raise prices, the Justice Department says," the article said.

But Bloomberg noted both sides in its coverage: "The government sought to use North Dakota's testimony to convince Judge Walker that allowing Oracle to take over PeopleSoft would give Oracle leverage to raise prices on software that performs some functions for large corporations. Dan Wall, Oracle's trial lawyer, said that North Dakota, with 10,000 employees and 58 departments, was not representative of the 'high function' customers that are at the heart of the government's case."
Dow Jones Newswires via The Wall Street Journal: Oracle Trial Hears Competing Views of Software Market (Subscription required)
Bloomberg via The New York Times: Witness In Oracle Trial Recalls A Bidding War (Registration required)
The San Francisco Chronicle: Witness Decries Oracle In Trial

Meanwhile, PeopleSoft's Phil Wilmington, senior vice president for the Americas, told the court yesterday that it offered discounts of up to 55 percent "whenever it was competing head-to-head with Oracle for new business or when it stood a chance to replace an installed Oracle application," eWeek reported. "The Department of Justice called Wilmington to the stand to highlight the fierce competition that exists between PeopleSoft and Oracle, which along with SAP AG comprise the top three vendors that hold the vast majority of the market share for high end high-end enterprise resource planning software. ... One of DOJ's key arguments in the trial is that enterprise application software buyers will pay substantially higher prices because such heavy discounting will disappear in a market reduced to two major players, Oracle and SAP."
eWeek: PeopleSoft Granted Hefty Discounts To Outsell Oracle

In his testimony, "Wilmington said he rarely faces Lawson Software Inc. or Microsoft especially in deals for contracts at large corporations," Dow Jones reported. "The government claims the acquisition will reduce competition in an already concentrated market and give Oracle the ability to raise prices to the nation's largest organizations. Wilmington's comments offered support for this view of the market."

And on Tuesday, automaker DaimlerChrysler, which uses PeopleSoft software, said in testimony that it "fears an Oracle/PeopleSoft merger could cost it between $50 million and $100 million, a company executive told a federal court on Tuesday," Reuters reported. The testimony "echoed a Nextel Communications executive who testified on Monday that the U.S. cell phone company feared having to spend tens of millions of dollars if PeopleSoft's software was not upgraded after an Oracle/PeopleSoft merger."
Dow Jones Newswires via The Wall Street Journal: PeopleSoft Witness Says Oracle Is Competition In Market (Subscription required)
Reuters via USA Today: Daimler: Oracle-PeopleSoft Deal Could Raise Costs

Match Point, Oracle?

But before you chalk up yesterday as a total win for the Justice Department, Oracle had a witness of its own (one whom the government dropped earlier) who bolstered Oracle's contentions that its bid will not interfere with the competitive marketplace. From CNET's "'It's just a matter of time,' said Christy Bass, a global managing partner at the computer services firm [Accenture], when asked whether Microsoft and Germany's SAP compete." More from the Dow Jones piece: "But she said at present Microsoft sells applications software primarily to small companies. That won't last, Ms. Bass added. 'In a matter of time, you're going to see everything converge,' with little distinction remaining between software for the big-company and little-company markets," the news service said.

"That testimony contradicted the position of U.S. antitrust officials, who argue that those major software firms would command too small a presence in the contested market to challenge Oracle Corp. if it succeeded in its $7.7 billion takeover bid of rival PeopleSoft Inc.," Reuters reported. Bass "said she believed SAP's strong cash position, technical expertise and position as the global leader in business software development made it a tough competitor to Oracle and PeopleSoft."

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