Feds set out to sink Oracle’s PeopleSoft bid

Larry Ellison faces his biggest opponent yet: The US federal government.

Last week the Oracle CEO learned that the US Department of Justice would contest his US$9.4 billion hostile bid for PeopleSoft and its enterprise applications. And, true to form, the company did not blink. At least not yet.

It is unusual for an acquisition to be pursued once the government has weighed in against it.

Oracle characterised the government's suit as 'without basis in fact or in law.' PeopleSoft reiterated its plea for Oracle to back off.

Ironically, Ellison now faces the scrutiny once focused on his archrival Microsoft and its chairman, Bill Gates.

Responding to the Justice Department's civil suit, filed Thursday, Oracle extended its PeopleSoft tender offer from March 12 to June 25.

One Oracle partner was unsure what antitrust issues apply. 'There are other big [enterprise application] competitors out there, look at SAP. I think this antitrust case has a lot of flaws,' he said.

But other factors may be at work. 'Never underestimate the amount of politics involved. Larry has been very critical of the Bush administration. They probably feel they owe him nothing,' said a financial analyst who requested anonymity.

Oracle is now between a rock and a hard place, others said. The company, which sees its still-huge core database share under fire, needs to diversify.
'Without PeopleSoft, Oracle will be marginalized. It's in the same position WordPerfect was before Office 97,' said George Brown, president of Database Solutions, a VAR in the US. 'It's staring down the sights of Yukon.' Yukon is the promised next-generation version of Microsoft SQL Server.