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PeopleSoft Urges No Action on Oracle Bid

June 2003

PeopleSoft Urges No Action on Oracle Bid

Associated Press
Fri, Jun. 20, 2003

SAN FRANCISCO - Oracle Corp. is putting more money into its pursuit of rival software maker PeopleSoft Inc., boosting its bid to $6.3 billion in a push to overcome PeopleSoft management's opposition to a deal.

PeopleSoft responded by urging its shareholders to take no action on the latest Oracle bid, and on Thursday, announced that it was moving ahead with its own planned acquisition of J.D. Edwards & Co.

Oracle chief financial officer Jeff Henley said management decided to increase its cash offer by 22 percent to $19.50 a share from $16 a share after meetings this week with PeopleSoft's largest shareholders. Henley emphasized that Oracle was "absolutely committed" to the takeover attempt.

"We've received input from a broad range of investors," Henley said in a telephone conference call with analysts and reporters on Wednesday. "Our revised price represents a great value for PeopleSoft shareholders."

Craig Conway, the otherwise outspoken CEO of PeopleSoft, did not comment directly on Oracle's bid in a keynote speech Thursday at the CeBIT technology trade show in New York.

He did defend the acquisition of J.D. Edwards, saying its strength in selling to manufacturers complements PeopleSoft's popularity in the service sector.

"It's a very compelling acquisition. It caught the interest of Wall Street, it caught the interest of industry analysts. It definitely caught the interest of competitors," he said, drawing chuckles from the audience.

Oracle's revised offer is the latest salvo in increasingly bitter competition in the business software niche, which builds computer programs to run giant databases so corporate clients can store customers' credit card and other personal information, process transactions online, or compile personnel data on internal Web sites.

Germany's SAP AG dominates the market, followed by Oracle, PeopleSoft and about 3,000 smaller vendors. Oracle's new offer represents a 13.7 percent premium on PeopleSoft's closing share price Tuesday. Oracle's original offer represented a premium of about 6 percent.

PeopleSoft said its board of directors would make a recommendation on the latest Oracle offer "in due course," and reiterated that the original hostile offer "dramatically undervalues the company based on its financial performance, continued market leadership and significant future opportunities."

Meanwhile, Pleasanton-based PeopleSoft moved ahead Thursday with its acquisition of J.D. Edwards, inviting stockholders in the Denver-based company to turn in their stock for cash or PeopleSoft shares, or a combination of both. The $1.75 billion exchange offer, open until July 17, does not require shareholder approval - simply the tendering of shares by J.D. Edwards investors.

Oracle, based in Redwood Shores, launched its takeover bid four days after the friendly PeopleSoft-J.D. Edwards deal was announced, offering $5.1 billion to buy PeopleSoft without J.D. Edwards.

Shares in PeopleSoft fell 32 cents to close at $17.61 on the Nasdaq Stock Market while shares of Oracle were down 8 cents to close at $13.34.

As PeopleSoft shareholders prepare to vote on the Oracle bid July 7, the company is turning to some of its largest customers for help, running newspaper ads Wednesday in which Toyota Motor and Nextel Communications praise PeopleSoft. Chicago-based Distributors and Manufacturers' User Group, which represents 300 manufacturing companies, issued a statement urging PeopleSoft's board of directors to reject Oracle's bid.

Ken Marlin, managing director at New York-based media and technology investment bank Marlin & Associates, said Oracle's latest offer is "quite fair."

"This reaffirms what (Oracle chairman) Larry Ellison has been saying for quite some time - that his offer is serious," Marlin said. "This offer absolutely makes sense. He had to start his bidding someplace, and from the beginning he was willing to negotiate. The PeopleSoft board of directors now needs to negotiate in good faith."

Oracle and PeopleSoft have long had an acrimonious relationship, marked by sniping between Ellison and PeopleSoft chief executive Craig Conway, who worked under Ellison from 1985 to 1993.

PeopleSoft filed a lawsuit alleging the bid is a "sham" offer designed to destroy the company. J.D. Edwards also sued Oracle, seeking $1.7 billion, plus unspecified punitive damages, for trying to interfere with its PeopleSoft deal.

Oracle said Wednesday it plans to sue PeopleSoft, its board of directors and J.D. Edwards in Delaware in response to "their collective efforts to eliminate PeopleSoft shareholders' ability to accept Oracle's tender offer."

It's unclear how 5,100 PeopleSoft customers would fare in a takeover. Big clients such as government agencies and Fortune 500 corporations spend hundreds of millions of dollars to install proprietary business software; switching is often a costly morass that consumes organizations' information technology departments for months.

Connecticut Gov. John G. Rowland and state Attorney General Richard Blumenthal filed a lawsuit against Oracle on Wednesday to scuttle the takeover.

The Republican governor said Connecticut has spent $80 million to upgrade its human resources and payroll systems using PeopleSoft software. If Oracle takes over and discontinues the PeopleSoft product line, it would cost the state tens of millions of dollars, he said.

Henley emphasized in the telephone conference that Oracle would not eliminate the PeopleSoft brand, but would not offer PeopleSoft products to new clients.

© 2003 AP Wire and wire service sources. All Rights Reserved.

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