PALO ALTO, California: Investor skepticism about the seriousness of Oracle's $5.1 billion bid for its smaller rival has dominated the early days of its high-profile road show intended to win Wall Street backing for the acquisition. Oracle, which had aimed to take the offensive with an ad campaign attacking PeopleSoft's management and performance, instead found itself facing hostile questions from fund managers who challenged the logic of its bid.

Some investors holding PeopleSoft shares said Oracle would have to raise its $16-per-share cash offer to at least $20 to get back in the game after PeopleSoft took steps to speed a friendly deal to buy J D Edwards & Co.

PeopleSoft's board has rejected Oracle's bid as a "low-ball" offer intended to disrupt its planned merger, which would create a company slightly ahead of Oracle in the market for business application software. Without a stronger bid from Oracle, some investors said they had no leverage to force PeopleSoft management to reconsider its stance.

"If they put something with a '2' in front on the table, we will absolutely raise enough hell so PeopleSoft will talk to Oracle," said a manager of a money market fund holding a large stake in PeopleSoft. The manager asked not to be named.

Oracle executives, who were pitching their proposed bid to major East Coast institutional investors, were confronted earlier in the day by one frustrated PeopleSoft shareholder. The man, who was identified as a representative of New York hedge fund Highbridge Capital Corp., called Oracle's offer price "a bullshit bid" during a Webcast presentation.

"You're wasting our time... You're not going to win here. If you make a real bid, then we'll go to the board," the man said in a recording obtained by Reuters. A representative for Highbridge Capital could not be immediately reached for comment.

An Oracle company spokeswoman said an archive of the presentation had not been posted to Oracle's Web site due to "technical difficulties". During the exchange, Oracle Executive Vice President Chuck Phillips and Chief Financial Officer Jeff Henley defended the company's offer as fair and said it would not be raised.

Some of the investor skepticism surrounding Oracle's bid stems from the company's own record of having walked away from mooted acquisitions of software Gupta Corp. in 1994 and Apple Computer Inc. in 1997, when that company was struggling.

On Monday, PeopleSoft put additional pressure on Oracle by changing the terms of its deal with J.D. Edwards. PeopleSoft, which had first proposed an all-stock deal, now is attempting to buy J.D. Edwards shares for cash and stock. That move would allow PeopleSoft to take control of J.D. Edwards without seeking shareholder approval from either company.

Zach Shafran, manager of the $1.8 billion Waddell & Reed Advisors Science and Technology mutual fund, which holds roughly 1.9 million PeopleSoft shares, said he has been discouraged by PeopleSoft's response to the Oracle bid. "I am extremely disappointed that PeopleSoft management and the board of directors appears to have rejected the Oracle proposal out of hand. They have an obligation to all shareholders to give full and fair consideration to the proposal," Shafran said.

Said the fund manager who had asked that his name not be used: "It seems both sides are desperately in need of adult supervision. Ultimately, the shareholders will decide here."

© Reuters