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Microsoft, another thorn in Oracle's path

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CIOL Bureau
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WASHINGTON: Microsoft Corp. has given U.S. antitrust authorities a sworn statement that could help the government block Oracle Corp.'s bid to buy PeopleSoft Inc., attorneys familiar with the case said.

Microsoft's statement to the Justice Department undercuts one of Oracle's central arguments in defense of the $9.4 billion deal -- that the two companies will soon face competition from Microsoft for a crucial part of their business.

The department filed suit Feb. 27 to block Oracle's bid for PeopleSoft, saying it would be anti-competitive. Oracle has dismissed such concerns as unwarranted, citing among other things an imminent competitive threat from Microsoft, the world's largest software company.



But in the statement given to investigators, a representative of Microsoft says the company has no plans during the next two years to move into the market at issue -- software sold to large business customers to manage things like finances, human resources and sales forces, the sources said.



"Microsoft has been deposed and said they will not enter this space (soon)," one source said.



Representatives of Microsoft and the Justice Department both declined to comment on what the company has told investigators. A spokeswoman for Oracle declined to comment.



Microsoft's role in the Oracle-PeopleSoft case is the latest twist in a long struggle between two bitter rivals.



Oracle was one of a group of technology companies that lobbied hard for the Justice Department to bring its landmark antitrust case against Microsoft and is now urging European regulators to crack down on company.



A federal appeals court ultimately found Microsoft liable for using illegal tactics to maintain its monopoly in personal computer operating systems. It reached a settlement with the Justice Department in November of 2001.



The European Commission is in the final stages of another antitrust investigation and is expected to decide within a matter of weeks what sanctions, if any, to impose.



Now it is Oracle that could get tripped up in court.



In a brief filed in court on Friday, Oracle's lawyers disputed the Justice Department's contention that a merger would cut from three to two the number of competitors in the market.



Oracle accused the department of "gerrymandering" the market to make it look as if it includes only three companies when in fact, there are many smaller software companies that can also compete for large customers.



Whether or not Redmond, Washington-based Microsoft will be competing in the market cited by the government also will be an important question during the upcoming trial.



"To the extent that's a market and Microsoft would find it difficult to enter relatively quickly, that would be very compelling testimony for the government," said Robert Doyle, an antitrust lawyer with the firm Sheppard, Mullin, Richter & Hampton LLP.



Under antitrust guidelines, would-be competitors are considered by antitrust authorities, but usually only if they plan to enter the market within two years.



In its lawsuit against Oracle, the department's antitrust division said the entry of new competitors "will not be timely, likely, or sufficient to undo the competitive harm that will likely result from the proposed merger."



But last week, one of Oracle's two co-presidents noted that Microsoft had already invested $2 billion to expand into the market for business applications market. Microsoft has acquired two companies already in the business.



In the brief they filed on Friday, Oracle's lawyers said the deal "will position Oracle to compete effectively with Microsoft Corp., which is aggressively expanding its position in the enterprise applications software."



A preliminary conference before the presiding judge in the case, U.S. District Judge Vaughn Walker, is scheduled for Wednesday.

(C) Reuters

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