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Oracle mulls more takeovers

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CIOL Bureau
New Update

Michael Kahn and Spencer Swartz



SAN FRANCISCO: Oracle Corp. Chief Executive, Larry Ellison testified that his company was actively considering three or four other possible takeover targets in addition to its hostile bid for PeopleSoft Inc., which the government is seeking to block.

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Ellison, one of the last witnesses to testify in the month-long trial in federal court in San Francisco, did not name the companies but said all were publicly traded. One was an applications provider, one was involved in "business intelligence" and a third was a software infrastructure, or middleware, provider, he said.

Earlier testimony and evidence submitted at trial had identified seven still-listed companies that Oracle had considered acquiring before it launched its bid for PeopleSoft in June last year, including BEA Systems Inc. and Siebel Systems Inc.

Ellison was not asked to detail how Oracle had narrowed the field, but the testimony from Oracle's combative chief executive underscored the pressure toward consolidation in the business software market and what Oracle sees as the competitive pressures that have given corporate customers more leverage in price negotiations.

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"I believe that every day the competition is getting worse. PeopleSoft, whether they remain or disappear, is not going to affect prices," Ellison said.



The Department of Justice wants to block the proposed $7.7 billion bid on grounds it would limit customer choice and drive up prices in the market for human resource and financial management software catering to large enterprises.

The government has argued that Oracle Corp., PeopleSoft Inc., and market leader SAP AG of Germany are the three main players in the so-called enterprise software market.



Oracle has sought to undercut that claim with testimony from smaller software providers such as Lawson Software, Inc. and outsourcing providers like ADP to bolster its claim that many firms compete for the business of big companies.

THE HUNT FOR ACQUISITIONS



Ellison said he had gone to his board in April last year with the message that the software company had to go on the hunt for acquisitions to grow in a maturing market.



Ellison told a packed federal courtroom that the market for business applications faced stiff competition from niche providers, outsourcing firms like Automatic Data Processing Inc., and new entrants like Microsoft Corp.

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"The moment they enter, prices drop like a rock," Ellison said of his longtime rival, Microsoft.



"Microsoft is coming after us very aggressively. I don't think Microsoft will be able to monopolize the business applications market like they did the browser market, but they are going to be a strong competitor," Ellison said.

Ellison was Oracle's final witnesses in the closely watched trial, in which the software maker is trying to persuade Judge Vaughn Walker to allow the takeover to proceed.



PeopleSoft has charged that Oracle's bid was intended to disrupt its business by creating uncertainty among its customer base. But Ellison insisted on cross-examination by the government that was not the case.

Some PeopleSoft clients have said that they fear that Oracle would force them into costly switch-overs, but Ellison said that Oracle would "take PeopleSoft's products and make improvements for the years to come."

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Earlier testimony and documents also showed that Microsoft had considered buying SAP and weighed taking a minority stake in PeopleSoft to help the company fend off Oracle's hostile takeover bid.



Ellison said Oracle did not want PeopleSoft's technology but rather wanted to acquire its 12,000 customers in order to boost sales and fund development of new products.

Final arguments in the trial are scheduled for July 20 and Walker is expected to issue a ruling soon after that date.

Oracle has projected $1.2 billion in savings from the merged company, including a planned 6,000 job cuts.

(Additional reporting by Daniel Sorid in San Francisco)

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