Microsoft, IBM to enter biz software mkt

Spencer Swartz

SAN FRANCISCO: Microsoft Corp and IBM both plan to move into the market to supply software to run key business functions, a government witness in the antitrust trial against Oracle said in a San Francisco federal court.

The surprise testimony appeared to support Oracle Corp.'s argument that the market for such software is competitive enough to accommodate its proposed hostile takeover of PeopleSoft Inc.

U.S. antitrust officials have sued to block the $7.7 billion acquisition because they believe it would hurt competition and drive up prices for software that helps companies manage their human resources and finances.

The argument against the merger hinges on the government's argument that the barrier to new entrants to the market would be prohibitively high.

But a technology consultant called to testify in support of the government's case said he believed Microsoft, which has made it a strategic priority to supply software to smaller and medium-sized businesses, would eventually move into the high end of the market.

"It's pretty clear they're coming," said Perry Keating, senior vice-president at consultant group BearingPoint, referring to Microsoft Corp., the world's largest software maker.

"They almost did it on Monday," he said, referring to news announced earlier this week by Microsoft that it considered -- but later abandoned -- the idea of buying Germany's SAP, the business software leader.

Keating said Siebel Systems Inc. could also become a player in the human resource and financial software market. The company is already dominant in customer relationship management software.

An IBM spokesman was not immediately available for comment.

Microsoft disputed Keating's claim. "We're very pleased with our progress in providing solutions for the small- and mid-sized solutions market," said Microsoft spokesman Jim Desler. "That's where our focus remains."

TOUGH LINE ON CONFIDENTIALITY

In a second apparent setback to the government's case, U.S. District Court Judge Vaughn Walker said, the Justice Department would also have to meet a high standard to keep information provided by corporate witnesses under seal.

Witnesses for the U.S. Justice Department, such as PeopleSoft and IBM, have fought Oracle's efforts to make public internal corporate documents that antitrust regulators are using to make their case against Oracle.

"It appears it's gotten out of hand.... I am going to take a tougher line," Walker said.

Walker later pressed a government witness to spell out the difference between the market for more expensive software systems and the so-called mid-market, another key plank in the government's case against the Oracle merger.

Walker, who will decide the antitrust case, said at the outset of the trial that he would rule based largely on publicly available evidence.

Analysts have also said the strength of the government's case could be undercut if cooperative witnesses, such as Microsoft, are forced to reveal sensitive information.

Former J.D. Edwards Chief Financial Officer Richard Allen testified Thursday that the software maker, which has since merged with PeopleSoft, was unable to break into the high-end enterprise market despite spending about $1 billion and devoting almost a decade to the effort.

His testimony is a key plank in the government's argument that new companies would face difficulty competing against a combined Oracle-PeopleSoft and could therefore have little impact on software pricing.

©Reuters