Oracle bid sees added opposition

Elinor Mills Abreu

SAN FRANCISCO: Oracle Corp.'s bid to acquire PeopleSoft Inc. faced a new hurdle, when Michigan said it will join a lawsuit to block the deal, but that legal challenge also ran into a problem from shareholder advocates.

Michigan Attorney General Mike Cox said he will join the U.S. government and seven other states in a lawsuit to bar the database software provider's $9.4 billion bid to buy its rival.

Meanwhile, the American Shareholders Association called on the U.S. Department of Justice to drop its action, saying the basis for the DOJ's challenge was undermined by the department's own software purchases.

The Justice Department argues that the merger would leave only two companies from which large organizations could buy human resource and financial management software -- market leader SAP of Germany and Oracle-PeopleSoft.

But Tuesday, a small provider of financial management software, American Management Systems Inc., said it had beaten out Oracle and PeopleSoft for a Justice Department contract that could be worth as much as $24 million.

"If that does not undercut the entire legal basis for the Justice Department's case, what does?" the American Shareholders Association said in a statement.

A Justice Department spokeswoman declined to comment, as did Oracle and PeopleSoft.

ONE MERGER, TWO VIEWS

Oracle says the business software market has matured to include many players and is overdue for consolidation. It defends its deal as "pro-competitive" and necessary in order to compete better with SAP, the market leader, and Microsoft Corp., which is making inroads into the market.

But the Justice Department and the states see things differently.

Michigan's Cox said that if Oracle acquires PeopleSoft, the merger would impair competition between businesses, government agencies, and other organizations that depend on the software.

"Some estimates place the cost to Michigan taxpayers at more than $130 million," Cox said in a statement.

Justice Department spokeswoman Gina Talamona said the agency was pleased Michigan's attorney general was joining the lawsuit.

Michigan may face the same questions the Justice Department does for being a customer of a smaller competitor to Oracle and PeopleSoft. The state's human resource management software is from Lawson Software Inc., said Kurt Weiss, communications director of Michigan's Department of Information Technology.

A trial in the DOJ's lawsuit against the PeopleSoft deal is scheduled to start June 7 in San Francisco.

The European Commission, using the same argument as the Justice Department, appears to be leaning toward opposing the deal as well.

© Reuters