Oracle uses Microsoft-SAP talks as defense

Spencer Swartz

SAN FRANCISCO: The now-scrapped plans by Microsoft, the world's biggest software maker, to buy Germany's SAP show the business software market is competitive enough to accommodate Oracle Corp.'s takeover of rival PeopleSoft, Oracle lawyers argued.

Oracle Corp. lawyers cited last year's exploratory Microsoft/SAP merger talks to counter U.S. antitrust regulators' argument that Oracle's proposed $7.7 billion takeover of PeopleSoft Inc. would hamper competition.

"This is an example of the competition in the industry," Dan Wall, Oracle's lead attorney, said in opening remarks at federal court in San Francisco.

Microsoft said it broke off the SAP talks a few months ago and disclosed the usually secret negotiations because it expected the information to be made public in the course of the Oracle trial.

SAP is the leading provider of software to manage accounting, sales, purchasing and other business functions at large companies and government agencies. The company -- which is most dominant in Europe -- dwarfs both PeopleSoft and Oracle, which round out the business-management software sector's top three providers.

Oracle -- the No. 1 provider of high-end databases and the world's second-biggest software company behind Microsoft -- believes the government's definition of the business-management software market is too narrow. Chiefly, Oracle argues the government view excludes numerous niche players and leaves out the faster-growing middle market.

Oracle restated on Monday its belief that Microsoft is edging into the high-end business-management software market and should be counted as a competitor, along with such specialty vendors as Siebel Systems and Lawson Software.

Oracle and government lawyers laid out blue-prints to U.S. District Court Judge Vaughn Walker of how they will argue their cases over the trial, expected to last about one month.

The government began calling witnesses Monday afternoon from companies, such as Cox Communications Inc., to support its argument that firms will face higher software prices if Oracle buys PeopleSoft.

DOJ ON MICROSOFT

Speaking to reporters, Thomas Barnett, a deputy assistant attorney general in the DOJ's antitrust division, rebuffed Oracle's assertion regarding the threat of competition from its long-time nemesis.

"Microsoft is not in the market, and if it were, it would be through an acquisition. All the evidence we have shows that Microsoft doesn't have plans anywhere in the foreseeable future to get into this market," Barnett said.

Oracle's hostile takeover bid, launched one year and a day ago, is one of the largest and most contentious in the history of the U.S. technology industry and has been repeatedly rejected by PeopleSoft's directors.

The Department of Justice's lawsuit, backed by 10 US states, focuses on software that helps large companies manage human resources and finances.

The department estimates the market of the two software segments at between $400 million to $500 million based on revenues of both PeopleSoft and Oracle in the two segments.

The DOJ says the Oracle deal would violate federal anti-trust laws by eliminating one of only three large sellers of high-end business software. To prevail at trial, the government must show the Oracle deal is anti-competitive and would lead to higher software prices.

"If you take PeopleSoft out of the picture, Oracle's ability to raise prices will be enhanced," Claude Scott, lead attorney for the Department of Justice, said in his opening statement.

The department also believes "entry" of new competitors into the high-end business software market is difficult because of financial and technical hurdles.

© Reuters