Oracle to back PeoplesSoft products for 10 yrs

Spencer Swartz and Michael Kahn

SAN FRANCISCO: Oracle Corp. will make upgrades to business software products sold by PeopleSoft for "10 years or longer" if Oracle succeeds in its takeover bid for that company, said a top Oracle executive.

Oracle Chief Financial Officer Jeff Henley said in videotaped testimony shown in federal court that Oracle would make "minor enhancements" to improve PeopleSoft Inc.'s products for current PeopleSoft customers.

Many PeopleSoft customers, such as U.S cell telephone provider Nextel Communications Inc., fear being forced to spend millions of dollars to change software vendors if PeopleSoft's products are not maintained after a merger.

Henley's video testimony came at the start of the third week of a one-month trial in federal court in San Francisco where U.S. antitrust officials are trying to block Oracle's $7.7 billion hostile takeover.

The U.S. Justice Department argues a merger would cut competition and drive prices higher for human resource and financial management software.

The government argues the merger should also be blocked because it would likely force companies like Nextel and German- American auto company DaimlerChrysler AG, to switch software vendors at an enormous cost.

Both companies testified last week as government witnesses that they did not believe Oracle would have the incentive after a merger to make software changes rapidly enough to allow them to keep up with market and regulatory changes.

"We'll support PeopleSoft's products for 10 years or longer ... we'd make enhancements," Henley said.

But Henley went on to say in the videotaped testimony that Oracle would not "invest huge amounts of time" to build a new PeopleSoft product.

ORACLE SOFTWARE

Henley, however, said Oracle would honor all existing PeopleSoft contracts that require PeopleSoft to build new "functionality" into software it has already sold. He did not say, nor was he asked by the government's top lawyer Claude Scott as to whether Oracle, might extend any of these contracts.

Henley also said it took Oracle three to four years to build human resource software, starting around 1995, and some years further to make it competitive with PeopleSoft's human resource software, which has been widely regarded the best.

This testimony appeared to support the government's argument that it takes many years to build business software because of the financial costs and technical barriers.

The government believes these "barriers to entry" make it more imperative to block the merger because there are no companies in its view that could build business software fast enough to keep an Oracle/PeopleSoft from raising its prices.

© Reuters