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Oracle pushes for PeopleSoft, amid criticism

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CIOL Bureau
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PALO ALTO, California: Oracle Corp. asked for a meeting with the board of directors of PeopleSoft Inc. and urged its smaller rival to drop a "poison pill" defense and the threat of a lawsuit as the battle lines hardened in its $5.1 billion hostile takeover bid.





Meanwhile, J.D. Edwards & Co. executives -- who have seen their company's pending acquisition by PeopleSoft thrown into question -- called Oracle's move a "half-baked" offer that would crimp competition in the business software market and raise antitrust concerns.





Last week, Oracle, had announced its plan to bypass PeopleSoft management and acquire the company by offering stockholders $16 per share in cash. Oracle said it was spurred to action by PeopleSoft's plan, announced last Monday, to buy J.D Edwards in a friendly stock deal now valued at $1.85 billion.





PeopleSoft and J.D. Edwards focus on business-management applications that automate such business areas as accounting, purchasing and human resources. Their merger would help PeopleSoft leapfrog Oracle in the application software market, giving the Pleasanton, California-based company the No. 2 spot behind Germany's SAP AG.







Sweeter bid needed?





PeopleSoft shares have spiked since the Oracle bid, causing the value of its prospective deal with J.D. Edwards to jump from $1.7 billion. At the same time, PeopleSoft's current stock price of $17.90 has added to speculation that Oracle may have to sweeten its offer or that another white-knight bidder could emerge for the software company.





Oracle's is one of the biggest hostile takeover bids to rock the software industry, which saw IBM Corp. buy e-mail provider Lotus Development Inc. in what began as an unfriendly, unsolicited bid in 1995.





The deal, which would be Oracle's largest acquisition by far, could also be a harbinger of increased consolidation in the software market as executives try to win customers amid dwindling corporate spending on new technology.

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In a conference call with reporters, Oracle Executive Vice President Charles Phillips defended the cash offer, which he described as less risky for shareholders than any competing bid based on stock.





"It's not funny money ... All that exit risk goes away with our offer," said Phillips, who added that Oracle had been mulling an acquisition of PeopleSoft for more than a year.





Oracle Chief Executive Larry Ellison in a letter* to PeopleSoft's board released on Monday also urged the company to drop its opposition to Oracle's bid. (See a copy of the letter at the end of the story.)





'NO SENSE'



J.D. Edwards Chief Executive Robert Dutkowsky said Oracle's $16-per-share offer made "no sense" for investors and that its takeover of PeopleSoft would "drive out customer choice completely" since Oracle would stop selling PeopleSoft applications and migrate those users to its own products.

The deal could be blocked by anti-trust regulators in the United States and the European Union, he added. PeopleSoft Chief Executive Craig Conway, a former Oracle executive, has said he could not recommend Ellison's bid under any circumstances since the offer was an attempt to disrupt its own announced merger.



Oracle Chairman and CEO, Lawrence J. Ellison's

letter to to Craig Conway, CEO PeopleSoft. 



June 9, 2003



Dear Mr. Conway:



This morning we commenced our tender offer for PeopleSoft. We believe that our offer provides full and fair value to PeopleSoft stockholders and a compelling future for PeopleSoft customers. I am reaffirming our request to meet with you and your board to discuss our offer further.



Your press release, quotes attributed to you in the press, and a notice we just received with respect to your intention to commence litigation against us raise the concern that you have taken a negative position with respect to the merits and motivations behind our offer before you and the PeopleSoft board have taken the time required to consider the offer. We have made a serious, fully financed, all-cash offer to your stockholders, and your fiduciary duties to those stockholders require a full and fair review done in good faith.



This matter will ultimately be decided by the PeopleSoft stockholders based on the merits and not by frivolous litigation. I reaffirm our request that you redeem your poison pill to enable stockholders to act on our offer, and I expect that the board will not take any further action that would interfere with the rights of PeopleSoft stockholders to determine the outcome of this process.



Sincerely,



Lawrence J. Ellison



Chairman and Chief Executive Officer

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(With CIOL bureau inputs)

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