PeopleSoft extends customer rebate plan

SAN FRANCISCO: PeopleSoft Inc. said it will extend a controversial customer rebate program that Oracle Corp. believes could make its proposed $7.3 billion hostile takeover of PeopleSoft prohibitively expensive.

PeopleSoft, based in Pleasanton, California, said in a regulatory filing that it had decided on Monday to continue the program until Dec. 31.

The program was launched in June and has undergone various revisions. It is seen by some analysts and critics as an anti-takeover defense that would be difficult if not impossible to unwind because it involves contracts with other companies.

Traditional poison pill defenses are in corporate documents and controlled by the company that put them in place.

PeopleSoft's customer assurance program promises to refund two to five times the cost of software if PeopleSoft is acquired and the new owner fails to meet certain terms.

The plan does not include several triggers that led Oracle and a group of PeopleSoft shareholders to ask a Delaware judge to block the program. Those since-removed triggers included a change in control of PeopleSoft's board of directors and the failure of the acquirer to meet certain software release dates.

In earlier filings, PeopleSoft said potential liabilities related to its "customer assurance program" were about $807 million as of Sept. 30.

In a research note on Wednesday, JMP Securities analyst Patrick Walravens said PeopleSoft's customer rebate program could be detrimental to stockholders and is likely to reduce the price an acquiring company would be willing to pay.

"Consequently, we believe an acquiring company would allocate a portion of its takeover budget to making cash payments to customers, with the balance going to stockholders," he said.

Walravens also projected the rebate program's potential liability could reach $1.35 billion by the end of the current quarter.

Oracle has charged in a lawsuit that the program is a "draconian" defense.

"PeopleSoft's customer assurance program either seems to raise serious accounting questions, or it appears designed to give customers a false sense of security with promises PeopleSoft has no intentions of keeping," Oracle spokesman Jim Finn said on Wednesday.

"With all the filings, the program would be more aptly called the customer confusion program," Finn said.

PeopleSoft spokesman Steve Swasey said the program is designed to assure that customers' investment in his company's software is protected over time.

"The program could have zero liability because it's only triggered if there's an acquisition of PeopleSoft and the acquiring company does not support and develop the products as we would," Swasey said.

(Additional reporting by Jeffrey Goldfarb in New York)

Reuters