J.D. Edwards And PeopleSoft Strike BackJ.D. Edwards And PeopleSoft Strike Back

J.D. Edwards & Co. and PeopleSoft Inc. fired back last week at Oracle, which made a hostile takeover bid for PeopleSoft two weeks ago. The play upset PeopleSoft and J.D. Edwards' plans to align forces. PeopleSoft and J.D. Edwards are rolling out products and conducting business as usual, but the turmoil could weigh heavily on customers' purchasing decisions.

The most aggressive move, taken by J.D. Edwards, was the filing of a suit in Colorado state court claiming that Oracle has "tortiously interfered with its proposed merger with PeopleSoft." The suit seeks $1.7 billion in compensatory damages and an unspecified amount in punitive damages. J.D. Edwards also is filing suit in California state court, alleging that Oracle chairman and CEO Larry Ellison and executive VP Charles Phillips have engaged in wrongful conduct and unfair business practices. It seeks an injunction to keep Oracle from proceeding with its tender offer for PeopleSoft. An Oracle spokesperson wrote in an E-mail to information that the company believes J.D. Edwards' case has no merit.

Before filing the lawsuit, J.D. Edwards raised antitrust issues. In opening remarks at the company's annual user conference in Denver last week, president, chairman, and CEO Bob Dutkowsky said there's a "high likelihood" that the deal would be blocked by the U.S. government, the European Union, or both.

Charles Biggio, a partner with the law firm Aiken, Gump, Strauss, Hower & Feld LLP and an antitrust official during the Clinton administration, says the bid is "worth investigating, to the extent that the overlap results in loss of competition."

News of the lawsuit came just hours after PeopleSoft's board unanimously rejected Oracle's cash offer of $16 per share, or $5.1 billion, and recommended that stockholders do the same. The board concluded that Oracle's offer would face lengthy antitrust scrutiny and that its plan to stop selling PeopleSoft products threatened stockholder value. It also reaffirmed its support of PeopleSoft's plan to acquire J.D. Edwards. "Many of the reasons included concern over the likelihood of antitrust scrutiny, the valuation, the predatory intentions, and the devastating effect on customers, employees, and the industry itself," PeopleSoft president and CEO Craig Conway said last week.

During Oracle's fourth-quarter earnings announcement last Thursday, which took place just as J.D. Edwards announced its lawsuit, Ellison said, "We don't believe PeopleSoft's board has done its job for the shareholders." Ellison maintains that PeopleSoft's acquisition of J.D. Edwards is a risky proposition.

Meanwhile, J.D Edwards last week unveiled more than 400 products and enhancements, with a focus on supply-chain management tools, including new functionality for planning, order management, manufacturing, distribution, and logistics. PeopleSoft this week will release analytics tools to improve customer service.

There is concern that the unsettled situation will hurt PeopleSoft's and J.D. Edwards' sales. But Ellen Martin, VP of supply-chain services at apparel manufacturer VF Corp., a PeopleSoft customer, says decisions must be based on how important the software is to the business and on the understanding that acquisitions can drag on or never happen. "If we had an upgrade scheduled, we'd continue," she says. "You can't stop project plans waiting for the software companies to make up their minds."