Oracle Gets Boost In Bid For PeopleSoftOracle Gets Boost In Bid For PeopleSoft

SAN FRANCISCO (AP) -- The stock market pendulum swung a little more in Oracle Corp.'s favor on Friday in its $5.1 billion hostile takeover bid for rival PeopleSoft Inc.-- but several other factors may still sway the high-tech showdown.

Investors helped Oracle by pushing PeopleSoft's stock down closer to the $16-per-share, all-cash takeover offer. The business software maker's shares dropped 45 cents to close at $16.92 on the Nasdaq Stock Market, a day after PeopleSoft's board spurned Oracle's bid.

Meanwhile, Oracle's shares rose 15 cents to close at $13.48 on the Nasdaq, reflecting Wall Street's response to the company's 31 percent increase in its most recent quarterly earnings, released late Thursday.

The results for the three months ended May 31 helped support Oracle's contention that its outlook is brightening while PeopleSoft's prospects are dimming.

Citing this trend, Oracle chairman Larry Ellison says PeopleSoft--and its shareholders--would be far better off under his control instead of pursuing a merger with another software maker, J.D. Edwards & Co., in a stock swap valued Friday at $1.7 billion.

Having been rebuffed by PeopleSoft's board, Ellison and his lieutenants plan to take their case directly to shareholders in a series of meetings before Oracle's bid expires July 7.

The discussions with PeopleSoft shareholders may convince Ellison to raise Oracle's bid, analyst David Hilal of Friedman, Billings, Ramsey & Co. wrote in a note to investors Friday. Hilal believes Oracle will have to sweeten its offer to at least $20 per share "to spark serious discussions."

With $6.5 billion in cash and a $5 billion credit line, Oracle could afford to pay a lot more.

Ellison also must overcome the antitrust concerns that PeopleSoft raised in its rejection.

PeopleSoft contends that a combination with Oracle would be difficult, if not impossible, because regulators would raise too many questions about how the deal would affect competition in the $20 billion market for business applications software.

Thousands of companies around the world depend on business applications software to help run their personnel departments and other behind-the-scenes operations. Combined, Oracle and PeopleSoft would remain behind the market leader, Germany-based SAP.

Oracle tested PeopleSoft's antitrust theories Thursday by filing papers asking federal regulators to review how its proposed takeover would affect competition.

The preliminary review could be completed before the end of the month. If regulators ask for more information to continue the review, it could be a sign of antitrust trouble.

Pleasanton-based PeopleSoft tried to throw another hurdle in front of Oracle on Friday by filing a lawsuit in California, alleging the hostile bid illegally interferes with the J.D. Edwards deal. The suit, which seeks a court order to block the hostile bid, came a day after J.D. Edwards filed a similar suit against Oracle.

PeopleSoft's 5,100 customers also could play a pivotal role in determining the company's fate. Because Ellison has said he intends to phase out PeopleSoft's software, customers have become hesitant about buying more licenses.

The uncertainty couldn't come at a worse time for PeopleSoft - the bulk of software sales are made during the final weeks of a quarter.

If PeopleSoft has trouble closing sales during the next two weeks, the company might not be able to deliver the earnings expected by Wall Street--a development that could torpedo its stock and bolster Oracle's bid.

PeopleSoft CEO Craig Conway says customers have been overwhelmingly supportive of the company since Oracle launched its bid.

"Customers' most common conclusion to their calls and their E-mails is, 'What can I do to help?'" he told analysts in a conference call Thursday.

Conway would receive a big paycheck should he lose his job in the takeover. Before Oracle announced its bid June 6, PeopleSoft's board doubled Conway's severance package, guaranteeing him two times his annual salary and bonus, according to documents filed with the Securities and Exchange Commission. Conway's 2002 salary and bonus totaled $2.92 million.

Even if shareholders begin to sell their stock to Oracle, PeopleSoft conceivably can thwart the deal by using an antitakeover mechanism known as a "poison pill." This complex tool--so Byzantine that industry analysts say even they don't understand it--is designed to make a takeover prohibitively expensive.

Analyst Tad Piper of U.S. Bancorp Piper Jaffray thinks PeopleSoft could ruin Oracle's plans in another way--by making a tender offer directly to J.D. Edwards shareholders.

Under the current agreement between the companies, PeopleSoft and J.D. Edwards are pursuing more bureaucratic procedures that won't be completed for several months.

Oracle's hostile bid is contingent on no changes in the proposed deal, so any revisions could turn into a shield against Oracle.