Ellison: PeopleSoft Can't Survive

Oracle CEO Larry Ellison said yesterday at an analyst day held by Oracle executives that PeopleSoft doesn't have what it takes to survive in the increasingly competitive application landscape. Ellison also outlined the potential outcomes of his company's takeover attempt of PeopleSoft. Originally the analyst day was held to discuss various issues at the software giant. However, the proposed acquisition took center stage. Ellison painted a grim picture of the competitive landscape, noting that SAP AG's dominance in the applications market would be hard to shake by any single vendor. "The number two, three, and four [ranked applications vendors] should combine and give them a run for their money," Ellison said. Pointing to PeopleSoft's viability if it refuses to join in on this type of strategy, Ellison said: "With or without us, PeopleSoft can't survive. They cannot compete in this business over the long term." Chuck Phillips, executive vice president at Oracle, backed up Ellison's remarks with some statistics comparing the two companies. "We have three times the cash, five times the number of employees, and eight times the revenue of PeopleSoft," he said, adding that Oracle generates more cash flow per year than the combined revenue of PeopleSoft and it's acquisition target, J.D. Edwards. Phillips then pointed to the positives of the merger, reiterating that Oracle would offer prolonged support for PeopleSoft products. He also emphasized the attractiveness of the deal to PeopleSoft shareholders. "It's cash in hand, with no exit risk. Plus, you avoid the uncertainty of the J.D. Edwards acquisition," he noted. But since PeopleSoft has so vehemently fought the takeover bid, both Phillips and Ellison downplayed the importance of the deal to Oracle's continuing operations. "This is not a make or break situation for our applications business," Phillips said. "Our applications business is healthy, and we have a lot in the pipeline. This deal is not being made out of any feeling of weakness." Ellison nonchalantly outlined the possible outcomes of the deal. "If the government says we can't buy them, it's over," he said. He did, however, note that Oracle would promptly close the deal if the lawsuits blocking the deal are settled. Ellison even went so far as to say the deal could last until next June, when PeopleSoft elects its board members. Oracle plans to vote in board members who would quickly green light the deal, Ellison said. PeopleSoft has continued its resistance of the hostile takeover. Steve Swasey, spokesman for the company, said in published reports that the J.D. Edwards acquisition will make PeopleSoft the second-largest application vendor, and its completion should squelch Oracle's efforts. Swasey also said the J.D. Edwards deal could close as early as July 25.
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