PeopleSoft Urges Oracle Rejection
PeopleSoft said its board of directors has unanimously recommended that PeopleSoft shareholders reject Oracle Corp.'s increased bid price of $19.50 for outstanding shares of the company.
"Oracle's offer undervalues the company and is not in the best interest of PeopleSoft stockholders. It is highly conditional, faces significant regulatory delays and uncertainty, and threatens serious damage to our business," Craig Conway, PeopleSoft president and CEO, said in a statement.
Conway stated that PeopleSoft is committed to its previously announced acquisition of J.D. Edwards and noted that, "the continued execution of our strategy will create significantly higher stockholder value."
The company says its board concluded that the revised offer undervalues the company based on its financial performance and significant future opportunities including the value created through the acquisition of J.D. Edwards. The board found additional risk to stockholders from the offer because it is highly conditional and Oracle could withdraw it at any time, PeopleSoft says.
In an attempt to counter PeopleSoft's claims, Oracle's executive vice president Chuck Phillips held a conference call to reiterate the fact that Oracle is serious about the acquisition.
"PeopleSoft management has put its interests first in front of shareholder demand," Phillips said in the call. He said that the company met with many shareholders and asked them what price they felt was the right one. "Most said either $19 or $20, so we split it down the middle and are offering $19.50," Phillips said.
Phillips also noted that Oracle intends to support users of current PeopleSoft products "for years to come," and hinted that Oracle's support for PeopleSoft 7 would be a longer time frame than PeopleSoft is offering. "We have to plans to alter the functionality of PeopleSoft products, and there is no reason for any users to worry if they do not see the need to change their systems," Phillips said.
But Phillips did say that when users of PeopleSoft products look to upgrade their functionality, Oracle would perform free modular upgrades to its E-Business Suite.
Patrick Walravens, managing director and senior research analyst, application software at JMP Securities, says that Oracle is likely to make good on the support claims. "I really do think Oracle will support PeopleSoft for years to come," he says. "Oracle support organization is a machine and the business is likely to be quite profitable for Oracle."
Sheryl Kingstone, CRM program manager at the Yankee Group, disagrees: "It's fine to continue to offer support, but that doesn't really help PeopleSoft customers in the long run. Since Oracle is not investing in the PeopleSoft product, companies have no choice--either migrate or stay on older technology. Oracle will support it, but not invest in it, but companies use technologies for competitive advantage, which means adopting newer, better, easier, etc."