Oracle Lowers its Offer for Rival PeopleSoft

Oracle announced it has lowered its offer for rival software vendor PeopleSoft in a move that has surprised many analysts. The revised offer brings the overall price tag down from approximately $9.4 billion to approximately $7.7 billion. In a statement released by Oracle, Chairman and CFO Jeff Henley said the "revised offer reflects changes in market conditions and in PeopleSoft's market valuation." In early afternoon trading Monday, PeopleSoft was down more than 4.5 percent, to $16.49. The stock has fallen sharply since hitting its 52-week high of $24.04 in January. As of Friday, according to Oracle's statement, nearly 8 million PeopleSoft shares had already accepted Oracle's existing tender offer. Oracle's initial offer for PeopleSoft, in June 2003, was just $16 per share, but that offer was soon raised to $19.50. In February 2004 the offer was raised again, to $26 per share. In a joint letter to PeopleSoft shareholders at the time, Oracle CEO Larry Ellison and Henley said that the $26-per-share offer represented "our final price, and we believe it represents a compelling value for all PeopleSoft stockholders." Oracle's bid has faced resistance from the U.S. Department of Justice from the get-go, as well as scrutiny from the European Commission. Oracle's appeal of the DOJ's antitrust suit is scheduled to begin in San Francisco next month. Oracle President Charles Phillips reportedly told a group of analysts last week that he predicts the antitrust trial will last about six weeks, and that if Oracle wins its appeal, he expects to close the PeopleSoft deal by the end of 2004. Scott Nelson, vice president and research director at Gartner, calls Oracle's move "clever." According to Nelson, the lowered bid is precisely what Oracle claims it is: "a response to the weakened [share] price for PeopleSoft," he says. But Nelson says the reduced offer also shows that Oracle executives "hope that it will signal to [PeopleSoft's] board that they better act, as the price may keep going down." PeopleSoft noted in a statement released following Oracle's revised offer that PeopleSoft's board had rejected each of Oracle's three unsolicited offers so far, and added that given "the significant antitrust obstacles in both the United States and Europe, we do not believe Oracle's bid can be completed at any price." The lowered bid comes just as PeopleSoft is gearing up for its annual Leadership Summit, which begins Tuesday in Las Vegas. PeopleSoft's corporate statement alluded to the timing, calling the summit its "most significant customer event for senior executives with more than 2,500 attendees. This is one more instance of what we firmly believe is Oracle's ongoing effort to damage our business." The statement concluded by saying that the PeopleSoft board "will evaluate the reduced offer at a regularly scheduled board meeting later this month." PeopleSoft spokesman Steve Swasey declined to comment further. Oracle spokespeople were unavailable for comment.