The stand-off between Oracle and PeopleSoft continues
with PeopleSoft's board refusing to accept Oracle's latest - and,
Oracle claims, its final - bid for the company.
A majority of PeopleSoft's shares were tendered into Oracle's
offer on Friday, but PeopleSoft's board told Oracle on Saturday
that it was confident shareholders would back the board in
resisting a takeover at that price.
"Based on the numerous conversations we have had with our
largest stockholders over the past 10 days, our board is convinced
that a majority of our stockholders agree that your $24 [£13] offer
is inadequate and does not reflect PeopleSoft's real value,"
PeopleSoft wrote in a letter to Oracle.
Oracle had threatened to walk away from its pursuit of
PeopleSoft if a majority of PeopleSoft's shares were not tendered
by midnight on Friday. Tendered shares can be withdrawn later, so
Oracle encouraged PeopleSoft shareholders to tender shares by the
deadline if they wanted to see the tug-of-war between the two
companies continue.
PeopleSoft now claims that a significant number of investors who
tendered shares did so even though they believed the company should
command a higher price. The board also maintains that if PeopleSoft
remains independent, it will deliver better value to shareholders
than the $8.8bn Oracle has offered.
To boost its case, PeopleSoft released aggressive financial
forecasts. Wall Street has greeted them with widespread
scepticism. PeopleSoft fell short of financial expectations in its
first two quarters of this year, and analysts fear it has promised
more than it can deliver.
PeopleSoft and Oracle will meet in court tomorrow, with Oracle
asking the judge to void the anti-takeover steps PeopleSoft's board
is using to keep Oracle at bay.
Legal experts said the case was unlikely to succeed.
That moves the next big set piece to PeopleSoft's 2005 annual
shareholders' meeting, which it will probably schedule between
March and May. Four of the seven board members are up for
re-election, and Oracle will have the option of running an opposing
slate of directors amenable to its takeover bid.
Meanwhile, PeopleSoft's board has a breathing space to meet its
financial projections and to convince shareholders of the value or
remaining an independent company. For PeopleSoft customers, though,
it's more uncertainty about their supplier's future.
Forrester Research analyst Paul Hamerman said customers should
update their software to the latest version to reduce some of the
risk around continued product support. He also advised against
signing long-term maintenance contracts, as the current uncertain
environment could give rise to a third-party market for PeopleSoft
maintenance and support.
Hamerman wasn't too worried about the distraction of Oracle's
bid (and the expense of repelling it) impairing PeopleSoft's
ability to develop a long-term strategy and vision. "They need to
show customers and shareholders they're innovating," he said. "They
need to demonstrate, before a proxy fight, that they're viable as
an independent company, which I think they are."
Others say a lingering battle will only continue to weaken
PeopleSoft and Oracle - to the benefit of their chief rival, SAP.
Oracle's bid is generally thought to have artificially inflated
PeopleSoft's share price, which may plunge if Oracle walks away for
good. Meanwhile, Oracle's Ahab-like pursuit of PeopleSoft ties up
resources some would like to see it devote elsewhere.
"Oracle should have better things to acquire than PeopleSoft,"
said Shareholder Value Management boss Jeff Embersits. "The big
winner has been SAP."
Stacy Cowley writes for IDG News Service