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 Tendered shares can be withdrawn later, so Oracle encouraged PeopleSoft shareholders to tender shares by the deadline if they wanted to see the tug-of-war between the two companies continue.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