Yesterday's announcement that Peoplesoft is to acquire JD Edwards drew mixed reactions from analysts.
The deal, which will create the world's second-largest enterprise applications software company after SAP, is worth $1.7bn (£1bn).
JD Edwards chairman, president and chief executive officer Bob Dutkowsky said the buyout had nothing to do with his company's reported financial losses for the second quarter, announced last week, adding that discussions actually began late last year.
He predicted that the combined company would get a boost in its infrastructure and better leverage, particularly abroad, where it faces a heavily embedded SAP.
While analysts agreed that the merger would give PeopleSoft greater clout in Europe, there were other issues that could prove a distraction to both companies at a time when they are fighting adverse economic conditions.
“This is a very bold move by PeopleSoft, but is it a smart one?” said John Moore, an analyst at ARC Advisory Group. He noted that the company now faces a very different set of technology platforms and customers, as well as two different cultures. Tackling those issues “could prove quite formidable", he added.
Jim Shepherd, at Boston-based consulting firm AMR Research, said “the combination should give PeopleSoft a particular boost in Europe, where it has had a problem convincing Europeans it was anything but a human resource company", and that this will give PeopleSoft a chance to break into the manufacturing market, which it has found tough to crack.
SAP issued a statement to say that the merger was unlikely to affect it.
"PeopleSoft and JD Edwards were already competitors of SAP," it said. "Their combination does not significantly change the competitive field and, therefore, has no major impact on SAP. Acquisitions always bring with them difficult challenges of integration and customer satisfaction. Otherwise, we have to await further developments to see if the PeopleSoft-JD Edwards combination will have any other effects on the market."
The transaction is expected to close by the third or fourth quarter of this year.
Marc L Songini writes for Computerworld