PeopleSoft faces legal action from shareholders

Business software supplier PeopleSoft faces new legal action from shareholders unhappy with the measures the company has taken to...

Business software supplier PeopleSoft faces new legal action from shareholders unhappy with the measures the company has taken to fend off a hostile takeover bid from Oracle.

The company acknowledged that a motion has been filed to suspend its recently amended "customer assurance" programme, which offers prospective software buyers refunds in the event PeopleSoft is acquired and its product lines phased out.

The assurance programme was intended to undermine Oracle's $7.3bn unsolicited bid, announced in June.

The latest legal action comes after PeopleSoft disclosed terms to the Securities and Exchange Commission under which payments of up to five times the cost of its licences would be made should it be bought.

Initially, the company said it would make those payments if it were bought within one year. It has now extended that deadline to two years. 

The terms also extend the period under which the payments would be made if a new owner drops any purchased applications or creates plans to end support for them. PeopleSoft initially said the payments would be made if that occurred within two years. It has now doubled that period to four years. 

The shareholder motion claims the customer assurance programme is a "disproportionate and unreasonable response to any threat from Oracle's outstanding tender offer" and "unfairly interferes with PeopleSoft's ability to maximise the value to PeopleSoft's shareholders".

The potential liability has already risen to $800m, as reported by PeopleSoft. 

"We want the stockholders to have the opportunity to accept the Oracle bid if they want to," said attorney Bruce Jameson. 

The motion also points to other triggering mechanisms, as divulged in the SEC filing on 27 October, including an acquiring company's decision to "reduce or materially reduce" the amount of money spent on updates or support or a delay in the release of updates. 

"We're going to defend ourselves against the lawsuit, and we believe it has no merit," said a PeopleSoft spokesman. The company believes the customer assurance programme "is a benefit to customers and ultimately to the benefit of our shareholders, and we're implementing against that plan". 

For its part, Oracle has denounced the new poison pill provisions. Spokesman Jim Finn said, "PeopleSoft's latest action is management entrenchment at its worst. These modifications to PeopleSoft's so-called Customer Assurance Programme are not about protecting customers. Instead, they reflect PeopleSoft's blatant disregard for shareholder value and choice, preventing shareholders from exercising their right to determine board membership." 

Marc L Songini writes for Computerworld

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